Understanding Car Prices & Why They Vary
A basic understanding of car prices involves more than just knowing what cars sell for. Auto costs are determined through a combination of actual value and what consumers are willing to pay for them. That is the fundamental truth of the matter. Consumer car prices are reflective of several layers of added value that increase car cost from what it is really worth to the price you see in its windshield. There are other factors that enter into the determination of car prices, and better times to buy than others. Gaining an understanding of the price mechanisms will help you immensely in getting the lowest price possible.
Actual Value vs. Recommended Retail Price
Most people are undoubtedly familiar with the notion of wholesale cost and retail cost. Businesses obtain goods at a wholesale cost, turn around and sell them to the public at a retail cost. The difference represents the profit to the business for going through the trouble and spending the money necessary to bring the goods to others. In other words, it is expected that retailers such as car dealerships make a little money on the deal. But how much? The Kelley Blue Book is often cited by car dealers as the most trustworthy source of a car’s value. This information is passed to the consumer who assume that if the Blue Book says a car is worth a certain amount, it must be.
What dealers do not tell you is that the Blue Book lists recommended retail prices for cars. Actual value is not their concern. Thus, it is a resource for dealers, not consumers. If you, as a consumer, want to learn a car’s actual value, you will have to search elsewhere. Do not, however, let a salesperson convince you they are giving you a deal by pricing a car lower than the Blue Book listing. All it means is that they are dropping the retail price by a certain amount to move the car, but they will still realize a profit.
Car pricing quotes vary from state to state and region to region for various reasons. For the most part, the vehicle MSRP and the invoice is exactly the same for each car no matter where it is sold in the United States. You might be able to purchase a specific vehicle in the state of New York for a lower price than in the state of California because of a regional discount. Once a vehicle arrives on a new car lot, the general manager can determine how much to discount the cars he or she is selling based on advice given by the vehicle manufacturer.
Prices According to Time of Year
The more demand there is for new cars, the higher the prices will be and the less likely a salesperson will be to discount the price. It pays to do a little research on the matter. The holiday season and the springtime are two times of year in which demand tends to rise. In December, however, even though demand might be high, because dealerships want to move out last year’s inventory, you might encounter salespeople willing to drop prices. Sometimes you won’t know when they will be willing to drop prices. If dealerships are not meeting their quotas, they will be more likely to lower the price just to make a sale.
Understand that a car’s sticker price is a reflection of its actual worth with a huge markup. By the time a car reaches a showroom floor, there is no value being added to it, so the markup is a matter of dealership profit. You won’t likely be able to talk a dealer down to paying what the car is worth unless they are very desperate. However, knowing how cars are priced can make it easier to talk them down and simply walk away if their offer is not to your satisfaction.