Good Car Deal – or Not?

best car prices1. A car dealer offers you what seems like a good price on a brand new car. Is it a good deal or not? Should you expect to do better?

There are two prices that are important to know when buying a new car. One is the MSRP (Manufacturer’s Suggested Retail Price) or “sticker” price shown on the car’s window sticker — retail price. The other is the “invoice” price — the price a dealer pays a car manufacturer for the car — wholesale price. With no other factors involved, a dealer can sell a car for a price anywhere between MSRP and invoice, depending how much profit he wants to make.

Many customers think dealers should sell cars at cost, which is ridiculous because any business has to make a profit to pay the bills and stay in operation.

Having said the above, dealers often get “help” from their manufacturer in the form of “holdbacks”, bonuses for making sales goals, and factory-to-dealer cash to help sell particular models and styles. Manufacturers also frequently offer direct customer rebates and bonuses.

Given this kind of help from the factory, dealers can often sell cars for prices that are below invoice price — with little or no money from their own pockets.

Although it’s easy enough to look up dealer invoice prices, it’s more difficult to know about holdbacks, hidden bonuses, and factory-to-dealer cash. Therefore, one of the best ways to know what you should pay for a new car is to know what other people are paying. TrueCar is one way to find out what others are paying for any specific car make and model. That way, you’ll be prepared with a knowledgeable price before you visit your dealer and begin negotiating.

2. A car dealer offers you a monthly payment that fits within your budget. Is it a good deal or not?

Unless you know the fair selling price of a car (see discussion above), how would you ever know if the monthly payment is a good deal? Just because it fits within your budget doesn’t make it a good deal. In fact, it might be a terrible deal.

Never negotiate monthly payments alone. Always negotiate price (as discussed above) first and have the dealer calculate the monthly payment for that price. Or you can calculate the payment yourself with one of the many auto loan calculator apps for smartphones. On a computer, you can use an online auto loan calculator such as this one.

Car dealers use their manufacturer’s “captive” finance company for providing car loans to customers, but you can always look for a better deal at a bank or credit union. The best finance deals are available to people who have good credit scores. If you don’t know your most recent FICO credit score, you can get it online before you go visit your dealer. What’s your FICO score? Find out now when you check your credit report for $1 at!

3. A car dealer offers you a low monthly lease payment. Is it a good deal or not?

Lease payments are a little harder to evaluate than loan payments.  Leases are based not only on the negotiated price of a car, but also on finance rate (money factor), lease term (months), and lease-end residual (resale) value.

Therefore, the most important factor in getting a good lease deal is negotiating a good price (see discussion above). The other factors are set by the dealer’s lease finance company and are not negotiable. However, you can evaluate such deals by using a Lease Evaluation Calculator such as the one in the Lease Kit.

Most special promotional car lease deals being offered by car manufacturers and dealers are usually genuinely good deals, if not excellent or outstanding (see other related articles on this web site).  These deals require no further negotiations.

If you don’t understand how car leasing works or don’t know if leasing is right for you, we recommend that you look at the free Car Lease Guide at


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