Step 3 – Organize and Compare Results
How to Buy a New Car
Now that you've collected your quotes, make sure they're neatly organized so you can compare them to each other. The car price comparison worksheet can help you with this. Here's how to understand the price information you have collected.
MSRP (Manufacturer's Suggested Retail Price): MSRP is the “sticker” price required by law to be shown in the window of a new car. The manufacturer decides a retail price for each model (base MSRP) and then adds on the retail price for each option. The dealer is free to charge more or less than this recommendation from the manufacturer, but MSRP is a useful guideline for both you and dealers to evaluate comparably equipped cars to each other.
Invoice Price: This is the price paid by a car dealer to the manufacturer for each car. This price is the same for every dealer across the U.S. However, this is not always the bottom line. There are rebates and incentives to both consumers and dealers that occasionally allow you to buy a car below invoice price. Dealers will most likely not send you the invoice price, but it is easy to find on Edmunds.
Target Price: There's no magic wand you can wave to find out the perfect target price. You'll usually (but not always) end up somewhere between the invoice price and MSRP. However, here are a couple methods you can use to get a goal to shoot for:
- A common formula is to take the total invoice price and add a small margin for the dealer. In the car price comparison worksheet, this is calculated for you automatically with a margin of 2% for the dealer. Keep in mind there are some newer models in high demand that may not come down much below MSRP, if at all.
- Find out the Edmunds TMV® Price or get a TrueCar Price Report. Both services are free and will give you a breakdown of MSRP, invoice price, and average prices paid by people in your local area.
Important: Never mention the target price to the dealer. This is strictly a point of reference for you. If you mention this to the dealer, he'll never give you a price below that number. And by using this system you might be able to beat the target price.
Comparison Price: The Comparison Price (or subtotal row) in the car price comparison worksheet will be the price you are quoted from the dealer. Since most dealers will not include taxes, tag, or title in their quotes, it's easiest to use this price for your comparisons even though it is not the final “out the door” price.
Important: To prepare for negotiations, order each option from most expensive to least expensive using the comparison price.
It may help to rank them by changing the “Choice number” at the top of each column. In the next section, we'll begin negotiations in this order, starting with the most expensive.