New Car Buying: A Final Cost Breakdown

July 2, 2012

There are many factors that go into new car buying in addition to the base price of the vehicle. These extras and additions are the way salespeople pad their commissions and dealerships make their profits.

Dealer Costs
The dealer has many costs when stocking their dealership with vehicles. Dealers have to pay delivery costs, interests on loans used to cover the purchase of the vehicles, the cars have to be cleaned and prepared to display. Then the dealership has building rent, utilities and staff salaries to pay. All of these costs are figured in the profit margin of each car.

Buyers' Costs
The base price is the cost of the car without options, including all standard equipment, such as floor mats and airbags. The base price also includes the factory warranty. The sticker price, also known as the MSRP, or Manufacturer's Suggested Retail Price, includes the base price, the installed options and the manufacturer's transportation costs.

Trade-In Fees
Many times the dealer, after offering you a price to take your used car in a trade-in, will charge you for the costs to make the car marketable. This is an item you should dispute. They already offered you a price to reduce the cost of your new purchase.

Fuel Costs
Usually, after you have signed all the papers and get into your new car, you may notice there is very little fuel in the car. You should check to make certain your tank is full before signing off, and notify the dealer if this is the case, so they can adjust the price to compensate for not having a full tank.

Additional Costs
After you have settled on a price for the car with the salesperson, you go to the finance manager to close the sale. In their office, other items that may increase your total expenditure for the vehicle are presented to you.

You are required to pay the fees for the license plates, vehicle registration and sales tax. Also you need to pay dealer prep (preparation costs) to have the car cleaned and ready for you to take delivery. They also charge you a fee for the processing of papers they need to file with the manufacturer to cover your warranty.

The finance manager will also recommend you purchase an extended warranty to cover the wear on the vehicle after the limited manufacturer warranty expires. They will also recommend you buy credit insurance intended to pay off your loan in the event you die or become disabled before it is paid off. You should check your current insurance policies to make sure you are not paying for double coverage. Credit insurance is not required by law, so if they insist you purchase this insurance, make sure it is part of the requirements of the financing program. Many car loans come with a processing fee. This is the cost of preparing and submitting the papers to the finance company.

Where to Find New Car Prices

When new car buying, a common question is: where does one go to find up-to-date, new car prices? It often seems as if there are millions of sources out there, each telling you something different, and each claiming to have the newest information. There are a few names that have risen to the top as consistent, reliable sources of pricing information for new cars. Listed below are some of the top names, with brief descriptions of the services they offer.

  • CarsDirect. Right here on CarsDirect we offer you a convenient way to search for any type of new car or truck. You can search the inventory of thousands of CarsDirect VIP new car dealerships and quickly compare prices on any number of vehicles, even expensive foreign and domestic luxury vehicles. Furthermore, CarsDirect has 24-hour online operators that can also help you find the car that best suit your needs and lifestyle. The helpful online operators at CarsDirect can also help you apply for quick decision new car or truck auto loans as well as help you find the lowest rates for car insurance for your new car or truck purchase
  • Edmunds.com. Edmunds.comis a veteran of online car information and pricing, having launched in 1995. In fact, they claim to have been the first automotive information site on the web. It's not just their age that sets Edmunds apart. Indeed, their detailed search software and unique page design offers a user experience that is intuitive and extremely powerful. Their data is consistently rated in the top three for accuracy and they've won numerous awards in the automotive web community
  • Kelley Blue Book. Kelley Blue Bookis an even older name than Edmunds, though they made their name as a printed guide to new and used car prices. As times and technologies change, so do most successful companies and Kelley Blue Book has risen to the challenge. Their site is easy to use, pleasant to the eye, and their data is backed up with a worldwide name-recognition when it comes to car pricing. They have also won over a dozen awards for their customer service. Some overall industry rankings now place them ahead of Edmunds as the best site for automotive information and pricing
  • NADA Guides. NADA Guides, like Kelley Blue Book, is the digital incarnation of a venerable, trusted name in the field of automobile appraisal and pricing. NADA guides have been sold for years right next to the Blue Books, and have their own legion of loyal devotees. NADA Guides was launched in 2000 as the guide's transition to the digital age, and has had notable success in becoming one of the top authorities on the Internet. On top of very accurate new car pricing, the site also features blogs and other informational resources for new car buyers and those just trying to stay current on industry prices
  • Yahoo! Autos. Yahoo! Autosis a bit different than the other services listed here, in that their expertise comes not from being renown in the auto industry, but in the search industry. Created as an auxiliary product to Yahoo's formidable suite of online search and social applications, Yahoo! Autos has quietly built itself a following and a reputation for fast searches and minutely specific searches. It also benefits from interoperability with Yahoo's other services, like searching for loans, or linking to automotive discussion forums

In order to get started with your new car search, you should visit the CarsDirect new car and truck search page. Once there, you can search among the thousands of new cars and trucks available.

Hopefully these resources will help you find, not just a price, but the right price for your new car. It can be tricky because there are so many resources that claim to "help" buyers. Be sure to only use recommended resources from credible companies.

Why Do Average New Car Prices Continue to Rise?

The major automobile companies explain the increase of new car prices as due to company restructuring, the increased cost of raw materials and shipping, and costs to meet the new regulatory demands.

After the U.S. bailout of the major automobile manufacturers, one of the demands from congress was a need for these companies to restructure to achieve long-term viability, energy efficiency, lower emission requirements and a plan to repay the bailout loans.

Changes in Demands
For many years, large SUV style vehicles were in demand. These vehicles have a higher purchase price and are more expensive to maintain and insure. With the slower economy, many of these vehicles went unsold. For this reason and the increasing demand for more economical and cost-efficient cars the manufacturers have to restructure their facilities to build these models.

New Technologies
With the increase of fuel imports and higher prices for imported oil, there are stronger regulations for fuel economy. Besides increasing the standard fuel economy of the current models, many auto manufacturers are looking to increase vehicle types that run on alternative fuels such as electric-powered, or bio-fuels. These new technologies add expenses to the auto manufacturers in the developing vehicles to run on these alternative fuels.

Increased Cost of Materials
The increased cost of steel is another contributing factor in the purchase price of new vehicles. With the lower demand for steel and other products, the only survival approach is to raise prices of their products. The money for these increased costs cannot solely be absorbed by the automobile manufacturers; they need to be added to the sales price.

Incentives and Advertising Costs
To increase the demand for a company's products, they need to be advertised and salesmen need an incentive to sell. To get the customers into the dealership showrooms, auto manufacturers spend millions of dollars on ad campaigns. They also offer larger bonuses to the dealerships for the sale of these selected models.

With the increasing costs of operating a new car dealership, high competition, and the lower volume of sales, many dealerships are keeping these incentives and not passing the discounts to the customer.

Import Taxes
Many cars are manufactured outside the U.S., and need to be shipped. Also, many of the components for cars that are manufactured in the states are imported. With increased shipping fees, these costs also contribute to the price of new vehicles.

Currency Fluctuations
The value of all countries' currencies varies on a daily basis. When the value of U.S. currency drops, the cost of imported products increases. These increases cause the manufacturer to spend more for their imported products.

Every increase of cost to a manufacturer affects the cost to produce, ship, advertise and sell their products. These costs, plus the need to make a profit are reasons the price of new cars are increasing.

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