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Michael, Librarian
Category: General
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Experience:  20+ years as information professional
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What is the best way to buy a new car? I made and offer at

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What is the best way to buy a new car? I made and offer at 3%below dealer invoice with mixed results. I have read that at this pricing, because of holdback, discounts to the dealer etc that they still make a nice profit. Is this correct. I had one saleperson say he had been in the business for 23 years and had never heard of that. How does it really work? Thank you
Hello, Thank you for using this service. I wish to introduce myself. I am a Research Librarian with 20+ years of experience.

Quite a number of ideas on how the right way to negotiate a deal for purchasing a new car. Did a little research on this very topic and can recommend some good reading on how the process works.

1. Money magazine has a great overview on purchasing a new car. They recommend that you should stay clear of the MSRP price and use the dealers invoice cost (available on sites like Kelly Blue Book and Edmunds). The formula for such a cost is listed as Dealer Invoice + Destination Charge + Options - Holdback - Rebate = True Dealer Cost.

Here is the detailed report:

2. Consumer Reports is something I have recommended for years for library patrons that wish to purchase a new car. Here is their report on how to negotiate that new car deal:

3. As for your question on holdback, I checked with the people at Kelly Blue Book and they give a very good detailed explanation on what a holdback is and how a dealer uses it in their pricing:

Reading these detailed reports should give you some good numbers to bring with you when you are ready for that new car purchase.
Michael, Librarian
Category: General
Satisfied Customers: 3230
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sorry, answer already accepted.

Customer: replied 4 years ago.

I was already a cr subscriber so I signed up for their pricing service but it looks like it won't give you dealer invoice or hold back info for 30 days? Fine print thing I guess. Thank you

Check with Kelly Blue Book as they give the dealer invoice information: I would also recommend visiting your local public library as every April the buyers guide for cars is printed if you do not already have that issue in hand.
Michael, Librarian
Category: General
Satisfied Customers: 3230
Experience: 20+ years as information professional
Michael and 31 other General Specialists are ready to help you
Sorry, typo as that should be Also edmunds offers this service as well.
I was requested to respond, so here goes.

The online purchase services, like consumer reports, all offer nationwide service, but there are a few other factors that will impact your specific negotiation.

If you are buying a high demand model from a dealer without much competition, do not expect national pricing to drive your deal. The only Toyota store in a small metro area will get all the money he can for his Prius.

If price is the driving factor, competition between dealers will drive price lower. Sticking to factors like percentage off MSRP or expecting dealers to live on the hold back is how dealers want you to think when you come in to purchase.

Every area of the dealership is its own profit center. Purchase price is just one area. Next is finance/insurance, where the dealership also makes money by arranging for financing (their bank charges 2.25%, they get you to pay 3.25%, and the bank sends them the difference each month). Given the small margins on some cars, dealerships can make more on the finance than the sale of the car itself.

Let me close with advice a general manager of a Chevy/Cadillac store told me once. The price of a car to the dealer can change every day. Incentives for slow moving product, incentives to the sales staff for selling them, are updated daily in addition to the advertising and other hold backs you know of. Ask your next salesperson if he is in line for any sales incentives near the end of the month (when one more Impala sale means a trip to Vegas, for example).

If you are driven by hold backs, your ability to negotiate is sorely limited. Your salesperson telling you these programs don't exist means your offer no longer has meaning, and you have been directed to defend a position you can not. Don't go back to them if you have other options. Next time, make a price offer after you have priced financing. They might be aggressive in vehicle pricing if you can be had on the finance of the vehicle.

I hope this helps. good luck, and thanks from Just Answer.