The Washington Times - August 18, 2008, 08:10AM

 

It’s time to deal

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You have probably heard that the end of the year is the best time to buy a new vehicle. It’s true, but only if you continue to be a wise shopper. If you must own the latest-and-greatest gadgetry or be the first to have a new model or can’t control your emotions during the purchase process, few end-of-year advantages will help. For those who do their homework, however, the savings can be substantial but it’s necessary to know a little about how the car business works.

Manufacturers supply vehicles to individual dealers based on total sales volume, customer satisfaction index (CSI*) and other factors, all of which add up to identify the monthly allocations (total vehicles and model mix). The dealer is invoiced for these vehicles at the time of delivery, so each vehicle accumulates finance charges from the bank the moment it hits the lot. There’s a direct financial incentive to sell the vehicle as soon as possible.

*CSI is a measure of criteria including the delivery process, dealer facility, delivery timing, paperwork, salesperson’s interaction and other factors. Most dealers are ranked by J.D. Power Co. through owner surveys. How well an individual dealer ranks depends upon how positive his/her customers’ responses might be.

The dealer doesn’t pay the manufacturer’s suggested retail price (MSRP) shown on the window sticker. His actual invoice reflects a discounted price that the manufacturer will charge. Affecting this price are such factors as:

·        Factory-to-dealer incentives, usually due to poor sales of particular models

·        Sales volume bonuses, usually paid monthly

·        Customer rebates and financing incentives

·        End of model year incentives

·        Holdback

What is Holdback? It’s a percentage of the invoice price that is repaid to the dealer by the manufacturer to offset dealer cash flow, sales expenses (commissions), finance charges, etc. The invoice price is actually inflated by the manufacturer, generally by 2-4% for most vehicles. Later (typically quarterly) the dealer is reimbursed that amount. The practice of holdbacks allows dealers to borrow greater amounts of money; pay lower sales commissions (on paper, the gross profit is lower); and to aid in the marketing of vehicles by enabling dealers to advertise “invoice” pricing.

Timing is everything, and proper timing does count when buying a vehicle. So, when would the ideal time be to visit a dealership? Well, if you can wait until the last day of December or January, and there’s a snowstorm, and it’s between 2 PM and 5 PM, and it’s a weekday, and you want to buy a convertible - go for it! The dealership will probably bend over backwards to get you to sign the contract. They are highly motivated to get the sales numbers up as high as possible before the month closes.

All you need to do now is to learn as much about the make/model you’ve chosen before visiting a dealership. Online sources abound, and two popular ones are Edmunds (www.edmunds.com) and Kelly Blue Book (www.kbb.com.) You should know the invoice price and any current applicable incentives in addition to having your financing details worked out. Armed with this knowledge you can confidently go about getting the best deal, but there are other things to remember when buying a vehicle.

According to Steven Swann, an Arlington consumer attorney specializing in Lemon Law and warranty litigation, “It’s important to always do your homework first (internet, other plentiful sources) to determine the accurate invoice price and incentives. Negotiate the option prices, finance charges and extended warranties. These are not fixed. Steer away from high-profit, marginally effective add-ons such as paint sealant, undercoating, fabric protection and credit life insurance. Never accept delivery at night (you can’t see flaws and damage). If the odometer shows more than a few miles, don’t accept the vehicle without a documented explanation. Take a calculator with you when writing up the contract and verify all amounts. Always read every document thoroughly before signing. Once you’ve signed the contract it’s legally binding, whether the amounts are in error or not. Above all, never go alone to purchase an automobile and if you’re not completely satisfied with the proposed deal or the experience, LEAVE!”

Your final deal will depend largely on your trade-in vehicle, its mileage and condition and whether or not you owe any money. If your vehicle is more than 4 years old you might consider selling it privately. You will probably get more for it and it won’t factor in the purchase of the new vehicle. Another issue is your credit rating. Those with the lowest credit ratings have the least negotiating power.