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Buying a Car on Your Terms

How Dealers Operate

Calculating Dealer Cost

Never Say to a Car Dealer

    Remember, the money you save is yours!

    Purchasing a car is often the second most expensive purchase you will make, after the purchase of your home. Owning a new car is fun. Buying one is not. Car dealers and salespeople sell cars for a living. They attend special sales classes and go through the sales process every day. It’s their job to be friendly and convince you that they are trying to get you the best deal possible. However, their income is a direct result of selling you a car at the highest price possible. On the other hand, how often do we, the consumer, buy a new car? It’s no wonder that it can be a intimidating experience for most buyers. This is why it’s important to read this pamphlet and do your homework before buying that new car. Doing homework means gathering information, developing a negotiating strategy to help eliminate the “games” that sometimes get played (the salesperson goes into the back office and comes back a little later and says the boss just won’t budge anymore on the price), and deciding on the car and most of the options you want ahead of time. This is where your credit union, MAFCU, can help.

      We believe that if you follow these steps below, you will be able to purchase your next new car at a fair price.


      First, pre-arrange the financing with MAFCU as a pre-approved new car loan.

      Taking care of the financing before you visit the dealership should make it easier to negotiate. Discussing financing during new car negotiations is an excellent opportunity for the dealer to divert your attention away from the cost of the new car and towards monthly payments. Usually the dealer will ask you how much you can afford or want to pay per month. Buying a new car by the amount of the monthly payment can be costly – for you. The monthly payment may sound good, but how much are you financing, for how long and at what rate? It’s a good bet that if you concentrate on the lowest purchase price of the car, you will have lower monthly payments with MAFCU financing.

      Telling the dealer you have pre-arranged financing with your credit union eliminates one of the tools the dealer can use to increase the cost of the car.Pre-arranged financing with your credit union allows you to drive a harder bargain with more clout because you already have the money available. You are able to tell the dealer “give me the deal I’m looking for and we can close the sale today”. A MAFCU pre-approved loan will tell you the maximum you qualify for, and you’ll be financing at MAFCU’s low loan rates. You always have the option of repaying your loan through direct deposit, cash or check. You can also repay your loan via weekly, bi-weekly or monthly payments.


      It’s important to make buying your new car, financing it and trading in your old car three separate transactions.

      By blending these three processes together, the dealer has the opportunity to maximize his profit at your expense. For example, if you negotiate the cost of the new car and the price of the trade-in at the same time, the dealer is able to manipulate the total cost to his benefit. The dealer may give you more than you expected on your trade-in to get your attention, but may then increase the price of the new car to cover his additional cost for the trade-in. Getting more than expected on your trade-in means nothing if the cost of the new car is inflated to accommodate the higher trade-in amount.Another thing about trade-ins. Most dealers don’t want older used cars. If you bring a 6 or 7 year old car into the dealership with 90,000 or 100,000 or more miles on it, the dealer has no interest in keeping the car on his lot. Very likely the dealer will ship the car to an auction house just to get rid of it.

      However, the dealer likes to see those cars as trade-ins because they can give you a lot of money for it, which makes you feel good, and the dealer will just add the extra cost to the overall cost of the new car. The best approach is to negotiate for your new car first before talking financing or trade-in. Once you’ve established a fair price for the new car, then ask the dealer how much he will give you for your trade-in. You can find out what your trade-in is worth by calling the Credit Union at 1-800-524-4985. We can give you the retail and wholesale price from the NADA Used Car Guide which is the same book used by the dealers.


      How do you find out what is the fair price for a new car.

      The best method for buying a new car is to negotiate from cost up instead of sticker price down. The dealer has paid a certain amount for each vehicle. He, of course, wants to sell the vehicles for more than what he paid for them, i.e., his profit.

      By using the dealer cost as a starting point, you can simply ask the dealer how much above cost will he sell the car for? While the selling price of a new car varies, based on popularity, many experts agree that $300 to $500 above cost is a fair price to pay for the average new vehicle. This method eliminates the hassles of haggling over the sticker price. No more games such as “I’ll come down $200 more but that’s it”.


      Dealer Discount Financing Programs

      This is a special case. Here, an automaker and often its dealers, pay the financing company to lower the interest rate on new car loans. The dealer then pays a subsidy to the financing company. The dealer recoups this subsidy by increasing the price of the car. Dealers like subsidized financing, or “subvention” campaigns because the programs sell cars. Keep in mind that discount rate financing often means a higher price for the car. With pre-arranged financing from MAFCU, the dealer will often give you a better deal since the cost of the car won’t have to be adjusted to compensate for the discount financing program.


      A source of good information is the internet.

      We suggest you visit web sites such as or or (stands for Kelly Blue Book) Here you can find information regarding dealer cost and prices on new cars and trucks Also you can visit for additional information.

      To find out the dealer cost of the new vehicle you can also call us at 908-526-8844 or stop by our office.

      We can provide you the dealer cost and sticker price of any new car, domestic or foreign. We’ll provide you this printed information, along with all the various option packages showing you what each option package includes. Take note of the CODE on the left hand side of the printout we give you. This code should correspond with the same code on the sticker on the car window. Compare the retail or sticker price. They should be the same price. If they are, this would indicate that the dealer cost is also accurate and should provide validity to your method of calculating the dealer cost.

      Use the worksheet at the end of this pamphlet to calculate the dealer cost for the new car you want to buy.

      We suggest you visit two or three dealerships and show them your work- sheet asking the dealer how much above cost they will sell the vehicle for. You may encounter some resistance as dealers are not used to negotiating this way. They may tell you the figures are not accurate or there are special circumstances regarding the particular car you’re looking at which may increase the price of the car. For example, they may discuss the need to add the cost of advertising to the final cost. In our view, advertising is part of dealer overhead and should not be added to the negotiated price of each car.


      The best time to negotiate for a new car is at the end of the month.

      Car dealerships operate on a quota basis, and they must sell a minimum of cars each month to maintain their inventory level for the following year. You will often find a more flexible salesperson at the end of the month if the dealership has not met it’s quota. Many dealerships are closed on Sunday which is a good time to walk the lot and check out the cars and sticker prices. Keep in mind that any current model year leftover cars that haven’t sold yet are costing the dealer money. When you negotiate for a leftover car you should remember that as soon as you buy it and drive it off the lot, it immediately becomes a one-year old used car with low mileage. Point that out to the dealer when you negotiate on that kind of a deal. The negotiating process works much easier when you know what car and options you want before you start talking money. Be sure to visit more than one dealership and bring along a note pad. Above all, make sure you read the purchase agreement before you sign it. Your negotiated purchase price can be increased in a number of creative ways. Remember, you are in control. You can always get up and walk out if you don’t feel you are being treated fairly.

        What can you do to persuade a dealer to sell you a car at a fair price?

        See the next section to learn How Dealers Operate