Here’s how to determine a fair price for brand new cars (see below for used-car pricing).

All new cars have a window sticker that displays the manufacturer’s suggested retail price (MSRP). It may also include destination charges, dealer-installed option prices, and other miscellaneous charges. The total of these charges is the price you would pay for that vehicle, less sales tax, without any discounts or rebates.

All these charges but destination charge can be negotiated. Manaufacturers charge dealers this fee for vehicle delivery, and dealers simply pass it along to customers without markup. It cannot be eliminated from the cost of a car.

Price can be negotiated for most vehicles. Unless the vehicle is a hot seller and in short demand, it’s usually possible to get dealers to discount the MSRP. But, how much? What’s the best price I can expect?

Here’s your strategy for negotiating price.

1. Get online price quotes

Use Internet car buying/pricing services to get price quotes. The quotes are free and you are not obligated in any way to accept them. We recommend you get quotes from multiple services so that you’ll have a number of prices to compare. The best sources for free quotes are:

• Yahoo! Autos
• InvoiceDealers
• Edmunds.com

The prices come from dealers in your area. Even though the prices are discounted, you may be able to do better if you are a good negotiator.

2. Learn about rebates and incentives

Visit Best Car Deals for information and advice about current car incentives, rebates, lease deals, and low interest loans, including 0% APR loan deals.

Also go back to Edmunds.com (see link above) and click on the New Cars section ”Rebates and Incentives” link. You’ll be shown the current incentive programs, if any, for the vehicle you’re interested in. Any price quotes you receive should already include any Customer Cash-Back Incentives, but you should verify this to make sure. If there are Dealer Marketing Support incentives, dealers are not required to share that money with customers, but many do.

3. Get dealer invoice prices

Invoice price is the wholesale price that a dealer is charged for a vehicle by the manufacturer. Dealers make their profit by selling at a margin over invoice price. Essentially, the best deal you should expect to get on a car purchase is something above invoice price, but less than MSRP, allowing the dealer to make some profit, which is needed to stay in business.

Get invoice prices for any vehicle make and model at Edmunds (see link above). It’s free.  Also check Edmunds’  TMV (True Market Value) price for your vehicle. It’s their best estimate of how much other people are actually paying for that car.

It is possible under certain conditions that you may be able to buy for less than invoice price. 

How so?

Dealers get certain bonuses and holdback fees from the manufacturer when vehicles are sold, especially when sales goals are reached. This reduces the actual cost of a vehicle to the dealer. Furthermore, any factory-to-dealer cash-back rebates (Marketing Support, mentioned above) also serve to reduce cost. If a dealer is willing to share some or all of these cost reductions with customers, your purchase price can actually fall below invoice price.

How much over invoice?

Here’s a good rule of thumb: On cars whose MSRP is $20,000 or less, offer $500 over invoice. For cars with MSRP of $20,000 to $30,000, offer $1000 over invoice. And for cars with MSRP over $30,000, offer $2000 over invoice. This assumes the dealer is getting no rebates or marketing support from his manufacturer.

These are only suggestions. If the car you want is in short supply due to heavy demand, you might not be able to get much of a discount at all. If it is a slow seller at the end of the model year when a dealer has plenty of inventory, you may be able to do better than invoice price, assuming there are manufacturer incentives. 

What to Pay for Used Cars — What’s a Good Price?

Used cars can vary in price depending on year model, mileage, and condition.

The best way to determine a fair price for a used car is to check with one or more used-car pricing guides such as Kelley Blue Book (www.kbb.com), NADA Guides (www.nadaguides.com), Edmunds (www.edmunds.com). Sellers generally use these guides to set their asking prices.

Private sellers often price their cars too high, allowing some room to negotiate with potential buyers.

Don’t fall into the trap of negotiating a price down, only to find out you still paid too much. For example, a dealer could set an asking price of $8000 on a car that worth only $6000. When a buyer comes in and talks the price down to $7000, he may think he’s gotten a bargain. However, the dealer made $1000 more than he should on the sale — and the buyer paid $1000 too much.

Dealer prices are generally higher than if a car is purchased from an individual.  However, UsedCars.com lists cars at local dealers at already-discounted prices. You can get free no-obligation price quotes online, which saves a lot of time when price shopping.

If you prefer to buy your car from an individual private seller, you can find hundreds for sale on the eBay Motors web site.

Prices are almost always negotiable. Dealers and individual sellers actually expect buyers to negotiate and set prices accordingly. Asking prices are generally about 10%-20% higher than sellers are willing to sell for. Dealers typically make more profit per-car on used cars than on brand new cars.

If a car is being advertised for an unusually low price, it’s probably for a reason. The car may have problems that the seller may not mention unless you ask. Beware of bargain prices unless you understand the reason.

Used car prices can also vary by area of the country. Convertibles, for example, are more expensive in sunny Florida than in chilly Vermont. Four-wheel-drive vehicles are in greater demand, and more expensive, in states with bad winters. Small compact cars are popular in college towns. Trucks are more in-demand in rural areas.

Use Kelley Blue Book and NADA Guides to check a used car you think you want to buy. Then have a mechanic check it over for problems. Any problems found, if you still want to buy the car, should be used to negotiate the selling price down further.

Also get a CarFax (www.carfax.com) vehicle history report to find out if the car has ever been seriously wrecked or totaled.

Beware of buying used cars on automobile clasified ad sites such as Craigslist and Autotrader, or even from newspaper classifieds web sites. Read about a common car sales scam in this article.

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From private party sellers

You can buy a used car from an individual seller - someone who owns a car they no longer want. These people may advertise their cars in a number of ways. Some simply place “for sale” signs in the windows. Others may park the car in an abandoned parking lot or consignment lots with a “for sale” sign and contact information. Others may advertise in newspaper classifieds or “autotrader” magazines available free at supermarkets and auto parts stores. Others may place ads on online sites such as , AutoTrader, and UsedCars.com.

From new-car dealers

Most new-car dealers also have used-car lots. These tend to be late models cars in relatively good condition and with low mileage. Some sell “certified” used cars that have been thoroughly inspected and come with a warranty, at a slightly higher cost than non-certified cars.

From used car dealers

These are independent used car dealers who are not associated with car manufacturers. They range from dealers who specialize in exotic cars, antique cars, luxury cars down to dealers who specialize in low-cost cars for people with poor credit and limited finances. Some of the lower-end dealers, called “buy-here-pay-here” dealers, should generally be avoided. They charge high rates for loans, selll older cars with high mileage and potential problems, and have very tight restrictions on payment terms. Many of their cars are repossessed from customers and sold over and over again.

If you have credit problems, you should consider a dealer who finances his own loans and works with people who have bad credit. Drivetime.com is such a dealer who has locations all over the country.

From online web sites

There are many web sites that offer used cars for sale by individuals and from dealers. One of the most popular is craigslist.com,  Another is , which offers tons of cars from individual private sellers and provides buyer protection features. And another is UsedCars.com .  There are many others but you should take precautions to avoid scams and cheats, particularly on online classifed ad sites such as craigslist and autotrader (see our article, Is This a Car Scam).

From car auctions

There are a number of different kinds of car auctions: government auctions, repo auctions, insurance auctions, and unclaimed vehicle auctions. For more details on these types of car auctions, we suggest you see, Car Auctions for Cheap Cars.

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