How to Pay Less for a New Car

Paying the manufacturer's list price shown on the window sticker of a new car may be about as smart as snapping up an itinerant rug merchant's opening offer. Very few buyers do-- but equally few have any notion of the facts on which dealer dickering is based. Such knowledge can save the buyer several hundred dollars.

Federal law requires that window stickers list the retail price of cars plus the price of optional accessories and the destination charge. Dealers cannot charge more than the list price; they can and generally do charge less. What the buyer really needs to know is the wholesale price--the price that the dealer pays the manufacturer. Dealers and manufacturers are not required to reveal wholesale prices, and they don't. A rule of thumb is that compact cars are marked up 21%, regular cars 25%, and luxury models 27% to 29%. Therefore, the wholesale price can roughly be figured backward from the list price. Example:

WOLESALE LIST MARKUP

Plymouth Valiant 200 1,840 $2,226 $ 386 Ford Falcon Futura 1,849 2,237 338 Dodge Coronet 1,902 2,302 400 Plymouth Belvedere I 1,913 2,315 402 Pontiac Tempest 1,926 2,331 405 Chevrolet Biscayne 1,945 2,431 486 Mercury Caliente 2,027 2,453 426 Ford Galaxie 500 2,142 2,677 535 Olds Toronado (V8) 3,694 4,617 923 Lincoln (V8) 4,457 5,750 1,293

True Value. The markup from wholesale to list price of course provides the main bargaining grounds for the buyer. In the competitive haggling, the dealer can say that he is discounting the list price of the car in question. Also, the buyer may be led to think that he is getting a good deal on the old car he is trading in. How can he determine whether he is getting a good trade-in price? It makes little, if any, difference if the trade-in car has only a few thousand miles registered on the odometer, whether it has good tires, or whether it has had only one owner.

What does matter is this: new-car dealers can rarely sell anything near the total number of used cars that they take as trade-ins. Rather, they sell most of their trade-ins to full-time used-car dealers. These sales take place at weekly auctions held in centralized locations throughout the country. What a trade-in car is worth is determined by what its year and model brought at the previous week's auction in a particular locality. These prices are listed in the trade magazine Automotive News. Thus, according to Automotive News, a 1962 Impala (8) Sport Coupe is most recently worth $1,075 in the area surrounding the auction scene of Westbury, N.Y.

When the auto shopper knows the difference between the list price and the wholesale price of his new car, and the amount of what his trade-in is actually worth during a given week in a given area, he is ready to begin bargaining realistically.

There are a few other things that the buyer ought to realize if he is to get a good deal. Among them:

>Big dealers with high turnover can afford to offer better bargains than small dealers. So can established dealers who are not paying big mortgages for new showrooms or buying costly advertising to get new clients. The "Honest Bob" whose commercials are constantly on television undoubtedly has a high advertising overhead, which he is passing on to the buyer. >Optional extras installed in the factory, such as power steering and power brakes, carry a 21% to 25% markup, but extras installed by the dealer, like side-view mirrors and seat covers usually have a 40% markup. >Different models in the same series are basically the same--in engine, frame, suspension, wheels and performance. Thus the listed $244.92 difference between a Ford Custom and a Ford Galaxie is spent almost entirely on chrome and trim. >When a new model is introduced, the manufacturer automatically pays the dealer a 5% rebate for old models still in stock, and this can make a difference of $200 on a $4,000 car. Knowing that this rebate is automatic, dealers can anticipate it by several weeks, and pass on some of the savings to buyers. The best time to buy a car, therefore, is shortly before a model change. >Manufacturers frequently run dealer contests, offering the dealers $25 to $50 rebates on cars sold over a certain quota. Contests are not announced publicly, but ads for "value days" or license-plate raffles are tipoffs to dealer contests that can mean better bargains for buyers. > When a customer arranges new-car credit through his dealer, the lending institution usually rebates part of the finance charges on the car back to the dealer. For his finder's fee on a three year $3,000 loan, for example, a dealer can collect as much as $180. Some dealers, especially in California, sell cars at cost or even below and make all their profits on finance rebates.

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