How To Buy A New Car Below The Dealer
UPDATE: How I Bought A Popular New SUV for $3,611 Below
by Mark Eskeldson, author of "What Car Dealers
Don't Want You To Know"
In October of 2018, my wife and I needed to buy a car to
replace the one that we were giving to our son, who had just graduated from college and was
starting a new job in another state. We only had one week to find a car, negotiate a great
deal and take delivery. But it was near the end of month - the best time to buy.
Since it was my wife who was giving up her car,
she got to choose the new vehicle - a popular new SUV, one of the top-three selling SUVs
in America - a 2018 Toyota Rav4. The 2019 models were not out yet, so the vehicle that we
bought was the current-year model. (That's our new car on the right.)
The SUV we wanted had an MSRP of $27,634 and a $2,500
factory rebate. Since we had no trade-in and did not need financing (we were paying cash),
it would be a simple transaction for the dealer. All negotiations would be done by phone
Using the strategies outlined in this site (see
How To Buy A New
Car), I began by getting lots of free new car price quotes using major car buying
services. My goal was to get as many dealers as possible to provide discounted price quotes
(at least 4 dealers, 6-8 dealers is even better), so I used several car buying services to
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Depending on the area you are in, a car buying service
can often get you price quotes from multiple dealers by submitting only one form, and their
quotes are always at a discount from MSRP. A smart shopper would not buy at any of those initial prices, they are just a starting point for negotiating with dealers - forcing them to compete against each other.
Here are the car buying services that I used: Edmunds,
The first thing I noticed about the price quotes was that
all of the dealers were including the factory rebate in their quotes - as a $2,500 "price
reduction" from MSRP. Most of the dealers also listed their own discount from MSRP, which
was typically around $600 to $1,200 - bringing the total "savings" to $3,100 (or $3,700) off
To shoppers who don't know how the car business works,
those prices may look pretty good - but they are NOT good deals at all.
Since all of the dealer quotes were based on
small discounts from MSRP, minus the factory rebate, those dealers were obviously hoping that
car shoppers (including me) would not under- stand how the rebate works. The rebate is our money
that we can use to pay for the new car, AFTER negotiating the best deal we can -
without the rebate.
By including the rebate in their price quotes and comparing
that to the MSRP, those dealers were trying to make their deals look a lot better than they
really were. Smart shoppers know that $600 (or even $1,200) off MSRP is not a good deal, but
when the rebate is included it makes a bad deal look good. Don't fall for this!
Smart shoppers buy new cars and trucks all the time at prices
that are below dealer invoice - without a rebate. So buying with a rebate should result in
prices that are at least $2,000 to $3,000 below invoice (not $3,000 below MSRP).
When the dealers called to ask if we had a deal, I said, "No,
your prices are too high." I told them I was a serious buyer who would be buying from someone
within a few days, and I didn't care which dealer I bought from as long as they had the lowest
price. I mentioned that I was negotiating with multiple dealers in two cities, so I was sure
that I could get a better deal. Then I said, "Tell your manager to sharpen his pencil and call
me back with a better price."
The dealers' initial responses to that only knocked off about
$200 so they were obviously trying to get me to pay close to MSRP (minus the rebate), which I
was not going to do. Time to play hardball!
I could have made a lowball offer, but that would have obligated
me to purchase without knowing whether another dealer could beat that price. And I didn't know
how low some of them would go. So I continued my strategy of forcing them to name a price, then
using that price to negotiate better deals with the others.
At this point, I decided to speed up the negotiation by telling
all the dealers that I knew people were buying below invoice - without a
rebate - and I was sure I could find a deal like that. Some of them responded by saying that
rarely happens (not true). I ended their challenges and forced them to admit that they could
sell below invoice by mentioning that Costco members can buy new cars below invoice.
To force the dealers to start quoting prices at or below invoice,
I asked them what their Costco price was for the car I wanted. It was interesting to hear how all
of them described their Costco prices - one said $750 below invoice, one said $500 below invoice,
and one said the invoice price was the Costco price. Some of them appeared to be guessing at the
correct amount because all were not Costco Toyota dealers for that area.
I told the dealers that they should be able to sell to me at the
Costco price, then mentioned that the cash rebate was my money and was not to be included in their
prices based on the invoice. (Some asked if I was a Costco member, some didn't. None of them asked
for my Costco membership number.)
After the Costco discount discussion, two of the dealers lowered
their prices by at least $1,200. Their quotes were now below the dealer invoice price - without
The other dealers were not willing to go that low, so that left me
with two motivated dealers who were willing to sell at a huge discount. Before I agreed to buy, I
wanted to see if they would go even lower. So I called both dealers and asked if that was the best
they could do to earn my business.
The dealer with the lowest price said that was
it, he couldn't go any lower. (He was already at $900 below invoice - without the rebate.) So I
called the other dealer who had a slightly higher price and told him what the other dealer's price
was, asking him if he could beat it.
The second dealer asked if I would buy from him if he beat the other
dealer's price by at least $200 and I said yes. So he lowered his price to $1,111 below invoice -
without the rebate - and I said, "You've got a deal, email me the paperwork. I will give you a $1,000
deposit (by credit card) right now and I'll be there with a cashiers check for the rest within two
I ended up paying $3,611 below the dealer invoice price, including
the factory rebate.
The price I got was $700 lower than TrueCar and $600 lower than
Costco's Auto Buying Program.
Factory Rebate $2,500 - Dealer Invoice $25,940
Price w/o Rebate $24,829
($1,111 below invoice)
Price w/Rebate $22,329
($3,611 below invoice)
Dealer Discount $600
Price w/o Rebate $27,034
Price w/Rebate $24,534
We hope you enjoyed reading How To Buy A New Car Below
The Dealer Invoice Price. For answers to the most common questions asked by new car
buyers, see our Car
Buying FAQ page. To learn how to save even more money, be sure to visit our
Money Saving Tips page.
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