Buyers Guide: Confusion around pricing structures
Vineet is looking to buy a new midsize hatchback. He has noticed some dealers are offering their vehicles at Recommended Retail Prices (RRP) while others have Recommended Special Prices (RSP). There are also those offering a factory bonus. “I find it all a bit confusing. Can Driven please explain what the differences are, and why some dealers have a different pricing structure for specific models” asks Vineet.
Vineet has a budget of around $30,000.
I must admit it does get a little bit confusing at times. The word recommended is there to highlight a new vehicle distributor’s suggested price for a particular model. The RRP is what the new vehicle distributor believes a vehicle should retail for through their respective dealer networks. It takes into account competitors prices and models with similar specification levels and also allows for dealer profit margins. They are recommended prices only however, not fixed prices.
There are many variables which can influence what a dealer sells a new vehicle for. If there is a trade-in involved in the sales agreement for example, the dealer may offer a generous handover price taking into account what they believe will be a healthy profit margin when the traded vehicle is sold. Swings and roundabouts really; lose a little on one sale and gain on another.
At other times, a traded vehicle may have limited value or appeal with buyers so the RRP or handover dollars is/are less negotiable. The Dealer may also decide to cut their margin on the RRP price because they can recoup some profit back from any big ticket accessories sold.
Recommended Retail Prices can also be more negotiable as month end looms. At times some dealers are incentivised by selling in volume, so prices can be reduced to enable those targets to be reached.
Honda is one franchise in NZ that has stuck to a fixed price policy but that’s not to say they don’t over trade at times to help make a sale. The win-one-lose-one scenario is simply reversed.
Recommended Special Pricing is usually when a new vehicle distributor wants to ratchet up sales of a particular model. It could be because a competitor has recently released a new model into the market with more features, or they have an oversupply of vehicles, or are gearing up for a facelift or new model, and need to clear their current stocks.
It also helps take away the pressure of negotiation for some buyers and sales staff, by offering a bottom line deal that is hard to walk away from. Astute buyers just need to make sure they don’t get offered a lower than expected price on their trades.
Factory bonuses are basically the same but marketed in a different way in comparison to the RSP deals and offered for similar reasons.
Sometimes it doesn’t pay to look at vehicle prices once you have handed over your money on a particular make or model as it’s not uncommon to see better deals offered a short time after purchase. But that’s the way it is for many products not just motor vehicles these days. Make your choice, pay the money and then move on.
Nissan Pulsar ST Hatch ($29,990 less factory bonus)
The Pulsar is a much underrated motor vehicle in my view. It’s not class leading but when it comes down to safety, reliability and economy it has those bases covered well. The 1.8 litre engine produces 96kW of power and has a claimed combined fuel consumption of 6.7L/100km. The entire Pulsar range is currently being offered with a $5,000 factory bonus. That automatically drops the ST price tag to a low $24,990 which equals great buying.
Toyota Corolla GX Hatch (RSP $26,990) or GLX Hatch(RSP $29,490)
The Recommended Retail Prices for these vehicles is around $35,000 and $37,500 respectively. Many would argue you never pay the full RRP for any Toyota but the current RSP offered on both models is certainly an enticing reduction. A 1.8 litre engine is common to both models as is the 103kW power output and 6.6L/100 claimed combined fuel consumption. The Corolla has always been one of NZ’s best-selling passenger cars and sells in huge numbers to fleet and rental companies. RSP’s like this are no doubt designed to attract and appeal to the more mainstream retail new car buyers as well.
Mazda3 2.0l GLX ($32,795)
When you already have what the majority of the NZ motoring press considered to be the best car of 2014, Mazda dealerships can argue they already have an edge over their competition and can afford to hold firm on prices. That’s not to say some discounting doesn’t take place during negotiations. Sales staff can also ‘sell’ the 3 years /100,000km (whichever comes first) service package at no extra cost as an extra incentive to buy.
Check out all the discounts on offer but don’t forget the respective franchise dealers will have a limit on just how much they can reduce prices by. Trying to push for a further discount on accessories for example may well be met with a firm no-can-do reply. And don’t forget to allow for those additional on-road-costs (registration/pre-delivery inspection /fuel etc) to be added.