Dealers are always going to try and tell you that they paid less for the cars than they actually did so that they can make a higher profit off of the sale.

Salesmen often try and make you feel guilty by telling you “I’m losing my shirt off of this deal”.

In truth, you are the one that is losing your shirt off of the deal, so don’t buy into it.

To calculate what your offer should be to the dealership, you should get the factory invoice price (don’t forget to include the options in this price), and add 5% to that amount. That is how you should calculate your offer the dealership.

When I mention the options, I mean the ones that you can’t avoid. Some cars come equipped with a CD, sun roof etc. and these are fees that you can’t avoid paying so sure to account for these at the beginning.

You should also be sure to account for any buyer rebates as well in calculating your offer. So in the end your offer should be calculated like this:

DEALER’S COST + 5% - ANY BUYER REBATES = YOUR OFFER

Calculating your offer to a dealership is as simple as that. When you are considering how much you can afford for a car, be sure that you don’t get sucked into paying more than that.

If you are unwilling to pay more than your opening offer, let the salesman know that your offer stands firm and how they will profit from the offer.

In the end you will get what you want on your own terms. To be certain that you get the drift I will set an example for you.

You are hoping to buy a Toyota Camry. You do your research at DealersInvoice.com, and find that the invoice price is $19,922; MSRP is $22,385. The dealer may offer you the car for $22,000, and shows you the invoice.

You learned by researching that there is a $500 factory to dealer incentive; and a $447 holdback on the MSRP (2%).

Based on the above calculations, the dealer’s real cost is $19,922 (invoice) - $500 (incentive) - $447 (holdback) = $18,957. This is far below the factory invoice number.

Now, if you add the 5% for your offer to that price, which will up the car price to $20,379 due to the addition of $455 for the destination charge that is always present, you will see that based on the offer that the dealership offered, you just saved yourself $3410.

This may seem complicated but if your use a pre-designed spreadsheet from CarsDirect.com or AutoUSA.com, the program does all the calculation for you.