Used Car: How Much Expect to Pay Below Sticker Price?
The demand for personal vehicles has risen over recent years. But, for various reasons, including the global economic crisis caused by the COVID-19 pandemic, the production of new cars was severely hampered. The pandemic has created a global shortage of new car production. Because of this imbalance between demand and supply, buyers have lost bargaining power. So even when buying used cars, buyers cannot expect to pay below sticker price.
Whenever buying a used car was an issue, buyers have always held the upper hand. Buyers can negotiate the car price with the car dealership to drive down the price. After some offers and counteroffers, car buyers can settle on a price that works for both the seller and the buyer. But this situation gets completely reversed if the demand is much higher than the supply. This problem is vividly noticeable these days, making customers like us spend more money on a single car than normal.
What is Sticker Price?
The sticker price is also known as MSRP, which is short for the Manufacturer’s Suggested Retail Price. This is the price that the factory sets as the possible retail price when selling to individual buyers. This is the ceiling amount that a dealership can get from a buyer, supposedly. This price is the fair price of the vehicle. Car dealerships buy the cars at a wholesale price much lesser than the sticker price; this price is called Dealer Invoice Price.
It isn’t easy to uncover what exactly dealers pay for the cars. But they add their profit margin, costs, added fees, and other mark-ups, and all these are included in the MSRP. So this amount should be the price that is written on the sticker on the body of the car when waiting for the sale. This price is normally the same at every dealership for each car of the same model and make. This is the highest customers might have to pay. Even it is suggested to buyers to never exceed this amount when buying a car.
Can You Buy Cars Cheaper Than the Sticker Price?
The idea of the sticker price is to set a basic value for the car. This price includes the dealer’s acquiring costs, as in the wholesale price of the car and any destination charges and other fees. These extra bits are negotiable. That is why it is common to buy cars below the suggested retail price (MSRP). In fact, that is what each buyer strives to do. And this car-buying process is done through negotiations.
Aside from a small profit margin per car, dealers often try to sell an ordinary car much below the sticker price. When the supply is higher than the demand in the car market, or when there is a car model that has proven to be difficult to sell, then dealerships push the cars to be sold as fast as possible, not thinking about making a high profit. In most cases, used car dealers care more about inventory turnover than the profit percentage.
How to Negotiate Car Prices?
When buying a used car, it is important to reduce the sticker price to drive the car cost down. For a new vehicle, this car is difficult as most flagship stores do not want to budge from the sticker price as the factory invoice price fixes it. But for used cars, good negotiation skills can go a long way.
Do Some Research
The prerequisite of having a successful negotiation is knowing the worth of different cars. That does not mean you have to memorize the price of different cars, as each used car in the lots of different dealerships will be unique. So these prices are never fixed. But you can check online listings and used car dealers. If you know the basic information of the car, the condition, mileage, make, model, etc., you can look up the possible price from Kelley Blue Book to get a general idea.
Make a Good Initial Offer
After you have a general idea about the worth of the car, you can make the initial offer on the basis of the sticker price. This offer is very important as it can indicate your knowledge about cars to the salesperson. If they want, they will then state another amount, or they might be willing to adjust the price for different add-ons and fees.
Make a Counter Offer
According to their attitude, you have to make a final offer. In this step, the goal is to ensure what parts of the vehicle are worth your money. Comparing the car to similar cars from other dealers can be very useful. Also, checking the car, engine, and other possible services offered can sway the final price of the car.
Know When to Walk Away
You have to remember that the main advantage as a buyer you have is the option to walk away. You have to know that you might not get a car today. And you have to convey that to the salesperson as well. If they get a whiff that you are desperate for the car, they will take advantage and will not reduce the price in any way.
When Do Car Buyers Not Pay Below Sticker Price?
Even though we are always told not to cross the sticker price when buying a car, even used cars might have to be bought at exactly the price written down. This happens in the cases of certain vehicles. Sometimes, one car is in higher demand than others, raising the market value of that car. So the car dealer knows that there will be an abundance of buyers who would want to buy the car at a higher price. So they do not have to feel liable to agree to any negotiated price you might offer.
If we give an example, in 2021, Chevy Corvette was a very popular car. It was recorded to have sold within thirteen days. That means the dealers wouldn’t have to accept a lower price than the MSRP. The high demand reduces the customer’s bargaining power. Customers have to at least pay sticker price if they want to buy that car. According to Edmunds, demand, and anticipation of a specific model, along with low competition, negates the effects of negotiation.
Why Someone Might Pay Much Higher Than MSRP?
There have always been cases when people pay way above the sticker price when buying specific luxury vehicles: classic cars, sports cars, and remodeled antiques. But these days, people find themselves in difficult situations where they are forced to buy cars at almost twice the price. Even used car dealers are doing this business at the expense of customers’ helplessness.
Unavailability of High Demand Models
When there is such a high demand for a car that the order number exceeds the possible supply number of the car, the dealers turn the transaction almost into an auction. The buyer then has to pay for transportation of the car, the upkeep, and a lot more extra add-ons. The scarcity of the car nullifies the main power of the buyer: walking away. So customers become desperate and cannot accept all the terms of the dealer.
Not Undergoing Proper Negotiation Process
A lot of people do not want to negotiate car prices. They fear the fact that the price they quote might be laughed at; that they might be humiliated. This reason is not enough to buy a car at a higher price. To avoid humiliation, follow the proper negotiation steps and learn about the fair value of different cars to get an idea of what a specific used car might be worth.
Any added fees for the car should always be at the buyer’s discretion. Otherwise, the transaction turns into a scam. Sometimes, dealers try to offer unnecessary and expensive insurance, protective programs, warranties, VIN etching, etc., to increase the car price. In most cases, new buyers have no idea about this tactic and think that the dealers are professionals, so they accept whatever is suggested by the salesman.
Supply Chain Issues
These days, the price of the vehicles increases because of different supply chain problems within the dealership’s locations. For new cars, the situation is direr as most vehicles are transferred all around the world from a specific factory. This price of inter-border transfer is added to the price. Sometimes, internal issues cause delays for which the customers have to carry the cost.
What a car is worth is not always correctly depicted by the sticker price. Sometimes, a car’s worth is increased because of certain associations, commercials, hype, and demand. And sometimes, the opposite can also happen. It is up to the buyer and their situation to choose a car and agree on a price through negotiations. Price negotiation is a big part of buying a used car. Skilled bargaining can help in such ways that you can expect to pay below the sticker price.