How to Get the Best Deal on a New Car in Canada
Saving money on a big purchase is the single best feeling in the world. Alright, getting a promotion at work or marrying the love of your life might beat getting a good deal on a new car — but it’s still rewarding to know you’re not throwing money down the drain!
Car pricing is complicated and the sticker price doesn’t always tell the whole story. It’s important to do your research before hitting the dealership, so you don’t get surprised by the final purchase price.
You should know how much you’re prepared to spend and the exact specifications you’re looking for in a new vehicle, right down to the model, trim and add-ons. It’s easy to get up-sold on things you don’t need in the heat of the moment, so be prepared to say no to things like rustproofing and an extended warranty if it’s not already in your budget. Dealership fees and sales taxes will also affect how much you end up paying.
This post will help you understand the ins-and-outs of car pricing so you can get the best deal on a new vehicle.
Here’s what we cover:
- What is the best month to buy a new car?
- Can you negotiate the price of a new car?
- What is a car invoice price vs MSRP?
- How much do dealerships pay for new cars?
- Can a dealer charge more than MSRP?
- Is sales tax included in MSRP?
- 10 steps to getting the best deal on a new car
What is the best month to buy a new car?
Timing is everything. That’s particularly true when it comes to buying a new car. Dealerships adjust the price of the cars on their lot for all kinds of reasons throughout the year and paying attention to the sales season can save you money.
The best month of year to buy a new car is November because this is when dealers are trying to sell off old stock to make room on the lot for new models. You can also take advantage of a dealership’s sales quotas by shopping at the end of the month when salespeople are more willing to give you a deal to hit their monthly goals.
Many dealerships take part in shopping holidays, like Black Friday or Boxing Day, by offering purchase incentives on new vehicles. Keeping an eye out for special sales events and paying attention to the time of year can save you thousands.
Can you negotiate the price of a new car?
Absolutely! A reputable dealership will be open to negotiating to make a sale. It might seem like an intimidating process, but there are a few ways you can prepare so the negotiations go smoothly.
First, make it clear that you’ve done your research and know how much you want to spend. You should also go in armed with competing prices from other dealerships, so don’t be afraid to shop around. Don’t be rude, but hold your ground and be prepared to leave if the salesperson can’t offer you a fair price within your budget.
Work up from your lowest offer instead of haggling with the salesperson on their highest offer. A common tactic in car sales is to focus on the monthly payment instead of the total purchase price, this can be a slippery slope that leads to hidden fees and confusion. Stay focused on the total price of the car and talk about trade-ins or incentives only after you’ve agreed on the bottom line.
Getting pre-approved for financing before you start shopping can also be a good tool to have in your arsenal. Being pre-approved means you have a set budget and will be less inclined to go over it. Some dealers may also offer you more competitive financing terms than what you’re pre-approved for to try and win your business.
What is a car invoice price vs MSRP?
The invoice price is the amount a dealership pays a manufacturer for a new car. This price is almost always lower than what a car is listed for because otherwise the dealership wouldn’t be making a profit on its sales. The invoice price isn’t always listed with the vehicle on the lot, so you might have to ask the dealership for a copy.
The manufacturer’s suggested retail price (MSRP) is also referred to as a car’s “sticker price” because it is the amount a dealer would like you to pay for a new car. Salespeople will often start negotiations at the MSRP and go up from there to try and make more of a profit on a vehicle. You should always consider the MSRP the maximum you’re willing to spend and try to negotiate below that.
How much do dealerships pay for new cars?
The simple answer is: it depends. Car dealers are in business to turn a profit, so it shouldn’t come as a surprise that the new cars on their lot are listed at higher than the invoice price. If they sold new vehicles at the same price or lower than they paid the manufacturer for them they wouldn’t be in business very long.
Dealership markups can vary widely and depend on the kind of vehicle. A small sedan, for example, might have a markup of 5% or less, while a luxury SUV could be priced at 10% or more of the invoice price.
Manufacturers also offer dealers “holdbacks” on new cars they purchase. This works as a sales incentive as the dealer is re-paid a certain amount of the invoice price whenever they sell a car. This means the dealer is usually paying less than the invoice price for the cars on their lot.
Can a dealer charge more than MSRP?
Dealerships have full control of how much they charge for a vehicle and the MSRP is just that, a suggestion. However, it’s generally in the dealer’s best interest to keep their prices low to attract customers.
Popularity also plays a role in how much a dealer charges and how low you are able to go when negotiating the price. As per the law of supply and demand, vehicles with high demand and low supply will often be sold at MSRP or higher because. Dealerships will usually be willing to sell less popular vehicles for closer to the invoice price because they’re trying to clear stock.
Is sales tax included in MSRP?
The suggested retail price does not include sales taxes or fees charged by the dealership. All of those things are calculated on top of the MSRP of a new vehicle and can add up you some serious dough. These extra fees should be part of your budget.
Finding out how much you’ll have to pay for a sales tax is pretty easy. In Canada, everyone has to pay the 5% Goods and Services Tax (GST) set out by the federal government. After that, each province has its own Provincial Sales Tax (PST) rate. In Manitoba, for example, the PST is 8% so consumers pay a total of 13% when they buy something from a retailer. That works out to an extra $3,250 in taxes on a new $25,000 car.
10 steps to getting the best deal on a new car
It might be harder to figure out how much you have to pay in dealership fees until you’re ready to sign the contract. Here’s our top suggestions:
1. Ask for an estimate at the beginning of negotiations — This will ensure you don’t waste time discussing the purchase without ever knowing what you might have to pay.
2. Start negotiations with your pre-calculated lowest-offer — Setting the standards around your budget at the beginning will ensure both you and the dealer are on the same page.
3. Be mindful of the time of year you’re shopping — As we mentioned above, different months provide dealers with different incentives. Take note of the time of year you’re shopping and, if possible, hold off making your purchase until it fits into a timeframe when you can optimize the deal.
4. Do your research about the dealership and model you’re looking for before heading in — Going in well equipped and informed shows the dealer you’re serious about making a purchase.
5. Be aware of competing bids from other dealerships — Knowing what other dealers and car website are charging for the same vehicle will challenge the dealer and put on the pressure to provide you with a better offer.
6. Calculate and be prepared to discuss what you’re willing to pay — Transparency is key, so be open about your budget.
7. Hold your ground and be confident in your numbers — You’ve done your research. Own it!
8. Ask confidently about trade-in and the vehicle’s worth to prove your knowledge — You have every right to know about the investment you’re making and what the return will be.
9. Know when to walk and head to another dealer — If the negotiations get stuck and the dealer isn’t budging on the price, it may be time to call it a day. Don’t waste your time, or theirs.
10. Know when to say yes, especially if the offer is in your target price range — If you’re offered a price that fits into the overall range your budget is in, say yes. From there, you can start talking about financing options.
At Birchwood Credit Solutions, we’re committed to providing our customers with the best car-buying experience. Our team of Finance Managers is equipped to understand your financial needs. Learn more about our process or apply for a car loan today.
