Ch. 10.1 New Cars:Selecting and Financing

Objective:1.Find out how to shop for a new car

2.Calculate the percent of markup3.Calculate monthly car payments

4.Compare terms for financing a car.

1. Shop before going to a car dealer

Sticker Price – the price that appears on a car window at the dealership.

One can use Kelley Blue Book’s car pricing for useful information

The sticker price is the Manufacturer’s Suggested Retail Price; MSRP.

The Dealer’s cost and the MSRP is where one can negotiate.

1. Shop before going to a car dealer

MSRP tells it all!• Has the base price, the amount the

dealership received it for• Dealer preparations and transportation

charges• Mileage: City and Highway • Engine power and other car details

1. Shop before going to a car dealer

Markup – is the amount the dealer adds to the car to get to the MSRP.

Some cars have higher MSRP’s because they offer more options, such as leather seats, rims, mp3 player, etc.

But price isn’t everything. Finding a good dealer is also very important.

2. Dealing with Dealers

“Falling in love” with a car can result in paying a high price. If a dealer knows you really want a car they know they have a sale locked in. The only question is, how much more can he mark it up?

2. Dealing with Dealers

There are 3 essentials for bargaining:1.Use competitive conditions to your advantage.2.Know the dealer’s costs.3.Allow the dealer a reasonable profit.4.Know that sometimes a car is in high demand,

so the dealer will be reluctant to negotiate prices.

2. Dealing with Dealers

The dealership will use tactics to sell you a car.Bait and Switch – There will be an advertisement

in the paper for a car but it is limited to one car in the dealership. The trick is to get people at the dealership to try to sell them.

Financing – financing from your own bank can be better at times. Dealerships have their own banking friends and do not always offer you the best deals.

2. Dealing with Dealers

Trade – in: one does not always get the best deals in trade-ins. But, they are a great options if one wants to get rid of a car right away.

Example

The sticker price for a starfire 2-door convertible is $14,255. Using the internet, we could find that the dealer’s cost is $12,450.

1.What was the markup?

2.What is the percent of markup?

Example

Compare prices between the dealer’s cars and their sticker prices.

Option Dealer’s Cost Sticker Price % of markup

Air Conditioning $356 $420

Roof Rack $116 $138

Automatic Transmission

$645 $774

CD/mp3 $440 $506

MONTHLY PAYMENT FORMULA

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