About this video
Using a sample dealership invoice, this video shows what to watch for when buying a car. It covers getting the price in writing to avoid a bait-and-switch, comparing MSRP and invoice price, knowing which fees are set by law and which can be negotiated, and resisting add-ons by sticking to a budget you set in advance.
You'll be able to
- explain why getting a car's price and details in writing protects me.
- tell the difference between MSRP and invoice price.
- tell which fees are required by law and which can usually be negotiated.
- explain why I should set a budget before going to the dealer.
Key words
- MSRP
- Manufacturer's suggested retail price: the price the carmaker suggests, usually higher than the invoice price.
- Invoice price
- What the dealer says it pays the manufacturer for the car.
- Documentation fee
- A dealer fee for paperwork that can usually be negotiated.
- Registration and title fees
- Fees charged by law to register the car and record who owns it; they can't be negotiated.
Transcript
- [Instructor] What we're gonna do in this video is think about some things that you should think about when you are buying a car. And to help us with that, we have this fake invoice from a car dealership for a car I guess, that I am buying. This looks like a used Honda Odyssey that I am buying.
I'm sure this is a fake vehicle identification number as well. But we're going to use this to get a sense of the different costs and things you might wanna look for. right over here, is a much simpler invoice just for the sake of the video. But you're gonna see similar information on whatever documents that you see when you're about to buy your car.
Now, the first thing that most people focus on is the price. And the price is usually the bulk of what you are going to have to pay. and you do a search on the internet and you see the listings and it seems like exactly the car you want. It seems like a great price.
And then you drive over to the dealership, you know, you drive maybe 30 miles over to the dealership. And when you go there they say, "oh, that car was just sold, but we have another car." But that car has some of these other features that you might not be interested in, but it's not quite the same price.
So one way to avoid that is to get things in writing. So exchange emails with the car dealer, make sure they can give you details about the car that they're talking about. Have them in writing, put down the price Now, another way to think about car price beyond really validating it, you can look online and figure out what the manufacturer suggested retail price is, MSRP, which it tends to be more than the invoice price.
The invoice price is at least what's stated the dealer pays for the car, or what they have to pay to the car manufacturer, for that car. Now, the dealer will oftentimes have some incentives to move cars off the lot. So if the car isn't in a lot of demand or if they have several of them on the lot, they might be willing to get close to invoice or even in certain cases, even below invoice.
But one of the really important things to think about, in this video, Now, it's important to know what these fees are and what these taxes are. Things like sales tax, registration fee, and title fee, this is not the car dealership just making numbers up. These are things that they have to charge by law and you really can't negotiate these things down.
But it's good to know that they are coming when you think about how much in total you are going to pay. Now, some of these other things you might see, and you'll sometimes see even more than this, documentation fee, that's something that usually can be negotiated.
And in any negotiation, you have to be prepared to walk away. Now, the last thing I will highlight is sometimes, when they're throwing on these various fees or they're saying, hey, why don't you want this extra feature or that extra feature? And it looks like a lot of money, it's, you know, $600, almost $500.
They might say, "hey, it's not a big deal, if you finance this thing and you pay it down over five years, it's only going to end up being another $5 a month or $10 a month. Think about how much peace of mind you're gonna have for that $10 a month, knowing that your undercarriage is protected."
Resist that, you should go in, ahead of time, knowing what your budget is. Either your budget for the total price of the car or what your monthly budget is. But not just your monthly budget, but the monthly budget, and how quickly you want to pay it down,
Video © Khan Academy, used under CC BY-NC-SA. Watch on Khan Academy. Puzzicle is not affiliated with Khan Academy.