When it comes to buying a car — new or used — you are likely to be bombarded with a variety of different acronyms and terms. One you will run into is the out-the-door price, commonly shortened to OTD price, which differs from the sticker price. It is the entire cost you will pay, including fees and sales tax.
By knowing this and other terms, you are likely to drive away with successful negotiations and the best deal possible.
What is the out-the-door price?
The out-the-door price is the term that describes the total cost of the vehicle. It truly is what it says — it is made up of the price that you will pay when walking out the dealership door with your new set of keys.
Knowing this number is vital to ensure you are getting the best deal while negotiating — especially because you may be able to get some of the costs removed. It is also important to request this number before signing off on your new vehicle because the out-the-door price is typically higher than the initial number you saw.
However, your out-the-door price can also be affected by your trade-in and down payment. When you negotiate the total cost of the vehicle, request that the trade-in and down payment are not factored into the amount you pay. This way, you can see how much your vehicle will cost to finance before you put money down.
What does the out-the-door price cover?
This price covers a range of costs that go into your new set of wheels, including:
- Price of the vehicle
- Documentation fee
- Vehicle title and registration
- Sales tax
- Registration fees
- Dealership fees
- Dealer extras like gap insurance or an extended warranty
Out-the-door price vs. MSRP
The main price you will see when car shopping is the MSRP. This is usually the number on the vehicle window — the sticker price — when walking a dealership lot. The MSRP, or manufacturer’s suggested retail price, is the price that the vehicle manufacturer recommends. Although dealers do not always follow this price exactly, it serves as the starting point for negotiation.
But this number is much lower than the out-the-door price. Don’t be distracted by the number advertised. Instead, ask the dealer for the entire price you will be expected to pay — the out-the-door price. It is also important to negotiate based on that number, not the MSRP. The difference in price will greatly impact your monthly cost, so calculate how much you can afford with an auto loan calculator.
Negotiate out-the-door price, not monthly payment
Dealers want you to conceptualize your car as a monthly payment. Avoid this. If you shop for preapproval, you should know how much you can afford to pay — and what you can expect your monthly payment to be.
Ultimately, the monthly payment can be manipulated by the dealer by extending the loan term or tacking on extras. Whether you opt for dealer financing or a loan from a bank, the focus should be on the total you pay at the end of the loan. The payment is simply the amount you budget for each month.
The bottom line
Saving money at the dealership comes down to preparedness. Remember that the number you walk out paying — the out-the-door price — tends to be higher than the MSRP, so don’t get distracted by the first price advertised. It is also smart to apply for loan preapproval and shop around for different financing options before signing off.