Virtually every driver knows that buying a new car puts a strain on your bank account. Obviously, there’s just no way around spending a good chunk of your money if you want a safe, reliable, high-quality, new car. Beyond the common knowledge that new cars are expensive, however, there are multiple new car pricing basics you should know before you head to your local dealership. Car pricing is way more complicated than many drivers realize before they arrive at the dealership to sign their purchase paperwork, but by understanding the basics, you can save a ton of money. So what are some things you should know before you buy that Nissan Altima you’ve been eyeing?
Remember that most new cars do not come with one concrete price tag. The price that the dealership pays the manufacturer for a car, the price the manufacturer suggests that the dealership charges for the car, and the price the dealership actually charges for it are all different.
These extra charges leave a lot of room for car salesmen and dealerships to advertise misleadingly low prices and trick you into paying thousands of dollars more than you expected when it comes time to actually take ownership of your new car. Understanding the essential pricing basics of new cars can prevent you from getting blindsided by a much higher price than you expected. It can also help you spot dealer scams and avoid overpaying for your new car.
Dealer Cost
The dealer cost of a new Altima is the price that your local dealership paid to purchase the vehicle from its manufacturer.
Knowing how much a dealership paid for a specific vehicle can help you determine whether or not to negotiate the sticker price of the car in order to avoid getting scammed or overpaying.
Manufacturer’s Suggested Retail Price (MSRP)
The MSRP of a new car is the manufacturer-recommended sticker price of that car. It offers an estimate for how much you should expect to pay for a specific car if you buy it new at a dealership.
If you’re not sure whether your local dealership is charging a fair price for a vehicle, check the car’s MSRP before making a decision.
Sticker Price
As its name suggests, the sticker price of a new car is the price that appears on the price tag sticker that is usually stuck to the window of the car on a dealership lot.
In order to judge the sticker price of a car, it’s important to understand the basics of dealer cost versus MSRP versus sticker price. The sticker price of a new car should be no more than seven percent higher than its dealer cost. To assess whether or not the sticker price of a new car is fair or deserves negotiation, you have to also know the dealer cost in order to compare the two prices.
Is There Additional Fees?
Oftentimes, dealerships tack multiple additional fees onto the base price of your car before you can drive it off the lot. Some of these fees are unavoidable, but others are unnecessary or at least negotiable.
Sales Tax
When you check out car prices, you’re probably not thinking about sales tax. For most everyday items you buy, sales tax doesn’t amount to much. However, when you make a major purchase-like buying a new car the taxes you have to pay can add several thousand dollars to your car’s original price tag. Unfortunately, sales tax on your new vehicle is usually state-mandated and non-negotiable.
Sales tax can be confusing and difficult to estimate because every state charges a different sales tax and certain cities add additional taxes as well. Research vehicle sales tax in your area before you head to your local dealership. If you’re trading in your current vehicle for a new one, make sure that you are only taxed on the difference in price between the two cars. Some dealerships try to charge you sales tax on the full price of your new car even when you trade in your old one.
Documentation
A documentation fee which covers the preparation of all paperwork and contracts that officially transfer your new car into your name is another additional charge that is Virtually unavoidable when you buy a new car. You should expect to pay between $100 and $300 in documentation fees.
Dealer Preparation
While state sales tax and a documentation fee might be unavoidable, you shouldn’t have to pay a dealer preparation fee when you buy your new car. Dealerships often charge this preparation fee under the pretense of compensation for dealership employees getting your car ready for you to take home. In reality, most car manufacturers pay dealerships to prepare the cars for their customers.
It’s important to remember that when you are prepared before going to the dealership, you can save a lot of time and hassle. Know what you can afford and work with your dealer to find the right situation for yourself.
