This monthly column presents crucial, stand-alone car-buying strategies to help you avoid dealership tricks and traps and get the best price on your next car.
Struggling U.S. automakers usually turn to new pricing strategies to try to excite new car buyers. Buzzwords like "value pricing" or "total value promise" or even "keep it simple" are used to create the feeling that buyers are getting better deals. But are they?
Edmunds.com pricing experts say there is a positive move in the pricing strategies of the domestics. They point to three new trends as proof:
1. Increased simplicity in the initial buying/negotiation process
2. More pricing transparency
3. mproved residual values
Increased simplicity: Car shopping can be a juggling act with a variety of incentives and rebates, complicated financing terms and confusing option packages. But following the popularity of several no-haggle pricing sales, automakers are realizing that when a consumer is comfortable, he or she is more apt to buy. Consequently, we are now seeing price tags on cars, just as with other consumer items. Also, some manufacturers are including more equipment as standard for the same or lower sticker price.
More transparency: The current trend is to reduce incentives and make the displayed price closer to the actual price. The process is slow but the evidence is clear: Incentives are at a record low point and moving downward. Furthermore, there is also a feeling that this transparency builds trust among consumers for domestic carmakers.
Improved residual values: This topic probably produces a loud, "Huh?" or "Why should I care?" But this is important, since the residual value is what the car is worth as it ages. If after five years the value of your car is higher, then your total cost to drive the car has been lower.
What does all this mean to you? You still need to see through the hype and determine the fair price you should pay for the car. Experts say that car buyers' satisfaction with their deal comes not from the price of the car but the price they pay in relation to others. Edmunds.com realized this in creating True Market Value® (TMV) pricing and described it as "what others are paying."
Edmunds.com prices will show if there is an incentive on a car, and factor this into the final price. Hidden incentives, so-called "dealer cash," are baked into the TMV prices because our experts know the "pass rates" — how much dealer cash they will typically share with the buyer.
So here is the order of events to follow when you go shopping for a new car:
1. Select a target list of cars to buy based on your budget.
2. Test-drive the cars and evaluate the choices using Edmund.com's True Cost to Own SM (TCO).
3. Check the TMV price of your choices.
4. Request quotes using our Dealer Locator. (Note: Some dealers will not provide a quote initially but will do so if you query a second time or follow up with a phone call.)
5. Compare dealer quotes to TMV to find your best price.
6. Request an "out the door" price from the top dealer. This will reveal any hidden fees.
7. Make an appointment to conclude the deal or have the car delivered to you.
8. Inspect the car before you sign papers.
9. Review your contract carefully and sign it.
10. Enjoy your new car with the peace of mind that comes from a good deal.
Using the tools on Edmunds.com you can X-ray vehicle prices in this new climate to see where you can get the real deals.
