When it comes to buying any car, new or used, there can be some confusion when it comes to the price that you see on the car’s windshield and the total price that you have to pay. The price on the window or on the window sticker is the car’s selling price, but the total price is called the “out the door” (OTD) price. And if you work on negotiating the out the door price the next time you buy a car, it could save you a lot of money.
What is the sales price or MSRP?
Before you can understand what the “out the door” price is, you must understand that the sales price of a car is the price that you see for it on the dealer’s website, the windshield of the car, or on the car’s window sticker, also known as the Monroney sticker.
Many car buyers negotiate this price thinking that it’s the overall price for the car. But what they typically fail to see is that the dealer still has to add on the sales tax, registration fees, title fee, and documentation fees to come to the total price.
What’s included in the “out the door” price?
The “out the door” price is aptly named because it’s the total price of the car, which always includes the sales tax, DMV registration fee, and a documentation fee. In order to break these down, here are some simple definitions:
- Sales tax: The sales tax rate when your purchase a car is based on where you plan on registering the car. This can vary greatly from state to state and even county-to-county. Just be sure to ask the dealer what tax rate they used to calculate the cost in order to ensure that it’s accurate.
- Registration fees: Depending on your state, the DMV registration fees will vary. You can always check with your Department of Motor Vehicles to make sure that you’re not being overcharged.
- Documentation fee: Dealerships can charge buyers a documentation fee, also known as a “doc fee,” which covers the cost of preparing and filing the sales contract, Edmunds says. Some states limit the doc fee amount while it’s unregulated in other states. Be sure to pay attention to this fee and ask about it as dealers can charge a large amount to hike up the price of the car.
- Title fee: If you plan on owning a car that you’re purchasing, then you’re going to need the title for it. Every state has an associated title fee when you request a title. And while this fee is typically only a few dollars, it’s good for you to know that it’s part of the OTD price.
- Accessories: While not every new or used car will come with accessories on it (installed by the dealer), some dealers will include this in the OTD price. Be sure to pay attention to that when looking at the price sheet for the car.
How do I negotiate the out the door price?
Now that you know everything that is included in the “out the door” price, you now know which number to negotiate down. If you would like to know a projected out the door price on a particular car that you’re interested in, you can always use the “Out the Door” price calculator on Your Auto Advocate’s site.
For example, if you’re looking to buy a car that’s priced at $19,995 on a dealer site, then you can simply plug in that price and the state you’re registering the car in to get the projected out-the-door price.
We plugged in “$19,995” as the car’s price and “Colorado” for the state, which equated to:
Sales price: $19,995
Sales tax: $1,529.62 (7.65% tax rate)
Title fee: $7.20
Registration fee: $300
Doc fee: $598
Total price: $22,429.82
As we can see, there’s a difference of $2,434.82 between the sales price of the car and the OTD price. In order to negotiate the OTD price, you can simply ask the dealer if they will sell it for “$22,000 out the door,” for example.
Depending on the car and your location, some dealers might be able to deduct thousands off the price if they have that much wiggle room in it. But try not to get too low of a number in your head because if a dealer can’t match the price that you want, then it’s possible they’re at the bottom price of what they can sell the car for.
Either way, negotiating the OTD price is a simpler way of negotiating the price of any car as you will know exactly what you’re going to pay for the car even before you sign the contract.