Q: When purchasing a new car how much below sticker price should I pay?
A: The sticker price on a new vehicle is also called the Manufacturer’s Suggested Retail Price (MSRP). Few vehicles sell at MSRP. The first thing you need to determine is what the dealership paid for the vehicle. Dealer cost is the amount that the dealer actually pays for the vehicle after holdbacks and incentives. When you see advertisements such as “$100 under dealer invoice” the dealerships are still making a profit. Commonly 2-3% can be estimated off the dealer invoice to establish the dealer’s actual cost to account for holdbacks and incentives from the manufacturer. It is reasonable and fair to offer 4% more than dealer cost. For example a car with an MSRP of $20,000 may have a dealer invoice of $18,000 and an actual dealer cost of $17,460. A fair offer on the vehicle may be $18,158 (4% over dealer cost). Remember always negotiate up from the dealer cost not down from MSRP. Kelley Blue Book lists dealer invoice on most new vehicles. Remember to ask for any special incentives offered by the car manufacturer.