How can I tell if this internet sales manager is telling me the real "true cost" of a new car to the dealer

Question

NOTE: To make this question more generic, I've replaced the real make and model with placeholders and fudged some of the numbers.

I've gotten in contact with an internet sales manager about a new car. After making an initial offer (that was deliberately low), I got this response:

I appreciate you allowing me the opportunity to assist you with your new MAKE purchase! While it would seem practical to reduce the price of the 2016 MAKE MODEL significantly due to the arrival of the new 2017 MAKE MODEL, MAKE did not put that much cash incentives on it to reduce it to the price you're requesting.

The following information that I give you is information that you can find on the internet...

MAKE has a cash incentive worth $900, whether you finance or pay cash. This is in addition to the special APR. The dealer gets money from MAKE for each vehicle sold, only after it has been sold. That number varies depending on the model. For the 2016 MAKE MODEL TRIM it is $800. Invoice is what the dealer pays for the vehicle.

MSRP for the 2016 MAKE MODEL TRIM is $26,000.

Invoice for the 2016 MAKE MODEL TRIM is $24,000.

Subtract $900 and $800 from Invoice and you get $22,300. (This is true cost of the vehicle to the dealer). Because MAKE requires that each dealer perform a PDI (Pre Delivery Inspection) on every vehicle sold and there is a prep department that gases and cleans the vehicle, add about $100 to the cost giving the dealer a true cost of $22,400. After the vehicle is sold the dealership still has to pay the sales person. In this instance however, the dealership can decide to give away a car at the $22,400 and absorb the sales commission to make room for the new MODEL's or not, however, I've never seen a dealership take a loss beyond that amount to make room for any new vehicles.

The price difference between the new 2017 MODEL's and 2016 MODEL's are significant enough to move out any 2016 MODEL's that are left within the next 30-60-days.

The owners and sales manager probably wouldn't like the fact that I'm giving you this information, but like I said, this is information that MAKE has release to the public on the internet. My job is to give you as much information as possible so that you can make an informed decision.

I hope that this was helpful. Let me know if you have any questions. Hopefully I've giving you a reason to consider my offer and we can close this out by the end of the year.

(My initial offer was quite a bit lower than $22,400. That's fine, as I gave it knowing it was only a starting point and that I'd have to go up.)

I'm frankly surprised that this manager was so (seemingly) straightforward with me. I sent the same email to multiple salespersons at other dealerships and did not get any other response like this. It almost seems too easy.

So, my question is, how can I tell if the "true cost" number this manager is giving me is real?

Answer 1

I don't buy new cars anymore, but I've helped family members negotiate prices on new cars recently. There are various online services to see the average price paid, as well as the low outliers. I've looked at truecar.com for instance to see what others have paid within 50 miles of my zip-code.

I think the only way for you to know you're being offered a good deal is to see if any of the other dealers that have not responded are willing to talk when you offer them $22,300 which the dealer above suggested was break-even point. If none of them respond, then you know you're really at the bottom of the negotiating window. If one of them does respond, then you can go back to that internet sales manager and ask why another dealership (do not disclose which one) is willing to sell it to you for less than $22,400 (do not disclose how much lower they offered to sell it for).

In my experience, most dealers will sell at or just below the break-even price at the end of the quarter so that they can beat other dealerships out for the quota. That gives you a week and a half to find the bottom price before going in on New Years Eve to seal the deal.

Answer 2

Consumer Reports offers a service that can tell you detailed actual cost to a dealer for a specific model and accessories -- real cost after rebates, not just invoice price. It costs a bit to order these reports, but if you are serious about buying a new car they are a highly recommended tool -- cu is independent and will give you the best info available, and simply walking into the dealership with the report in your hand can save huge amounts of negotiating. "If you can give it to me for $500 over the real price, as shown here, I'll sign now."

Of course, standard advice is that it's usually better to buy a recent-model used car. I believe cu has other reports that can help you determine what a fair price is in that case, but usually I just bring it to a trusted garage and pay them to tell me exactly how much work it needs and whether they think it's worth the asking price.