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| The Basics | 5 keys to driving a hard new-car bargain
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Know the territory before you ever set foot on a dealer's lot. By gathering information on prices, rebates, financing, insurance and fuel economy, you can negotiate from a position of strength.
By Jennifer Mulrean
Despite the advent of no-haggling Web sites and one-price dealers, if you really want to get the lowest price on a car, you've got to go head to head with a salesperson. Your secret weapon: information.
The quantity and quality of data available to car buyers is steadily improving. No longer do you have to guess at what a dealer really paid for a new car or the amount of secret incentives. Everything you need to get the lowest possible price on a new car is available online, either free of charge or for a few bucks. Here's a rundown of the pit stops to make online before stepping into a real-world dealership.
Not only are there countless resources for evaluating prices, but the Net offers the ultimate in pressure-free browsing. You can search by price, specific car make and model, or by category, such as "passenger cars" or "sport utilities," on sites such as MSN Autos, Autobytel, AutoWeb and CarsDirect. The detailed vehicle write-ups make these sites a great way to narrow your search to a handful of competing models.
'True market value'
In addition to listing details such as ground clearance and headroom, the sites list the manufacturer's suggested retail prices and dealer invoice prices, which are a first step toward evaluating the all-important "wiggle room" when the real deal-making begins. Other important factors are dealer incentives, how long a car has been sitting on the lot, the local market and the level of demand for a particular model. These numbers can be much easier to find online than on a car lot, where you might have to pry them from your dealer's fingers.
Edmunds.com's calculator for new-car prices uses the manufacturer's suggested retail price, the dealer invoice, overall supply and demand, and monthly pricing data from dealer transactions to give you an idea of what people are really paying for a given car. When I looked up the 2001 Subaru Outback Wagon (with a manual 5-speed transmission), I found that the list price was $23,390 and the dealer invoice was $21,262 (including a destination charge of $495), which matched what I found at Kelley Blue Book. Edmund's "True Market Value," however, priced the same car at $21,608 including the same destination charge.
Rebates, incentives
Another weapon to bring to the bargaining table is knowledge of the incentives and rebates dealers are receiving from car makers. These include typical cash rebates, sometimes thousands of dollars, but also something called a "holdback."
Holdbacks are the manufacturer's way of helping dealers finance the cost of keeping a car on the lot, usually for up to three months. If a car has been sitting on the lot for close to that time period, the dealer may have more incentive to sell it before the holdback runs out because he'll have to start paying finance charges.
On the other hand, if you're buying a car that has only been on the lot a short time, the dealer stands to make more money by pocketing the holdback than by selling you a car that has been there close to 90 days. You can find lists of dealer incentives at Kelley Blue Book and Edmund's.com, which also lists the 2001 holdback values for select car makes (usually a percentage of either the invoice or MSRP). I found that the Subaru I was interested in had a dealer cash rebate of $300 and a holdback of 3% of the MSRP.
Remember, holdbacks and other dealer incentives often allow a dealer to make money even when selling you a car at or under the invoice price. If you don't know the exact amount of dealer incentives for a particular model, Autobytel notes that you can assume some level of dealer incentive is in effect on models that have been in showrooms for six months or more.
If you're considering two comparable cars, rebates or low-rate financing incentives that put money in your pocket can be a deciding factor. MSN Autos, Autoweb, Autopedia and Kelley Blue Book are good sources for this information. I found that 2.9% financing is being offered on that Subaru Outback through July 2. Edmunds.com also noted the geographic limitations of this offer.
Often buyers are given a choice between cut-rate financing and a cash rebate. Do the math both ways to make sure a check in hand is worth giving up a lower monthly payment.
Financing
To make sure you don't give back in interest any savings you negotiated off the sticker price, secure your financing before you even go to the dealer. It may prompt the dealer to try to beat the lowest rate you've found. But if he can't beat it, you won't be forced to accept anything but the best terms possible.
You can research car-loan rates across your state on MSN Money. The best rate I found for a 37- to 60-month new car loan using this search was 7.15% from PeopleFirst.com (for people with "excellent credit," according to PeopleFirst's site).
A calculator on Edmunds.com breaks down average car-loan rates by credit rating. For example, someone with a "platinum" credit rating in Seattle could expect to receive a rate of 8.72% for a 48-month new car loan. (You can complete a quiz to determine what your credit rating would likely be or you can order a report on your credit score here.)
Insurance
It's possible that you'll be looking at cars with similar initial costs that may be vastly different when it comes to insurance and repairs, adding to your costs over the life of the car. You can research and compare injury, collision and theft losses at the Insurance Institute for Highway Safety (IIHS) Web site. I found that Subaru Outbacks (1997-1999 models) were better than average for injury and theft losses but only average for collisions.
You can also research how much it costs to repair a car that is in a low-speed (5 mph) fender bender typical of clogged highway and parking lot driving. Though I couldn't find results for the exact model Subaru I was looking at, the 2000 Subaru Legacy had an average repair cost of $390 in four different low-speed tests performed by the IIHS.
To compare the costs of insuring two different cars, you can get free insurance quotes online from sites such as MSN Money and Progressive. Both sites offer quotes from multiple insurance companies. Also, Esurance allows you to compare insurance costs for up to four cars at once.
Fuel economy
Another ongoing cost to research is fuel economy -- or lack thereof -- for cars you're considering. The U.S. Department of Energy and the Environmental Protection Agency have a fuel economy site where you can look up the stats for individual vehicles and make side-by-side comparisons. You can see a car's estimated annual fuel cost and the amount of carbon dioxide emitted yearly, in addition to the miles per gallon -- for the city, on highways and a combined rate. (These calculations are based on 45% highway driving, 55% city driving, 15,000 annual miles and a fuel cost of $1.70 per gallon, though you can also customize these values.) In case there's any doubt, the site spells out whether your car is a gas-guzzler.
It also has a list of most and least energy-efficient cars, including those that don't use gasoline, and a fuel-cost calculator. Using the site's example of a car that gets 20 mpg versus one that gets 40 mpg, and a cost of $1.70 per gallon of gas, driving the 40 mpg car would save you $2,550 over four years (based on 15,000 miles per year).
By choosing a car that makes the most economic sense, negotiating aggressively and taking advantage of low-rate financing, you can save thousands of dollars over the life of your new car.
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