On new cars, the dealer doesn’t actually pay invoice for the cars, they have about 3% of the msrp built in under invoice, mostly used as advertising money and to pay the power bills. it’s really hard negotiating to get them to go under invoice when selling a car. it mostly depends on how long the car has been on the lot. usually after about 3 months, the dealer has to start paying interest to the manufacturer for it sitting there un-sold, then they get pretty anxious to move the car.

My best advice for buying a new car is to pick out the one you want, with the options you want, and shop at least 3 of the biggest dealers in your area with that model. In my experience, small town dealers have to sell for higher profit on each unit to be able to stay in business, the large dealers keep it going by selling a lot of units. Don’t commit to anything when your there, just tell them your “shopping for the best deal”. At most dealerships, they aren’t going to let you walk out the door with a price holding a lot of gross profit, they know your going down the street shopping and they want you to come back. Give them your phone number and wait about 3 or 4 days (if that long) and they’ll be calling you to “see what they have to do to put a deal together” then use the info you have gathered up to that point and let them fight each other for the sale. Remember that rebates are from the manufacturer, not the dealer, so negotiate your best price, then take the rebates off after that.

On a used car, it’s a different game. Used cars are where salesman usually make the most money, because the buyer has no way of knowing what they actually paid for that car. You could have two of the exact same models, spec’d the same way…one that came in on a new car trade and one that maybe came from an auction, or somewhere else. Both could be priced at 10,000….on one that might give the dealer 800 profit, the other maybe 4,000 or even more. You really have no way of knowing. My best advice is to use edmunds.com, or some other car value web-site to see what similar models are selling for in your area. Then just go with the one you feel best about.

Remember, buying a new car is supposed to be fun and exciting, so try to have fun and enjoy it. Just don’t let the salesman pick up on that, cause they’ll use your excitement to make more money than they should.

If you are buying used, check and for values.

Used cars are just a wild guess. The dealer may have bought it at an auction, or may have taken it in as a trade-in car, and have absolutely no money invested in it.

If you’re uncomfortable with your negotiating skills, you might do well to either deal with set-price dealers (Carmax, Saturn) or take someone along who is more savvy with negotiating skills.