Reading a Car Window Sticker

With new car prices on the rise, consumers are paying closer attention to the sticker price at the dealer's showroom. Unfortunately, they are not providing as much clarity as most of us would prefer. One of the problems is different option packages can cause wild fluctuations in the prices of cars that are almost the same in every other way. That is why you need to understand what you are reading – to ensure you are getting a fair deal from the dealership and a good price on your new car.

Dealer Invoice

The "Dealer Invoice" number tells you what the dealer reports to have paid for the car. Keep in mind this price does not include any rebates the manufacturer might have offered the dealer or 'holdback' incentives manufacturers provide to dealers for actually selling a vehicle. When you include those two items, the dealer's out-of-pocket cost might be thousands less than the Dealer Invoice price.

Depending on the popularity of the vehicle, the dealer's inventory levels and the time of year, the dealership may be more or less inclined to sell below or hold firm to their invoice price. The bottom line is that you should not take for granted that "Dealer Invoice" is the starting point for sales negotiations.

Options and Add-Ons

For the most part, the least expensive version of a new car is the plain version that has no frills, no bells, and no whistles. Extras add extra costs to the vehicle. Options installed at the factory can make the car more attractive to own and drive. However, they can also add significant dollars to the sale price of the car and your monthly payment.

Sometimes, vehicle options are bundled into packages. An SUV, for instance, might have an off-road package or entertainment package that includes things like DVD players or gaming consoles to keep kids from getting bored on the long drive to grandma’s house. These things add value to the vehicle and increase the price tag quite a bit. Since options are part of the car when it arrives at the dealership, there usually isn’t much negotiating room as to whether they are part of the vehicle or not. The dealer might be willing to be more flexible in what they charge you for those enhancements.

Add-ons, similar to options, are added at the dealership and not by the manufacturer. They include things like pinstripes, undercoating, fabric protection, extended warranties, and VIN etching. Some of these items simply aren’t worth the costs for the rewards you get in return. Do your homework before paying extra for these types of offerings or negotiate to try to get them for free if they are something you want.

Incentives and Rebates

These are the hidden goodies you want to know about if you are comparing prices. Some of them may already be reflected in the bottom line price of the car window sticker, so make sure you are not expecting them to be added or deducted at the end.

In fact, that is one way some lure potential buyers into their dealerships. They advertise available discounts, incentives, and rebates, then when you come in, they tell you those discounts are already factored into the advertised price of the car. It can be confusing to buyers who are often expecting savings below the bottom line on the window sticker.

If you are negotiating for a lower price, the best practice is to walk in with the number at the bottom of the windshield and begin the negotiations from there. Let the sales person you are haggling with know that is where you are beginning the negotiation process and you are prepared to walk if they discuss prices above that line.

Other Things You Need to Know

There are other bits and pieces of information on the window sticker that are simply useful to know. These include things like the engine specs, estimated fuel economy ratings, and even your estimated yearly fuel costs.

Buying a car does not have to be a huge hassle – especially if you know the make, model, and options you want before walking into the dealer. Do your research regarding the prices in your area for similar vehicles and packages and walk into the dealer with a price in mind. If the dealership will not match your number, be prepared to move on to the next one. While it might take some serious shopping, you will eventually find the right combination of costs, options, and add-ons for a price that’s sure to make you smile.

Information presented in the Northwest Financial Wellness Center is provided for educational purposes only and is not related to actual Northwest products or services. Northwest makes no representations as to the accuracy, completeness or specific suitability of any information presented. Information provided should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. Northwest recommends you consult a professional for any specific guidance you are seeking.