Negotiate as close to invoice pricing as possible.
The invoice price is the amount a dealership owns a vehicle for and MSRP is known as the Manufacturer's Suggested Retail Price. The difference between the two is the amount the dealer hopes to make for profit.
Resources
The Edmunds website can be used to determine the invoice cost for a vehicle using the True Market Value tool (see Resources). Price the car with options to ensure you are seeing the right invoice price--prices differ for level and the options available. Go directly to the manufacturer's website and virtually build a vehicle to determine the MSRP price. If you print off the invoice price amount and show the dealer, he is likely to show you his paperwork for invoice pricing if you are incorrect.
Considerations
When figuring MSRP and invoice pricing on a new car, include the transportation fee (which is listed separately). This fee is part of the vehicle cost and is not negotiable. When building the vehicle at the manufacturer's website or choosing options from the True Market Value tool, it is a common error for shoppers to exclude floor mats or other minor add-on items. Dealers do not usually order a vehicle from the manufacturer without floor mats, so keep this in mind for pricing. Expect some variation in the differences you see online and at the dealer's lot.
Warning
Manufacturer incentive programs, such as those that offer $1,000 off of the MSRP price, do not come from an independent dealership. The dealer is reimbursed for the discounted amount by the manufacturer. If you want to negotiate below MSRP, do so before deducting any incentives. Otherwise, you are buying the vehicle for full sticker price.
