I’ve been saying since the beginning of this column that most car salesmen are honest, and it’s true. But that doesn’t mean you should let down your guard completely, or accept everything they say. Because some of the things that dealerships do can be unintentionally misleading, or at the least confusing, if you don’t pay attention.
Today I’d like to talk about one of the biggest causes of misunderstanding, which is not reading the window sticker closely — something that often trips up the average consumer when it comes to the manufacturer’s “Regional Discount,” or “Option Package Discount.” As you probably know, every new vehicle in the United States comes with a window sticker, sometimes called the “Monroney.” It shows the MSRP, or Manufacturer’s Suggested Retail Price, for that vehicle.
This sticker typically shows the Base Price of the vehicle at the top, and then lists all the Options that have been added below, with the cost of the Options listed next to them. Below that is the “Destination Charge,” sometimes listed simply as “Destination,” which is a fee the manufacturer charges dealers to cover the cost of transporting the vehicle to the dealership.
At the very bottom of that column you’ll see the total price, which is the Base Price plus the Options minus any discounts plus Destination. This is your MSRP. Sometimes, if you look right below the list of options — particularly on trucks — you’ll see something called the “Option Package Discount,” or something similar. This number represents a discount that the manufacturer builds into the MSRP to help sell the vehicle.
It’s usually based on the vehicle having been ordered with a set of options that are bundled together in an attractive package, like special wheels, chrome trim, upgraded suspension and a unique grille, or whatever. Or sometimes it’s based on where the truck is sold. If you buy a certain type of truck in a certain state, such as Georgia, it may have a “Regional Discount” on its sticker.
The exact same truck in Nevada might not have the discount. The best way to understand this is to look at the window sticker of an actual Chevy truck:
- Base Price $31,550
- Option (defogger) +175
- All Star Edition +2775
- Total $34,500
- Package Discount -1,500
- Destination +995
- MSRP $33,995
As you continue reading, keep these figures in mind — and don’t forget the package discount. It’s a real discount — a real savings — to you. But, the way some dealerships present their “numbers” (their pricing information), that discount can get lost in the shuffle.Let me give you an example.
Let’s say you’re looking for a truck, and you find a Chevrolet Silverado that’s just perfect. It’s a two wheel drive Extended Cab with a regular bed, cloth interior, and the 5.3L V-8. When you’re out on the lot you look at the window sticker and see that the MSRP is $33,995. You look at a few other trucks that day but this one stands out so you come back later and test-drive it.
You vaguely recall it has a price around $34K. But you’ve also been looking at trucks all day, and all kinds of numbers are floating around in your head. After the test drive, you go inside with the salesman and he comes over and sits down with a piece of paper in his hand that shows you the “out the door” price for the truck, along with a detailed breakdown of how they got there: the MSRP of the new truck, the discount, or “Customer Savings,” the rebate, the Selling Price, the value of your trade-in, the fees, the taxes, the amount of your pay-off, various amounts of money down, your monthly payments, etc.
That’s a lot of numbers on one piece of paper. And generally, what happens is, the customer focuses in on one or two key numbers that are most important to him, such as the trade-in value, or the discount, or the payments, which is completely understandable. But you need to stop and look at where the dealer began. Because at some dealerships, they will not be starting at MSRP.
They will be starting at a number that is actually HIGHER than MSRP… and showing you a “discount” you have already received.In this particular case, you were shown a discount of $1,500 and a rebate of $5,000, which totals $6,500 off, resulting in a Selling Price of $28,995.$6,500 off. That’s a pretty good deal, wouldn’t you say? And if they’ve given you a fair amount for your trade you may be tempted to take it.But wait a minute. How much has the dealer really discounted the truck?
Remember I said that the Optional Package Discount is already built into the price of the vehicle? If you look at the window sticker I’ve reproduced above, you’ll see that General Motors has already given the customer $1500 off the price. The actually MSRP of this vehicle, including the $1500 discount, is $33,995. But on the paper the salesman presented, it shows an MSRP of $35,495. How can that be?
Again, go back to your window sticker, which you probably last saw five or six hours ago. The MSRP is $33,995 — which includes the $1500 Optional Package Discount. All the dealership has done is added back the manufacturer’s Option Package Discount and left in Destination (which they can’t waive) to show you a starting point of $35,495. And then they’ve taken off $1500… which actually takes you right back to MSRP. In defense of the dealership, they’re not lying. And if you question them, they’re likely to say, “Hey, we’re not trying to fool anybody. It’s right there on the window sticker, Mr. Customer.” And they would be right. The discount is printed right there on the window sticker, for all the world to see. You are in fact getting a $1500 discount, because of the options on that truck.
If you tried to buy the same type of truck with those same options at a different time of year, when the manufacturer wasn’t offering that discount, your MSRP would be $1,500 higher. So it’s a real discount. But it’s coming from the manufacturer, not the dealer. So essentially the dealer hasn’t discounted the truck a penny. General rule of thumb: always read the window sticker carefully and note any manufacturer discounts, or “package discounts.” And make sure you start any negotiation at the actual MSRP listed on the bottom of the sticker. Good luck!