Why new car quotes can differ between car dealers
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Car dealership quotes for new cars depend on many factors beyond make and model. While every manufacturer sets a standard MSRP, it won’t be the final price you pay. The average new car costs around $48,000, according to Kelley Blue Book — but you may find the same car at higher or lower price points at different dealerships.
The dealership will rely on location, wholesale cost and other factors to pick a sticker price. It’s up to you to negotiate the cost to suit your budget.
Reasons car quotes may differ between car dealers
Car prices are extremely flexible. Dealerships know how much they need to charge to turn a profit — and may even pad your interest rate if you opt for dealership financing.
Car dealership quotes rely on quite a few factors, so even a common new car model will cost more at one dealership than another.
Manufacturer wholesale pricing isn’t set
Manufacturers sell their vehicles at different price points to dealerships. The invoice price — the amount the dealer pays — depends on the established relationship between the dealer and the manufacturer. While one dealership may receive a new car model at $40,000, another may receive it at $50,000. This is largely due to rebates and other incentives offered by the manufacturer.
This difference in wholesale value is passed on to the consumer. To improve profit margins, the dealership that bought the car at a higher price may charge you more even if the vehicles are the same. The MSRP, or manufacturer-suggested retail price, is not the maximum possible price. Dealership costs and other fees will be wrapped into the sticker price.
Dealerships work with different lenders
Dealerships act as a middleman for lenders when they offer financing. Interest rates are never set in stone and depend on the lender’s criteria, the credit bureau your score is pulled from and other elements of your finances.
In addition, a car dealer quote on a loan may be higher than if you had applied with a bank or other lender directly. Dealerships typically mark up the rate you receive from one of their lenders to make a profit.
These factors will impact the total cost of the vehicle and the monthly payment you receive. And if you haven’t applied for financing yet, the dealership may be quoting you an interest rate you don’t qualify for. Ideally, you should check your rate before you visit a dealership.
Dealerships appraise trade-ins differently
If you plan on trading in your old car, know that dealerships have different standards and will present you with different offers for your trade-in. If you use your trade-in to offset your next vehicle’s price, the monthly payments won’t match up among dealerships.
You can make the most of your trade-in by shopping it around. You aren’t obligated to buy from a dealership that accepts your trade-in. Your best course of action will be to sell your current car at the best price, then use it as a portion of your down payment.
If you trade in your old car and buy a new one from the same dealership, negotiate the two transactions separately. The sale price of your trade-in should not impact your next car’s purchase price.
Dealership fees vary widely
Dealerships charge fees for overhead, application processing and other parts of the car-buying process. Since these vary widely between dealerships and are worked into the overall cost of your vehicle, it may change the purchase price.
Most of these fees are negotiable — and there are even a few unnecessary dealer fees you should always try to avoid. VIN etching, gap insurance and extended warranties can all be bought individually from third parties. But some fees, like destination and documentation fees, are set by the state or your dealership. They must be paid and may not be flexible like other parts of the purchase price.
So even if you negotiate the price of the vehicle down and secure financing from outside the dealership, you may not get the best deal. This is why shopping around and getting quotes from multiple sellers is important. A lower price may be overshadowed by higher fees increasing the total cost.
Dealerships may price the same vehicle differently because of location. Taxes — both local sales tax and taxes — will change the profit margin on a sale. And dealerships may charge a higher sticker price in high-income areas.
If you’re looking to avoid high taxes in your state by traveling, don’t bother. You will need to pay the taxes rate of the state in which you register your vehicle. But if you find a great deal for a new car a few towns over, it’s a different story. Travel could be worth it if you can save enough money to cover the time, gas and delivery expenses.
How outside financing can level the playing field
One of the biggest factors affecting your monthly payment is your interest rate. Dealerships work with lenders to offer financing, but to make a profit, they often upcharge interest. For instance, if you qualify for an APR of 10 percent, you may be quoted 12 percent by the dealership.
You can get around this by applying for financing with a bank, credit union or online lender. Since there’s no go-between, you’ll receive a more competitive interest rate. After getting preapproved with several outside lenders, you can see if the dealer will beat your best rate. Either way, you should be able to get the best rate for your financial situation with this tactic.
Getting outside financing can mean a lower monthly payment. You’ll also have more standing to negotiate the total vehicle cost with the dealership. If you only have $30,000 to spend, you can be firmer on the total purchase price, taxes and fees.
The bottom line
There are good reasons why the same car might cost you more at a different dealership. To get the best deal, do your research and walk in with financing. With the right negotiation, you could score a solid price. Keep taxes and fees in mind when looking at the overall cost of your next ride.