What to know about the out-the-door price
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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 a car’s sticker price. The OTD price is the entire cost you will pay for a vehicle, including fees and sales tax.
By knowing this and other terms when car shopping, you are more likely to handle negotiations more successfully and drive away with the best deal possible.
What is the out-the-door price?
The out-the-door price is a term that describes the total cost of the vehicle. It truly is what it says — it is the total cash price that you will pay to walk away with keys to the car. This cost often includes a variety of extras, including some of the dealer’s expenses associated with the car. It is not unusual for OTD fees to include the costs of an extended warranty, dealer service fees, dealer handling fees, advertising fees and processing fees.
Knowing the OTD number is vital to ensure you are getting the best deal while negotiating — especially because you may be able to get some of the additional 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?
The OTD 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 service fees
- Dealer extras like gap insurance or an extended warranty
- Processing fees
- Advertising fees
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, which distracts you from what the total cost of the vehicle will be. Avoid this. If you shop for preapproval for a car loan, you should know ahead of time how much you can afford to pay overall for a vehicle — and what you can expect your monthly payments to be based on that price.
Ultimately, the monthly payment can be manipulated by the dealer by extending the loan term. At the same time, the dealer may be tacking on extras that drive up the total cost out-the-door price of the vehicle. Whether you opt for dealer financing or a loan from a bank, the focus should be on the total you will 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. Make sure you know what costs are included in the out-the-door price so that you are prepared to negotiate and eliminate those items you don’t want to pay for.
It is also smart to apply for loan preapproval and shop around for different financing options to get the most competitive rate and loan terms possible.