How to negotiate for new car price - Forester

[GoshenSubaru]

I am confused on how best to negotiate with a Subaru dealer for a new Forester. I have researched prices on some web sites (e.g.: CarsDirect, TrueCar), and have the MSRP and invoice as listed on those sites. One strategy for negotiation is to make the dealer an initial offer of, say, "$200 over invoice". But isn't the problem with this strategy the definition of "invoice"? I have one number for "invoice" from the web sites but the dealer probably(?) has a different number for "invoice". So when I make my offer, I do not really know the absolute dollar number of the offer since my invoice number may be different from the dealer's. Am I not understanding something with this strategy? Comments?

[idosubaru]

welcome to USMB, i'm in Morgantown.

 

they'll have different invoices and expenses, etc.  if it's a hot Subaru market they'll be far less flexible than some southern dealer with limited sales.  also they aren't likely to budge much from their typical marketing plan on a visit or two.  you'll have to be very persistent, creative, on a vehicle that's not hot, and lucky to get a "better than average" deal.

 

based on quite a few factors i would guess this area is not hurting for sales and you're likely constrained to their typical marketing plans minus small change here and there.

 

if you're wanting to wheel and deal you might try bridgeport dealer first and see how it goes. a practice run and see what those numbers are like.  once you know how they're going to play, add some questions and thoughts, and take that experience with you to morgantown. 

bridgeport may pull the "you don't live as close to us and aren't likely to service your car here so we're not that interested in negotiating" card.

 

i bought my 2003 Outback off of Goshen Rd

[idosubaru]

also realize that dealers have expenses that vary wildly by location and the way they stock inventory from Subaru is a fascinating and complicated process/equation.  so it's not as simple as "what did you pay for this car and i want to offer $200 more".  inventory is stocked via contracts, changing valuations, credits based on complicated equations...etc.  and then the business model as a whole is complex too...beyond just the sale of a new car.

[idosubaru]

some forums have threads where people share what they paid for a vehicle.  i know subaruoutback.org has one.  i'd go to a forester forum and look for a similar kind of thread.  this forum is probably the best resource for Subaru specific mechanical and experiential expertise, not a resource on model specific new purchases.

[JKinPA]

Hi,

 

First I used to sell Subarus and contrary to popular belief there is ONLY ONE invoice.  What sometimes confuses people is in an item called "Hold Back".

 

Here is how it works...

The person who owns the dealership must purchase the cars on the lot from Subaru.  They purchase them at the invoice price.  Subaru to assist the dealership with selling a vehicle provides aditional money (called hold back) to aid in advertising, floor plan costs, etc...until the vehicle sells.  Then Subaru will sometimes offer MFG. rebates to you the purchaser.

 

The average Subaru will have about $2,000 to $2,500 in "profit" built into the vehicle.  This is the difference between the sticker price and the invoice.  You will NEVER see hold back on an invoice because it is actually not part of the vehicle purchase transaction between the MFG and the Dealer.  This is probably why people believe there are two invoices.  If a dealer sells a vehicle(s) in a short enough period of time they do not eat away too much on that hold back money so it becomes a form of profit to the dealership (NOT WHAT THE SALES PERSON GETS PAID ON).

 

Dealers will also receive cash incentives from Subaru for purchasing a certain number/type of vehicle into their inventory that Subaru is trying to move.  During these times the more vehicles they take the more money Subaru gives the dealership.  AGAIN this is NOT nor will it ever be on the invoice it is NOT part of the sale of the vehicle but an added incentive given directly to the dealership from Subaru as a result of a transaction.  Think of it like this...you purchase a set of tires and if you mail in your receipt from those tires the tire company gives you a $50.00 bank card.   That bank card will not show up on your receipt because it is totally separate from the initial transaction.  This is why when the market is light dealers can and will sell below invoice.  People trying to sell books call it hidden money...and make the dealership out like a criminal trying to steal your money...they are not.  They are trying to make as much as possible yes but most are doing nothing illegal.

 

The truth of the matter is the person you are hurting the most in a below invoice deal is the sales person.  They generally work on straight commission and that commission amount is taken directly from the amount of profit left in the vehicle (the difference between sticker and invoice).  When the deal settles at or below invoice it is called a "mini" and depending on the dealership is usually worth about $50.00 in "commission".  Sales people also receive "bonuses" based on the number of cars sold in a month and if they are the top sales person.

 

Here is an example of how that could work:

 

$22,034 sticker, car sold for $21,000 (before tax tags tec).

Invoice on that car was $19,985 so the profit on the car is $1,015

Sales person makes say 10% commission, he/she will see $101.50 before taxes in the paycheck.

If it's their 20th car that month they might receive a $200 bonus.

If they are high sales maybe an additional $250

SO at the end of the month selling 20 cars if only half are mini's (that is generally low) that sales person would see about $1,965 before taxes.  If they did that for 12 months $23.580 per year before taxes...which is why I stopped selling cars.

 

So why is all this important...simple buying strategy...

Many times dealerships will have top sales people awards in listed somewhere in the dealership.  If so pay close attention to this.  You don't want the person on the top of the list THEY ARE THERE FOR A REASON and it is NOT because they are blowing cars out the door at invoice.  You want the second or third person down from the top.  They are more hungry and generally are looking for that extra vehicle to push them over to the top spot or into a bonus for number of vehicles sold.  If they have a list ask for the person by name...the reason for this is that sales people work on a rotation...usually called an "UP LIST".  If you don't ask for a sales person by name you get whomever is UP.

 

Going at the end of the month IS BETTER.  The sales people are trying to hit numbers, the dealership is trying to hit numbers and so is Subaru so yes if you can the best day for everybody is the last saturday of the month (PA has a blue law so the dealerships are closed on Sunday).

 

Understand the sales person's goal is to maximize profit and move cars.  The goal is to be able to sell about 30 cars a month.  Some do most don't.  If they sold every car as a mini $50.00 per car that's $1,500 per month or $18,000 per year BEFORE taxes, not counting possible bonuses.

 

The people I worked for who owned the dealership seemed to be doing fine...the sales people not so much which there is a large turnover.  The dealership (if their smart) generally are not looking for the car sales to drive their profit that comes from the service department.

 

Lastly there is the math of it all...on average it will cost you $20.00 per Thousand on a 60 month loan.  so if you can afford a $400 monthly payment you are looking at financing about of $20,000 over a 5 year period.  That has nothing to do with the dealership its just math.

[idosubaru]

fascinating how all that works, thanks!  "hold back" was the word i was reaching for.

 

based on your explanation, would this work...though I sadly see this is hurting the salesman which sounds like a terrible position:

Negotiate price as low as possible, then deduct a few hundred and offer:

"Call me when you need/want (careful word choice) a sale and I'll be here at this price"

 

I have heard of people that want more specific vehicles also have less negotiating power over someone less concerned with color and accoutrements. If you want *that* color and *those* exact options and they gotta order it in and wait around...that may not play to the buyers favor?

[ivans imports]

First thing check for any headgasket leaks if oil leaking / coolant. knock 2500-3000 off the price has timing belt been done ? service history? any motor work been done ? how dose the car work ect dealer like to hide problems to sell cars. So if you dont ask they will not tell and watch out for cars that are super clean or deatailed under hood trying to hide somthing ?

[JKinPA]

fascinating how all that works, thanks!  "hold back" was the word i was reaching for.

 

based on your explanation, would this work...though I sadly see this is hurting the salesman which sounds like a terrible position:

Negotiate price as low as possible, then deduct a few hundred and offer:

"Call me when you need/want (careful word choice) a sale and I'll be here at this price"

Yes and no...You must understand that there is a point where the dealer simply cannot afford to go any lower.  Unfortunately because of years of unscrupulous dealers people believe that there is tens of thousands of dollars in these cars and there isn't.  If you use this tactic you must be willing to walk out and not come back, at least not for that same vehicle.  Additionally where you should not walk but runaway from a dealer who says this special deal is only good for right now...it is a sales tactic called a trial close that is IMHO the lowest of the low...The only thing that should affect the deal from a time perspective is something that you can verify (Rebates or financing that are ending at the end of the month), other than that your deal should be good today tomorrow a week from now etc...

 

Your best bet for getting what you want at the price you want is to decide BEFORE you go into the dealership what monthly payment you can afford and how much you plan to put down (NOT COUNTING THE TRADE).  The same rule I quoted before ($20 per Thousand) works both ways.  For every $1000 you put down you will lower your monthly payment by about $1000.

 

Some people will tell you NOT to tell the dealer you have a trade...I'll leave that up to you...but if you tell them you don't have a trade and you do you are lying to them EXACTLY the same conduct that most people believe the dealers are doing to them...

 

Understand your trade is NOT, and NEVER WILL BE worth what you think it is, nor what KBB or other online services will tell you your car is worth.  No matter what type of car you have if it has over 100,000 miles it will be a $500 car to the dealer.  Additionally if you still owe money on your trade THAT WILL CHANGE YOUR DEAL and not because the dealer is trying to get over on you.  If your trade is worth $2000 and you still owe $4000 there is a $2000 deficit that must be paid to the agency that you purchased your current vehicle from.  That will raise your monthly payment (if you negotiated price with out telling the dealer about a trade) by $40 per month.  In this case they are not doing anything shady they are responding to you not being upfront about your trade.

 

You should also know that no matter how much or little you paid for your car, when you tell a friend, other dealer or uncle louie THEY COULD HAVE GOTTEN A BETTER DEAL, and YOU PAID WAY TOO MUCH...

 

A deal is only as good as you think it is.  I have sold cars for full sticker (Volvo's, Corvettes, and the Subaru BAJA when they first came out) and the people were happy because they got what they wanted when they wanted it and service during and after the sale.  In some cases I actually delivered the car to their house.  Do you think I would have done that for a $50 deal?  No you get what you pay for ESPECIALLY service.

 

My best advice is: Before you go to the dealership decide how much per month you can pay for a vehicle.  That will tell you how much vehicle you can afford.  Then decide now much money you want to put down.  Then if you are planning a trade.  Call the bank or finance company that you have the loan with and get the pay off amount.  Then go to www.kbb.com and put in all the information on your trade.  Get the trade in value from the poor condition choice.  Subtract about $500 and use that for your trade in allotment.

 

So lets say that you would be comfortable with a $440 monthly payment for 5 years.  That will buy you $22,000 worth of vehicle with no money down.  Lets say you your trade is worth $2000 and you owe $3000 (this is called being upside down and is more often what happens in this case by $1000). So to make up that difference you just lost $1000 ($20 per month) so instead of $22,000 of vehicle you now can only afford $21,000 of vehicle at the same $440 per month.  Or if you still want that $22,000 vehicle you have to either put $1,000 down or commit to an extra $20 per month in your payment ($460 instead of $440).  In this case, if the car you are looking at has an invoice of 21,000 with no rebates you will more than likely NOT be going home with that car.

 

At the end of the day if you have a monthly payment that you are willing to pay for the car and the dealer can make that happen isn't that what is most important?  If the dealer makes a profit and the salesman makes some money and you get the car you want at the monthly payment you are willing to pay where is the problem?  I don't understand the "lets screw the dealer out of every possible penny we can" mentality.  Never did not even when I was not in sales and purchasing a car.

I have heard of people that want more specific vehicles also have less negotiating power over someone less concerned with color and accoutrements. If you want *that* color and *those* exact options and they gotta order it in and wait around...that may not play to the buyers favor?

That depends.  If another dealer has one and they can do a dealer swap it's usually not an issue.  If they have to go a distance for it that cost will have to be added to the deal (usually about $100, it won't appear on the deal but it will be factored in by the dealer).  If you are special ordering a vehicle you should not have to pay more but the rebates/financing available today may not be in effect when your vehicle arrives so that could inflate the cost at NO FAULT of the dealer.  The dealers are generally more motivated to move a vehicle on the lot, even when doing a dealer trade they are still moving a vehicle off the lot so they are pretty good at doing that.  They can do a vehicle search and see where the car you want is located...There may not be any configured exactly how you want it.

 

My recommendation is to have several color choices.  Be wary of questions like Do you like the red or the blue?,  that is a trial close...there is a technique that I found very useful called the "Columbo", the sales person starts to walk away after a few steps they turn and ask "did you have a trade?"  This is a way of getting a response that is unguarded and can see through the "I don't have a trade" when you really do ploy.

 

There is a saying that sales people joke with..."How can you tell the customer is not telling you the truth...their lips are moving."  It goes both ways because of the past history of dealers that did infact take advantage of people.  That is not really the case anymore.  There is no other industry that you can BEFORE going shopping know how much the retailer paid for the item you are buying.

 

OH  Always Always get a copy of the deal sheet, some places will call it a 4 square.  If they don't want to give it to you ask why not?  If you believe the dealer just does not want to move the car take that 4 square and go to another dealer...lay it all out tell them the deal you want.  If they will write it take it and take delivery on the spot.  Especially if it is the last day of the month letting them know that you want to leave with the vehicle TODAY (we called them SPOTS) is important.  That vehicle sale does not count for the sales person or the dealership until the plates are on and it's tail lights are going down the road.

[ivans imports]

Buyer beware and i totaly think its worth whatever it cost to have a exp tech check car out for you I charge 40 $ to checkout car and is worth every penny. Find all that little stuff you whould not think about and can get a good look under the car. Even if it cost 120 $ still worth it when one small repiar can cost 1000 $ at least gives you power to negotiate and a report on car from tech gos along way .