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What Affects a Vehicle’s Sticker Price?

Owning a car in New York City is not as expensive compared to other states, but you wouldn’t know it just by looking at the sticker price of a new car. Ever wondered why the figure on the sticker is as substantial as it is? It is affected by a number of factors, including the following:

 

Invoice price

This is the price the dealership presumably paid the manufacturer to purchase the vehicle. The amount is presumed because the invoice price may not be the real price the dealership paid to acquire the car.

While it is true that all auto dealers pay the same price for the same vehicle from the factory, the true cost of acquisition may differ due to dealer holdback. Dealer holdback refers to the percentage the auto maker offers the dealership as a reward for selling the car. The holdback typically amounts to 2 to 3 percent of the amount the buyer pays for the vehicle.

 

Options

The base price is the cost of a vehicle’s stripped down model, plus standard equipment and warranty. It is typically exclusive of options, though there are some manufacturers that do include the extras in the base price. Options include air conditioning, navigation system and leather seats. The more options you want included in a car, the higher the price. According to NADAguides.com, options can cost around $3,000 to $8,000.

 

Dealer add-ons

Aside from the main sticker, there is another sticker found next to it. The main sticker is from the manufacturer, while the other one is from the dealer. The latter details what the dealer has done on the vehicle, such as the addition of pin stripes and other after-market options. These are expensive, with add-ons costing thousands of dollars.

 

Dealer incentives

This is similar to, and not the same as, dealer holdback. Also known as ‘manufacturer-to-dealer incentives,’ these are awarded by manufacturers for dealers to push certain models. The price range of these incentives is $500 to $1,500. If a car buyer knows about these incentives, he or she will be in a better position to negotiate on the vehicle price.

 

Buyer incentives

Customers also have incentives, which can either be from the auto maker or dealer. These are provided in the form of rebates, cash-back and the like. Another incentive are discounts for car buyers who fit particular criteria (i.e., students, military families, etc).

 

Dealer prep fee

‘Dealer prep’ is short for dealer preparation. The fee covers the cost of preparing the vehicle for a sale, including washing the vehicle and putting gas on the tank. It is basically a business cost, one passed on to consumers. More often than not, there is no breakdown of the kind of preparation done to the car. Dealers use the small cost of a bit of manual labor to try to get more money from customers.

 

Processing fee

Also called as documentation fee, this covers the amount of processing paperwork such as those related to auto title and registration. This can affect your price especially if you seek financing from the dealership. The fee should be modest—you shouldn’t be charged over $400. Just like the car price, you can negotiate for this one.

 

Destination/delivery charge

Sometimes referred to as ‘D and D’ or ‘shipping and handling,’ this is the standard charge imposed to cover shipment of the vehicle from the factory to the dealership.

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