Car Buying Terms with Definitions
Here are car buying terms that are used
at car dealerships. These are good to know whether you are a consumer or are a
car dealer.
 Ad
Unit Cars (Ad Units, Advertising Units):
These cars are advertised at really low prices to try to get you on to the car
lot so they can sell you something more expensive. They are usually loss leaders
for the car dealership and are advertised in local newspapers with a picture and
text that will say something like "Only 2 available at this special price".
Allotment (Dealer Allocation): A system used by the car manufacturers to
give cars to their dealerships.
Asking Price: This car buying term is about an ad for a car that says
something like "asking $3000.00" then you just need to know that the price is
usually negotiable. If the ad said "$3000.00 Firm" then obviously they aren't
going to be very negotiable unless they end up sitting on it a long time.
Book (Book Value): Book value is referring to the prices of used cars
found in the Kelley Blue Book
or NADA guides. These
publications are used as a guideline when trying to figure out how much a used
car is worth.
Carryover Allowance: As car manufacturers start releasing cars for the
new model year, the dealers will discount their inventory of last years cars.
Its a good way to get a fairly deep discount on a new car.
Churn & Earn: These are low-demand vehicles that new
car dealers have to buy from
the car manufacturers when they are buying high-demand vehicles. Its just a way
for the manufacturers to move cars that nobody wants. The dealership will
advertise these at a discount mainly just to bring in potential buyers for their
more profitable vehicles.
Commission: The cut that a car salesperson gets from selling a car. The
more units (cars) they sell per month then they are also in line for bonuses.
Customer Incentive (Incentive, Rebate): These are discounts available on
low-demand vehicles or when sales are slow in general.
Dealer Holdback (Holdback, Giveback): Car
dealerships don't like to reveal what Holdback is to customers because even
if you bought a new car that was just $10.00 over invoice price, the
manufacturers might still be offering the dealership 2% to 5% under the invoice
price. When you know what the Holdback is then you can get the best deal on a
new car.
Dealer Invoice Price (Invoice, Tissue): This is the price a car dealer
pays for a new car.
Destination Charge (Delivery Charge): This is what
car dealers have to pay
the manufacturer for having the car shipped to them. Its the same price whether
the dealership is 5 miles or 500 miles from the manufacturer.
Manufacturer's Cost (Auto Maker Costs): Simply the cost for the
manufacturer to build a vehicle. All those things like energy, payroll,
machinery, insurance, taxes, property and building costs, maintenance and
repairs must be factored in to the cost of a vehicle.
Manufacturer to Dealer Incentive (Dealer Incentive, Factory To Dealer
Incentive): When car manufacturers build too much of a certain vehicle they
will offer their supply to the dealers at a discount. Its up to the car buyer to
find out when these are happening to be able to negotiate an even lower price.
Market Prices: They are the price differences for the same vehicle based
on the where it is selling because a convertible, for example, might sell for a
few thousand more in a warmer climate and less in a cold climate. Market prices
change over time because they are based on supply and demand.
Minimum Deal: A sale where the profit is small that the dealership will
pay the salesperson a flat fee to sell the vehicle instead of a percentage. Ad
Unit vehicles usually fall into this category.
MSRP (Manufacturers Suggested Retail Price, Sticker Price, Sticker, Munroney,
List Price, Retail Price): This is merely the price the manufacturer is
suggesting the dealer sells the car for. You will see the sticker on the side
window. Munroney was the senator that introduced the law that makes it mandatory
that this sticker is on the window.
Non-Commissioned Sales: This is a relatively new thing where dealerships
sell new cars for a non-negotiable price. The psychology is that its supposed to
be a no-pressure relaxed environment for the buyer. These places are for pussys
that are afraid to negotiate and the truth is that they are probably paying way
more these cars.
Option Packages: Car manufacturers will offer a package deal on
accessories that might include something like an "Off Road Package" or a "Sports
Package" or whatever, that might have: special wheels and tires, different
interior, pin striping, a more heavy duty suspension, etc., etc.
Retail (List Price): This car buying term is about the top price a
vehicle could sell for without the buyer doing any negotiating whatsoever.
Special Circumstances Dealer Incentives: The car manufacturers might
offer special discounts on vehicles to a new car dealership just to help them
get started and establish a customer base.
Wholesale (Wholesale Value, Actual Cash Value): This
car buying term is about the value
determined when a car lot takes in a trade-in vehicle that they plan to sell to
wholesale dealer or at a used car auction. Leave
Car Buying Terms to see more Auto Terms
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