Auto Buying Guide
What is an "auto mall"?
An "auto mall" is collection or cooperative of dealers, sometimes owned by the same dealer, sometimes owned by many different dealers. They have all put themselves on one particular street or one particular area of town to give people the most choice and be able to test drive vehicles in a much tighter space. So you'll have every different manufacturer located there. Most often there will be one particular test track in the same area where you can then compare in a very fair "apples to apples" test of different vehicles within the same conditions. It's also often thought that you'll be able to get a better discount because you'll have a lot of competition, a lot of different models all in one place, and big year-end inventory of all of them. I think it's most important to get a good deal. Its mostly important to make sure you've done your preparation and your research. The "auto mall" may or may not help in that respect, but does help in being able to say, "the guy across the street is offering me x price for a similar vehicle." So it does give you some angle there but I don't think it been confirmed that you'd get a better deal there.
What does "tax and tags" mean?
Tax and tags are what is added onto the price of the vehicle after you've negotiated the actual cost of that vehicle. This includes the taxes that you have to pay to the state and all the tags - the license, the registration - that go to the Department of Motor Vehicles. Tags are all the fees and processes for the Department of Motor Vehicles - so your license, registration fees; all the governmental procedural processes.
What does "sticker price" mean?
The sticker price generally refers to the MSRP, or the suggested retail price that the manufacturer has posted on the vehicle. That is just a starting point in your negotiations. Generally, the difference between the MSRP and the invoice price is anywhere from three to six percent, depending on the make and model. The sticker price is really the kick-off point for your negotiations. The sticker price refers to something called a Monroney sticker, which was a legislated process from the government, that all cars had to have a standardized list of the specifications and the price for all those specifications on the vehicle. You'll usually find sticker prices on the left-hand side of the vehicle, usually on the passenger-side window.
What is "sticker shock"?
Sticker shock is probably something reserved for the moment when you expect a vehicle's going to cost you a certain amount, and walk in and find out that it's going to cost you much more. Sticker shock also relates to having to make a much stronger effort with negotiation to get the car to the price that you're expecting.
What is a "destination charge"?
A destination charge is a fee that comes from the manufacturer, and basically it's to cover the cost of delivering the vehicle from the factory to the dealership when you're looking at the vehicle. That fee is automatically passed on to the consumer.
What is a "floor plan fee"?
Floor plan fees, or flooring as it's ofter referred to, is the cost that the dealer incurs for having the vehicle in the dealership itself. So when he takes the vehicle from the manufacturer, from the factory, he then pays a flooring company to basically hold the vehicle here until he sells it. Obviously he's going to be paying the manufacturer for that vehicle until he sells it, he needs to have a way of keeping it here and then passing the profits on to the manufacturer once the vehicle is sold. So its the inherit cost of having the vehicle here on the lot ready for you to shop. Holdback is generally referred to anything that is part of the profit margin for the dealer, and this is money that comes from the manufacturer in the form of co-op advertising, advertising support, special incentives the dealer can pass on to the sales person to push them into selling that particular vehicle. So the holdback is usually considered this little pot of money if you will that is the gurantee that the dealer will make some profit on.
What is a "flooring company" and how do they affect the cost of the car?
It's kind of like the flooring company fronts the manufacturer the cost of the vehicle, and then the dealer pays a fee to the flooring company to have the vehicle here. Like all the vehicles that are here at this store, he's taken them from Honda. Honda's charged him for them, but then he passes the charge to his flooring company. He pays maybe $200-300 per vehicle per month to keep it here until he sells it. So when a dealer's got a vehicle on the lot for six or seven months, he's anxious to sell, because he's paid a lot of flooring cost on that.
What does "market adjustment" mean?
Market adjustment is a fee which the dealer tries to pass on to the consumer, to take advantage of whatever sort of energy there is for that particular model in the marketplace. If a vehicle is a new convertible, it's got a lot of appeal and it's a hot model, often the dealer will add a market adjustment, which is an additional price above and beyond the MSRP, for the right to buy that particular vehicle.
What does "total" mean on the sticker price?
“Total” on the sticker price refers to the full transaction price on the vehicle. So all options, any special specifications, any dealer markup, the true cost of the vehicle if you will before any state fees, license fees, taxes, etc.
What is a "dealer invoice price"?
A dealer invoice price is something which is very available on the internet now. It's very easy to access that information for any vehicle. What the dealer invoice price refers to is the transaction price the dealer has paid for that vehicle to have it at his showroom. The dealer invoice price is usually considered to be a great place to aim when you're doing your negotiations on the car. However, if you pay invoice, or $500 off invoice, which is a very common way of cutting a deal, be aware that there are additional holdback fees where the dealer is still going to make his money. To be fair, a dealer does not make a lot of money on the actual sale of the vehicle. Much more of his profit comes from service and after-sales. When you get down to dealer invoice price, it's an excellent price for the vehicle, but be aware that there's still money after that which the dealer may or may not want to part with. As an example, let's say the dealer has a vehicle on the showroom floor for $15,000. The dealer invoice price might be $10,000. That's your gap. He's going to try to keep you up as close to fifteen as possible, and you're going to try to get down as close to ten as possible. Once that vehicle is sold, then the hold back fees, or the incentive money from the manufacturer, come into play. The car dealer always knows that he can get as close down to that $10,000 dealer invoice price, knowing that once it's sold, he'll get additional funding from the manufacturer for selling that vehicle.
Where can I find the dealer invoice price?
The dealer invoice price is available on many different websites - intellichoice.com, kellybluebook.com. Many different reputable sources have dealer price because these websites have relationships with the manufacturers and collect invoice prices as part of their pricing analysis. It's always a smart thing to check sites like Intellichoice, Kellybluebook or Edmonds, in order to identify what the invoice price is. That will give you a rough idea of just how deep you're might be able to get your negotiations with the car dealer.
What are "factory to dealer incentives"?
“Factory to dealer incentives” usually refer to rebates, special financing rates or anything that the dealer can essentially pass on from the manufacturer directly to the customer. This can be a $25 rebate or percentage of financing - anything that is factory money passed through the dealer to the consumer. Factory to dealer incentives sometimes are advertised: they'll be part of a national campaign to incentivize you to come in and take a look at a particular vehicle. Other times, they're kept very quiet because the dealer and manufacturer would prefer not to offer them, and would rather sell the vehicle at a higher profit margin. Similarly to with invoice prices, it's very important to do your research about factory to dealer incentives. Go to sites like intellichoice.com or kellybluebook.com and get a latest status on all the incentives on vehicles. This is all published information. It's just something you need to know because you can't always count on the salesperson to offer up all the money they have available.
What does "holdback" mean?
Holdback refers to a little pot of money which the car dealer can be sure he will receive once the vehicle is sold. This can come from co-op advertising funding, special incentives or special rebates that the manufacturer will kick in once the vehicle goes off with the consumer. The point of a holdback is to ensure some degree of profitability for the dealer, to actually go through the process of hiring people to sell the vehicle, for keeping it clean on the showroom floor, etc. Holdbacks are just an incentive to make sure that the vehicle is presented to the consumer in the very best way.
What are "dealer prep" fees?
Dealer prep fees are the dealer asking the consumer to pay the price of preparing the vehicle once it comes off the delivery truck. Vehicles come from the factory usually in different degrees of dirtiness or needs of preparation, such as removing plastic from the seats or attaching different features, like maybe radio buttons, license plate frames, etc. Dealer prep is a little bit of work that needs to go in before the vehicle can go from the delivery truck to the showroom floor. These fees are usually passed on to the consumer. A typical price would usually reflect the actual price of the vehicle, so depending on how much work needs to be done, you're not going to be able to get as much on an economy car as you can for a luxury car. I would expect that the typical price would be anywhere between $300 to $500.
What are "ad fees"?
Ad fees are a cost of selling the vehicle, an inherent part of the dealer's business, that he then tries to pass on to the consumer. If he carries an advertisement in the local newspaper, quite often he'll try to pass the direct cost of that advertisement on to the consumer.
What are "dealer fees"?
“Dealer fees” are really just a way of ensuring that the dealer makes some degree of profit on the vehicle sale. The actual sale of the vehicle is probably a very small portion of the dealership's complete financial picture. Most of the dealer's profit is going to come from service and aftersales, so they try to maintain and hold any last penny they can from the sale of the vehicle. Some of the dealer fees are negotiable, and some not, and are all a way of holding up their profitability.
What is "no-haggle pricing"?
No-haggle pricing is something that was really pioneered by Saturn here in the US, in that the sticker price you see on the vehicle is the actual transaction price of the vehicle. The dealer or the seller is not prepared or authorized to negotiate from that price. The caveat being that the sticker price, of the MSRP, needs to be set at something that is very fair and reflects true market demand for that vehicle. So if you're going to go into a no-haggle dealership, you need to expect and hopefully agree that the MSRP price is close to what is a fair price for the vehicle. If the vehicle has a lot of add-on fees and additional market adjustment fees added on, then it's not a no-haggle dealership. If you're the type of consumer that is fearful of the dealership environment, thinks it's a hassle and don't like to negotiate, and just want to get the new car and get out, then a no-haggle environment is probably best for you. Essentially, the MSRP is your pre-agreed transaction price of the vehicle. So you come in, see the price, you like it, that's what you buy and off you go.
What is "MRSP"?
MSRP is the sticker price you see on the vehicle which reflects what the manufacturer suggests is the retail price for that vehicle in the marketplace. An MSRP is generally considered the starting point for your ultimate negotiations on the car.
What is a "test drive"?
A test drive is very important in the sales process because that is the time when you're going to get to know the vehicle. The skills and information that the salesperson has is important, the presentation is important, but you need to take a test drive of the vehicle and drive it in the ways that you're going to actually be using the vehicle. Don't just follow the salesman's process on the little roads he takes you on. Quite often there will be quieter roads with few imperfections in the road. You want to really want to drive the car on a test drive like you will when you own it. Get it out on the highway, get in the hills and get in some breaking situations. That's what test driving is: testing the vehicle. It means more than just the actual driving dynamics. Also, test the interior. The dash is where you're going to be living with the vehicle so make sure that you're able to reach the controls that are important to you easily. Make sure that the air conditioner and the radio work to your satisfaction. This is the part of the car that you're going to be establishing the relationship with, so make sure you test it out thoroughly. In order to go through the test drive process you need to only provide a valid drivers license. Expect that in most cases the car dealer, representative or salesperson is going to join you on that test drive. Obviously they're making sure that you don't take off of the vehicle. However, there are exceptions. If you're driving maybe just a two seat sports car, and you really wanted to bring along your spouse, or a friend you usually can negotiate something. They're going to keep your drivers license so that they have a little bit of collateral on you and know though you'll be coming back. However, in most cases the dealer goes with you on a test drive, because he wants to be able to explain features to you while you're out on the road.
What is the difference between unleaded, regular, super and diesel?
Fuel economy is usually referenced by the EPA rating, or the city and highway miles per gallon that you can expect in normal driving. Unleaded and super unleaded gasoline are two different grades of gasoline and it's in reference to its octane rating. The only reason to put a super unleaded or a higher octane fuel in your vehicle is if it's stated in the actual owner's manual of the car because the vehicle has been built to such a specification that it requires that additional octane to run correctly. Diesel fuel is actually a completely different concoction that's much more oil-based. This is used in diesel vehicles, most often in trucks, semi tractor trailers and larger vehicles, but it is becoming more popular and common in passenger vehicles as well. Essentially you need to make sure that you never mix diesel fuel into a vehicle that's due to run on gasoline, and vice versa, because the two are very damaging to the wrong sort of engine.
What is a "vehicle title"?
A vehicle title is basically a official document or record identifying who is the owner of that vehicle and usually comes in many different colors. A vehicle title is the official document that states that the vehicle is either owned by me as the personal owner, or by the bank that I am paying through the financing to own that particular vehicle.
What is a "vehicle registration"?
Vehicle registration is a yearly fee that the Department of Motor Vehicles assesses to the driver of every vehicle on the road. These vehicle registration fees are compiled and then used for road maintenance, highway works, driver education programs, etc. It is basically the fee that goes along with the privilege of being able to drive on America's roads. When you go to register the vehicle, when you get the documents from the DMV, take a look at that number and you'll see that every year that vehicle license fee has gone down as the vehicle gets older. A 1985 vehicle doesn't cost as much to license as a brand new vehicle. As a vehicle goes down in value in the market place, it does in vehicle registration fees, too.
What is an "auto inspection"?
An auto inspection is a process where the vehicle is gone over with a fine-toothed comb, so to speak, where they'll look at the major functions, the brakes, the transmission, the engine, as well as some of the smaller things, the safety systems, the audio systems, etc. The mechanic will also do a complete diagnostic on the state of that vehicle at that particular time. Obviously, as the vehicle gets more mileage accrued, smaller things tend to break and those smaller things tend to turn into larger things and so an auto check is something it goes through and helps you identify things that might be causing a problem in the future. An auto inspection is something that you'd have to do on behalf of the DMV, so you take it out, have the inspection done, and take the report card into the DMV for processing.
What is a "smog check"?
A smog check is required on all vehicles on a varying basis. As the vehicle gets older you may be asked to do a smog check every two years. A smog check is basically taking the car into a mechanic's shop that has the diagnostic equipment for analyzing the exhaust coming out of the vehicle. A smog check is looking for a certain threshold of particulates and different elements of the emission to make sure it matches and exceeds the states clean air laws. Quite often when a vehicle is registered for the first time by a new owner, the state will ask you to provide proof of a smog check, and that your car has passed that test. It's a good way for the state to make sure that the vehicles that they have registered on the road are meeting or exceeding their particular emissions control laws.
