What is a fair price? How should I negotiate a great deal?

[Eikon]

Let's talk a bit about dealerships, invoice pricing, profitability, and negotiating.

First, let's all understand that car dealerships are "for profit" businesses. They don't exist simply to benefit us. The do provide that service, but at a price. They exist to make money. That's OK.. they should make money. They need to stay in business, pay their employees, and taxes, etc...

Let's also understand that the salesperson is not the "enemy". I spent some time as a new/used car salesman a few years ago. It's a tough way to support your family. It seems that most customers come on the lot expecting to do battle with you. They treat you as the enemy and think no matter what, you will try to screw them. This isn't true! Treat your salesman with respect and appreciation. Their job is to help you decide which vehicle is best for you and then reach an agreement on a sales price that is fair for you and the dealership. Keep in mind that most are paid according to the profit to the dealership, so it's inherently in their best interest to keep a higher price. But at the same time, they have to make a sale in order to make any money. So it's a difficult job.

Invoice Pricing is usually NOT what the dealer's actual cost is on the vehicle. Years ago the invoice was a simple figure that described a dealerships actual purchase price was for a given vehicle. When this data started to become common knowledge to the consumer, the auto industry got smarter. They increased the invoice price and introduced dealer "hold-back". From Edmunds.com "Dealer hold-back is a percentage of either the MSRP or invoice price of a new vehicle (depending on the manufacturer) that is repaid to the dealer by the manufacturer. The hold-back is designed to supplement the dealer's cash flow and indirectly reduce "variable sales expenses" (code words for sales commissions) by artificially elevating the dealership's paper cost." Not every manufacturer has a hold-back, but Nissan does. Here is a great article to help explain and show what that hold-back amounts to. http://www.edmunds.com/advice/....html

What is the complete picture for dealership profitability through car sales? Well, we've established that the dealership earns a profit from the difference between the sales price and the invoice price. We've also now established that the dealership earns an income through dealer hold-back. The third major part, and often the most profitable for the dealer is through the finance department. The finance managers of a dealership earn profit through selling car loans, car care packages, extended warranties, gap and disability insurance. Did you know that the prices on some of these items are also negotiable? This can be a great way to save a few bucks a month on your payments. In addition to the finance area, car dealerships can earn profit through specialty part sales and add-ons. Finally, the most profitable part of a dealership is usually the service center. They earn money through the repair and maintenance of your vehicles. One additional point to consider is that dealership sales volume is also a source of profit for the dealership. Having more units to spread out fixed costs is a benefit. More than that, most manufacturers give preference in allocating future vehicles to dealerships who move more volume. So, simply moving more units off the lot can also be a source of benefit for the dealership.

How should I prepare to negotiate a good price on my vehicle? Knowledge is key! After you decide which vehicle is best for you, it's best to leave the dealership and do some homework before returning to discuss terms of purchase. Go ahead and fill out a credit application to save time when you return. But don't get caught up in the heat of the moment and negotiate just after falling in love on the test drive. You can go ahead and ask the salesman for a price prior to leaving, but tell him that you'd like to do some homework prior to entering negotiations on price. Before negotiating price, research a few key items. First off, know the MSRP of the exact build you desire. Second, know approximately what the dealer invoice is on the build. Third, have a feel for what the dealerships hold-back would be on each car. Fourth, get a feel for what other's are paying on the vehicle you are looking at. Obviously as of today (Oct. 2, '07) the Rogue is brand new and still in short supply, thus people are paying near MSRP or above. Fifth, decide ahead of time what other services you are willing to discuss (getting your car loan from the dealer, insurance, extended warranty, etc..) Now that you are equipped with the proper knowledge, you can make some decisions.

Competition is key! In my experience, the single greatest negotiating tool is to introduce competition into the equation. A dealership will fight tooth and nail for every dollar they can get as long as they feel they have the sale hostage. However, as soon as you introduce competition into the mix, the dealer's new chief concern is simply putting another deal into their books and not the competing dealerships books. Remember that volume is important to most dealerships as it gives them additional competitive advantages. I can tell you that many times the goal in the negotiating went from "let's make a profit on this sale" to "let's make sure we get this sale". When this happens, the prices can fall very quickly.

What is a fair price? So now that we've gotten down to the nuts and bolts of this pricing game.. what is a fair price? Well, we should all agree that the dealership needs to make some money. Of course, we all want the lowest price we can possibly get as well. At this point we truly come down to an individuals opinion on the matter.

My opinion is that on the average new car a fair deal for both parties is a price of a few hundred over invoice and the consumer's willingness to use the dealership's finance department for their services as well.

I think asking for a price in that "hold-back" is territory is unfair to the dealership. A consumer should not ask for this as it's vital to the dealership to cover it's fixed expenses. The exception to this rule is in certain very high volume, high competition vehicles. For example, the Toyota Camry is a car that is very often advertised for hundreds under invoice. It's the highest volume seller, and competition has gotten so cut-throat that dealership simply view them as a volume tool and to help drive in finance and future service business. I can assure everyone that the Rogue will not reach this point.. unfortunately.

I think a price at or over MSRP is for people unfair for the customer. Unless it's a new Nissan GTR, a vehicle who's demand will far out-pace it's supply, the negotiated price should always be under MSRP. Please don't pay the sticker price on your new Rogue. Even now, when dealers claim they can sell them high because of supply and demand. Remember that the quicker they can sell those first Rogue units, the more allocations they will get in the future.

In my opinion, a well equipped consumer should be able to sit down and have a stress free experience in negotiating a sale price. Start low and understand that they will counter you high. Each time you make an offer express some of your reasoning for that offer. Tell them what you know to be true and show them that you are well prepared. Always remember to play the competition card early in the process as that will change the dealerships train of thought and help immensely. If you plan to discuss financing and other insurance or warranty purchases, make sure you express this to the dealership so they can consider these other profit centers into the equation and hopefully relax their stance on the contract price alone.

I hope you find this helpful. Good luck in your Rogue purchases!

If anyone else has any observations, opinions or experiences to share with our forum, please don't hesitate to reply to this thread. Let's use this as a tool to help all of us.

[mquebe]

I think I would offer $26,000 for the SL with the color spoiler,moonroof,leather package,mats and kick plates plus TT&L. Is this a fair price. Invoice comes up around $25,000 something.

[rsm]

I've done quite my fair share of reading and research over the past few weeks. this is an AWESOME post, eikon.... very descriptive and a great overview. I also recommend Edmunds for more reading.....

I agree with the post above. I think many dealers WILL offer below MSRP. The question then becomes by how much. The mark-up looks like it's less than 9%. If I was offered a mark-up of 4%, I'd think it was a pretty good deal.

However, I have never bought a car in the year before the model year....

Eikon: nice work, as usual!

[Roguerunner]

I just bought a Rogue SL,premium pkg (Bose stereo,satellite radio),Moonroof,FWD this past Wednesday. The sticker was 24,780 & I offered 23,700 & got it for that. I feel like I got a good deal,based on the fact that this is such a new model. I am absolutely loving it. I looked at Rav4 & for the money,this is the way to go. The same package on Rav4 would have been $27,000! They are selling like hotcakes at our dealership in Norman,OK!

[avenger97]

I asked for a price over the internet, they came back with 250 bucks over invoice for anything on the lot

[henrysmom]

I just purchased a SL AWD, Leather pkg, premium pkg, moonroof pkg, bumber protector,splash guards, 5 piece mat set, wind deflector for 24,543 plus tax and license. I had to drive to a dealer out of my area because nobody would match it. I did it all on the internet. I walked in and signed the paperwork. I get delivery in early Dec.

[jasonMz3]

Picked up my Rogue last night. Iridium Graphite with Gray Leather, moonroof, floor mats, bumper protector, and cross rails for roof rack for $24990 + TTL. MSRP was $27940.

[ILBUCKI]

Good post Eikon.

I just purchased a Rogue SL AWD Gotham Gray/Gray Cloth Interior, Premium Package, Roof Rails, Mats, Splash Guards, Bumper Guard, Aluminum Kick Plates and Wheel Locks. Also included in the deal: no dealer advertising on the vehicle, the first 2 scheduled maintenance visits under the Premium Maintenance Plan (inlcudes many more visual checks than the other two plans), free loaner anytime the vehicle is in for service at purchase dealer and free car washes on Saturdays. Total price: $440 below invoice.

No add ons, such as undercoating, fabric protection, etc. No dealer financing.

It took the dealer 3 weeks to "locate" it (our area seems to prefer black interiors).

Other dealers said my "deal" would fall apart and the dealer would not honor it. The others were holding on for MSRP. I took delivery - and all was delivered as promised.

I agree with the post.... whatever you do....don't pay MSRP or above.

[Eikon]

Wow.. congrats on the purchase! Sounds like you got a whale of a good deal!

[ILBUCKI]

I've long held the same approach you outlined. The more informatin you have the better off you are. The more you (buyer) talk, the more power they (dealer) have in the negotation (true of any negotiation, not just for car purchases). Also - creating value is important. Engaging them into the "Premium" maintenance plan gives them the mindset that I'll be more aggressive with my maintenance routine (read...more profit for the dealer in the long run).

[Palmetto]

I've approached both dealers in my area for an online price quote via Edmunds and directly through their websites. I can't get either of them to do anymore than call me and ask me to "come in". What's the best way to go about getting them to actually offer a quote via the internet? Perhaps they're not hungry enough right now because the Rogues are so new?

[avenger97]

every car dealer has a "Internet price Guy", He can quote you directly, but you must request the quote thru the internet Nissan site, go for as many dealers as you can even if its further away, you can still have it serviced by your local dealer. the more quote the more competitive the pricing. If you ask a floor sales guy he wont even the internet guy exist

[Rogue Man]

I want to get a Rogue SL AWD with leather and moon roof which is $27,415 MSRP i hope i can negotiate as low as 24,000 and then go from there so 24k_ TTL is that possible? also indigo blue or black? what color should i choose? i like both colors but cant choose which one to get! and with black leather.

[ILBUCKI]

While I would never say "never"...$24K will be on the far edge of realistic given the market conditions. You might be able to cut a deal on a "demo", but even those aren't sticking on the lot long enough to get enough miles and wear/tear to justify moving at $24K. If that is your max price, you may need to either (a) wait until model year close-out or (b) ditch the leather.

Color is a purely personal choice.

[MIKE DEGUZMAN]

go in w/ a copy of a edmunds TMV on the particular car u want and say that the nissan dealer down the road offered 500 over invoice and ask how much they can beat that by.

[Palmetto]

go in w/ a copy of a edmunds TMV on the particular car u want and say that the nissan dealer down the road offered 500 over invoice and ask how much they can beat that by.

I'm afraid the Edmunds thing wouldn't work very well on a Rogue. At least in my area, they're quoting TMV the same as MSRP.

[jayT]

Guys, I am new here. You guys are doing a great job !!!

Rogue Indigo Blue SL 2WD Black cloth interior with premium package, splash guards and rear bumper protector for $ 22,888 + TTL.

From reading this post, this deal seems to be good.

What freebies can I ask for (like tinted windows etc...) ?

It's my first new car... appreciate any help...

[gypsylien]

I just purchased a SL AWD, Leather pkg, premium pkg, moonroof pkg, bumber protector,splash guards, 5 piece mat set, wind deflector for 24,543 plus tax and license. I had to drive to a dealer out of my area because nobody would match it. I did it all on the internet. I walked in and signed the paperwork. I get delivery in early Dec.

Can I ask you from w/c dealership you got your Rogue from? I'm currently still in the "research" mode, and this site has helped out immensely! I'm from the Ventura area of Cali, and w/ my costco membership, my best quote has been $300 above the invoice. The Rogue I want MSRP's @ 27,600 & Invoices @25,439. I've been told to add 9.5% to the "agreed" price and this will be +/- your OTD price, w/c puts this car OTD @28,100--but if I'm able to save an extra $1000---I'm almost willing to drive to another state!! Any help, advice, tips would be soooo appreciated. Thank you!!

[Eikon]

Guys, I am new here. You guys are doing a great job !!!

Rogue Indigo Blue SL 2WD Black cloth interior with premium package, splash guards and rear bumper protector for $ 22,888 + TTL.

From reading this post, this deal seems to be good.

What freebies can I ask for (like tinted windows etc...) ?

It's my first new car... appreciate any help...

Welcome jayT.

This is a great question that you ask. One that I should have mentioned when I was creating the original post. But it was a sales technique that I rarely employed when I was working in the business, so it was an oversight on my part.

Freebee's are almost never Free! Dealerships and salesman love "throwing in free stuff" during the negotiation process.

It changes the perspective of value for the buyer more significantly than it changes the profit level for the seller.

The markup on the Rogue and most other cars is around 10% between MSRP and Invoice. The markup on dealer accessories, parts, and services, warranties, and maintenance programs is typically as much as 50%. Obviously the markup will differ depending on the item, but the markup is almost always significantly higher than the car itself. So when negotiations get tight on the real dollar amount of the car, turning to "freebees" can be a great way to convince the buyer to sign without giving up more profit.

The reason this is so successful is a strange thing to me. The buyer in a car negotiation always seems to perceive the value of the car deal based on their knowledge of the markup available on the car. But for some reason when items that are not included in the sticker on the car (non factory installed options) are brought into the process customers always seem to perceive the value of that addition based on the MSRP. They just seem to forget about markup on that item.

As I type this, I am thinking that my point may be difficult to understand, so I'll give a real world example...

John Doe walks into a dealership and finds Rogue that he would like to buy. He's already read this thread and is very well educated and has a price in mind that he'd like to reach in his negotiations. Let's say the MSRP of this fictitious Rogue is $25,000 with the invoice at $23,200. Mr. Doe is prepared to buy the vehicle for $23,500. The two parties push back and forth and just don't appear to be able to give anymore. The dealer is still offering a price of $24,350, but Mr. Doe won't agree to it. Suddenly the salesman has an idea. He goes and talks to the manager and comes back with a new offer. He says, "Mr Doe, I really want to see you drive away in this new Rogue today, so I've got an offer that I think your going to love. Here's what we'll do for you. The price of the Rogue will be $24,300, but we'll throw in a 2 year maintenance plan worth $450 and window tinting worth $300 and wait... even better.. a set of all weather floor mats value at $125 for FREE!!!"

Mr Doe, thinks to himself.. "Hmm.. so i'd be getting a price of $24300 with a 2 year maintenance plan worth (a fictitious value) of $450 and a window tinting worth $300 and a set of floor mats worth $125. So I'd really be getting a value equal to $24300 - 450 - 300 - 125 = $23,425. That's $75 less than the $23500 target that I set. I'll take it!!!" Mr. Doe drives away a happy new Rogue owner.

The dealership is thinking.. Alright, so were at $24300 which is a profit of $1100 over our invoice of $23200. To make this deal happen we had to give up a maintenance plan that our service department will invoice us $250, plus a window tint that we have an outside contractor do for us at a cost of $200, and a set of floor mats that our parts invoice price is $60 on. So, not including other dealership profit centers such as holdback and finance department income, our sales department earned a profit of $590 on the vehicle which would be comparable to a straight sales price of $23,790.

Mr. Doe perceived a value of $23,425 or $225 over invoice, while the Dealership earned a profit equal to $590 which is comparable to $23,790.

Again, what happens is that the buyer's perception of value when dealing on the car only is based on a perception of wholesale costs, but when new items are introduced, the always seem to view the retail value of those new items.

Moral of the story after 30 minutes of rambling on my part is: Freebees are never free! Always consider the wholesale value of an extra item and continue to press the dealer for a lower price!!! *But remember, a fair deal leaves the dealership with some profit because they wouldn't be in business long if they lost money.

Done rambling now.

[jayT]

Eikon,

Thanks so much. That definitely puts me in a better position to negotiate.

Do you think the price is fair?

Thanks.

[Eikon]

Jay.. your MSRP would be $23500 correct?

If that's right, your getting a bit over $600 off sticker price?

It's not a bad price, but I think you can do better. Shop around a bit.. there are tons of Nissan shops in the Dallas/Ft. Worth area. I bet you'll find one closer to $22k even. Remember there's always another dealership, and time is on your side.. the longer you wait, the more they will be willing to negotiate a lower price.

I'd set a target around $22,200 or lower.

But remember that I'm not familiar with your local area, demand for those models, how cutthroat competition is there, etc.. just an opinion from afar.

Good luck!

[ILBUCKI]

Agree completely - nothing in life is free...not even if your buddies "bought" it for you at your bachelor party. Always focus your deal on the price of the car. Always have your financing in your back pocket (pre-approved) and then play the dealer's best offer against your bank...your bank will almost always match it (but not 0% financing, which gets you stuck with darn near sticker pricing). Bank customers with good credit have the upper hand.

Once you are within $100 of your target price, then y ou can think of add-ons. Avoid the shams - interior protection (it's a couple of $6 cans of Scotchguard), teflon coating on the paint, undercoating and all that crap. Think about the things you might want to add after buying the car (roof rails, door edge guards, etc.). You'll pay "retail" plus installation after you take delivery of the car. Plus, you will usually only get a 1-year warranty. However, if they are installed on the delivered vehicle, you get the full length of the manufacturers warranty. Your research will tell you what the "invoice" price is (example...bumper guard retails for $60 plus installation, but invoice is ~$40 for the part alone). The most you should pay for any add-ons is invoice...because the dealer is still making a profit (invoice is not what the dealer really paid), but then again, you're not paying retail plus installation. If you package a couple of the add-ons together, target a price below invoice. The key is to know exactly what add-ons you want BEFORE you start the negotiation. Don't add-on anything you did not plan for before the negotiation because you will not have done your research to establish a target price in advance.

I hate to sound like the school teachers we all hated growing up...but you have to do your homework before talking price. If you don't, you'll fail your test (negotiation). Knowledge is power. You'll still get your car and the dealer will make the sale. Remember, economic theory states that a "fair price" is what a willing buyer and a willing seller (both will perfect information) are willing to payfor or sell an item. We don't live in a world with "perfect information" for either side (you don't know every fine detail of what the car really cost the dealer and they don't know every single piece of information about you...unless you tell them!).

Best of luck in your upcoming negotiation for your Rogue.

[jayT]

Eikon and ILBUCKI,

Thanks a lot for all the info and advice. I visited 6 dealers in the area. Noone would do better than 22,800 + TTL. Still looking.

Thanks.

[ILBUCKI]

You're welcome. Be patient. Supply & demand will level out.

Also - you don't necessarily need to tell a dealer what the other dealers are offering. That gives them too much information. Plus, they can lower it by $100 and claim the lowest price...which is not necessarily the price you want.

Out of the 12 dealers I communicated with in my search, 8 of them stuck at or near MSRP. Once I got 1 of them to start to move, my position with other dealers was how they faired in terms of being "competitive" with another dealer's price. I never revealed any dealer's pricing to a competitor until I got below invoice. Once I was there, most dealers said the deal would never go through and claimed they would "see me again" when the low price dealer did not make good. Turned out they were all wrong...I did get my deal, but it required patience (took nearly a month to do the dealer locate on the specific Rogue I wanted). The key in my case was that I was working with a high volume dealer that was hungry to increase his future allocation of Rogues.

Patience is the key. Remember...it's your money. The economy is tanking and discretionary spending (new cars included) is going down. The pressure will mount for dealers to pay their overhead. Rogues are hot for the moment, but that heat will cool down. Take your time and stay focused on getting what you want at your target price.

[Roguer]

HiGot my new Rogue:SL AWD, Leather, Premium, Moonroof, Splash guards, weal lock, 4 matsPrice: $24375 + TTL

Rogue is much, much, much better then I expected

[Ohio Beverly]

I work for a company that is a Nissan supplier, so I can get the VPP discount. The price should be 2.5% over dealer cost. How do I know the salesman is telling me the true dealer cost and not inflating it? Do I still have to worry about hold-backs and all kinds of other add-ins? Since the price of the new car will be set, what kind of leverage do I have as far as what they will give me for my trade in? I am going in to my local dealer tomorrow and would appreciate help from anyone who is knowledgeable about VPP pricing.

[ILBUCKI]

The most important thing to keep in mind is that a VPP program does not represent a contractual obligation to purchase at whatever price VPP ends up being. It is a pricing point...perhaps you can get better, perhaps you can't. It does not mean you HAVE TO buy at that price.

I don't know what all gets counted in the "dealer cost" of a VPP deal. Sorry I can't help you there.

Trade-in is an entirely separate deal all together. Typically, you will get the short end of the stick on trade-ins. NEVER tell them any amount you owe on the trade...it is irrelevant to the value of the trade-in. More importantly, go in prepared with trade-in, private party and dealer retail values from NADA, Edmunds and Kelly Blue Book. You'll have a decent idea of your true value which should be you best barometer. I'd also suggest you take the car to CarMax. They'll give you a free purchase analysis that they will guarantee for 7 days. That way...you already have one offer on the car. Don't reveal that value to them until after you see what they offer on trade-in. My experience at CarMax (to do the free valuation) was completely hassle-free. They offered me $4,000 more for my car than the Nissan dealer did on the trade. Even after you take the tax-advantage into consideration for the trade-in, I still ended up better off selling to CarMax than trading in the car. CarMax's offer was consistent with the data in NADA, Edmunds and KBB.

Best of luck.

[Ohio Beverly]

I've been back & forth with this dealer's internet salesman all week. "They have someone who wants my car, but I have to come in this week." Pretty amazing, huh? There can't be that much demand for a Z3 roadster this time of year in OH (it's snowing!) Anyway despite the obvious lie I will go in and see what he has to say. However I have already decided I will not test drive a new car until I hear what their offer is. No sense wasting either of our time. I am sure they will offer me the trade-in value and I am looking for closer to the retail. As much as I would love to have a new Rogue, I am not giving away my paid for and well-loved car. Thanks for your advice.

[Eikon]

Beverly, I don't mean to sound crass, but I promise you won't be happy with the offer they give you for your used car if you are expecting close to retail value.

Car dealerships offer a trade-in value for the sake of earning a profit on a used car. They have various fees involved in reconditioning, the risk of major mechanical repairs, financing it into their stock, etc..

If you are holding out for a higher offer, you'd be wise to sell your vehicle via private party advertising.

[Ohio Beverly]

Ha, pretty much what I've been hearing from the guys I work with. I really have no expectation of coming home with a new car, honestly. A value somewhere in the middle would be ok. I'm really torn because I love my little car, but I want the new one too... having 2 really isn't an option for me. I guess I just need to hear what they say and get it out of my system.