Nailing down the best deal

Kiplinger's New Cars & Trucks, Annual, 1999 by Ed Henry

But with the exception of Saturn and Daewoo models, which sell for fixed prices, what you pay for a vehicle generally will be determined by negotiations between you and the dealer. The better you bargain, the better the price you'll get.

It helps to have a target price in mind right from the start: a price that gives you a good deal and lets the salesperson make a living. The target prices for cars and trucks in our tables begining on page 18 are fair estimates on which to base your negotiations with a dealer. If the model you want isn't listed, you can set your own target by adding 1% to 2% to the invoice price.

To set our target prices, we reduced the invoice price by the holdback--an amount equal to 2% to 3% of the cost of the car, which is refunded to the dealer after the sale. Then we added 4.5%--an amount that's slightly lower than the average 6% dealer markup.

No-haggle deals translate into low pressure. But haggling is the order of the day at most dealerships, and you should brace yourself for a well-choreographed effort to maximize the price. Every year we hear from readers who encounter salespeople who pooh-pooh the prices in our tables. But our prices are the latest manufacturers' prices that were available at our deadline. They may become outdated because of subsequent price increases, but the ratios of suggested price to invoice to target price will remain virtually the same.

Watch out for extra charges

Be careful not to lose the money you've saved negotiating a good price when you get to the finance and insurance (F&I) office, where the deal is closed (see "Be Wary When Closing the Deal," on page 79). Car dealerships put their best salespeople in the F&I department, so be prepared.

When you walk into the F&I office, steel yourself against buying credit life insurance, extended warranties, disability insurance and other products--such as rustproofing or fabric protection--that are of dubious value.

Also beware of charges the dealer may add to the final contract, such as document preparation, processing and dealer prep fees. Dealers are paid by the factory to prepare new vehicles, so if you pay a dealer prep charge, the dealer gets a twofer. But dealers look at these extras as their chance to win back some of the concessions they made on the price of the car or truck.

If extra-charge items such as pin-striping are listed on a second sticker that was put on the car window by the dealer, you can ask the dealer to remove those items or get you a car that doesn't have them.

Does it pay to postpone a purchase?

Here's the single most reliable way to save money on cars: Keep your clunker and drive it till it drops. A decently cared-for vehicle should still be running long after the odometer has clocked 100,000 miles. Keep driving it and you save money not only because you don't have to make payments on a new car but also because insurance premiums are lower, along with registration fees. Personal property taxes are also lower, in states that base them on the market value of the vehicle.