Uncovering hidden rebate costs when buying a car

VANCOUVER (NEWS1130) – If you are in the market for a new car, your head is probably full of numbers: MSRP, incentives, interest rates, and trade-in values. But there are a few more figures you should be aware of; ones the dealer won’t necessarily tell you about unless you ask.

“Buying a new car an be an anxiety-filled experience,” says Paul Timoteo with Car Cost Canada, one of a few companies that provide wholesale invoice price information to car-buyers for a fee.

“But if you know the lingo, you can get through it a lot easier,” he adds.

Everyone has easy access to the Manufacturers Suggested Retail Price (MSRP); it’s right there on the window sticker.

“That’s the list price; the price the manufacturer sets for the car and it’s the price the dealer would like you to pay. But of course, you should very rarely, if ever, pay that price,” says Timoteo.

“Then there’s the dealer invoice price; the price the dealer actually pays the manufacturer for the car,” he explains. “Obviously, you can’t expect to buy it for the dealer invoice price but if you know what  the  dealer paid and you know [what the] MSRP is, the difference is basically the haggling room you’ve got to work with.”

But Timoteo notes you have to understand some other little pieces of math:

“One is what’s called ‘hold back’ or ‘marketing assistance.’ Most manufacturers help to subsidize the interest charges that the dealer pays for the inventory, marketing advertising… that sort of thing. They normally get an amount back from the manufacturer to help cover some of that. That’s why a dealer can actually sell a car for only three-to-five per cent profit margin; because some of those expenses are covered by the manufacturer.”

Additional incentives

Timoteo tells us there are also factory-to-consumer incentives. “[They’re] basically savings for you. In an effort to stimulate sales, manufacturers will offer certain incentives that are advertised to the consumer.”

“They can be something as simple as zero per cent financing or a couple thousand dollars [in a] cash rebate. There are a million different things that they’re always coming up with to try to stimulate sales. These are savings the manufacturer offers to the consumer, however not all of them are advertised,” he explains.

Then there are what are often called “secret incentives.”

“These are the factory-to-dealer incentives, commonly known as hidden incentives or secret rebates. These are very rarely advertised, so if you don’t know to ask for them, you won’t get them,” says Timoteo.

“If you do know to ask for them, the likelihood is that you will get them. And once you have all of this information, you are now armed with as much information as the sales person has,” he says, adding a three-to-four per cent mark-up is fair for the dealer, once you figure out the true price of the car.

Where to find the information

All of this information is available, but it can be hard to find Canadian numbers for free.

CarCostCanada offers wholesale reports on up to five different models for $40. Consumer Reports offers a similar service for paid members and includes Canadian prices.

Edmunds.com and a number of other websites provide figures for US models, often for free.

“It really kind of levels the playing field,” says Timoteo. “The consumer is now empowered with the information they need to make a good decision and know if the dealer is actually offering a good price.”