The allure of a brand new car, built precisely to your specifications, is a powerful draw. Many buyers wonder if ordering directly from the factory offers a significant cost advantage over buying from a dealer’s existing inventory. The answer, as with most things related to car buying, is nuanced. Several factors influence the ultimate price, and understanding these elements is crucial for making an informed decision.
Understanding the Factory Order Process
Ordering a car from the factory isn’t as simple as picking options and waiting for delivery. It’s a process involving dealers, manufacturers, and a timeline that can stretch from weeks to months. Let’s break down the key aspects:
The Role of the Dealership:
Despite ordering directly, you’ll almost always work through a local dealership. Manufacturers typically don’t sell directly to consumers. The dealership acts as an intermediary, placing the order on your behalf, managing the paperwork, and handling the delivery when your vehicle arrives. The dealership’s role is important to remember because they’ll still need to make a profit.
Customization Options:
One of the primary appeals of factory ordering is the ability to tailor the vehicle to your exact preferences. You can choose the specific trim level, exterior color, interior upholstery, and optional features that best suit your needs and desires. This level of customization is usually not possible when selecting from existing dealer inventory.
The Waiting Game:
Patience is a virtue when ordering from the factory. The production timeline can vary significantly depending on the manufacturer, the vehicle model, and the complexity of your customization choices. Some vehicles might be built and delivered within a few weeks, while others could take several months. Supply chain issues, factory shutdowns, and high demand can all contribute to delays.
Price Negotiation:
Even with a factory order, the price is still negotiable. The Manufacturer’s Suggested Retail Price (MSRP) serves as a starting point, but you should always negotiate with the dealer to secure the best possible deal. Incentives, rebates, and special financing offers can all impact the final price.
Cost Factors: Factory Order vs. Dealer Inventory
Several factors influence the price difference between a factory order and buying from dealer inventory. Let’s consider the key elements:
Incentives and Rebates:
Manufacturers often offer incentives and rebates to encourage sales. These incentives can vary depending on the vehicle model, trim level, and geographic location. Sometimes, specific incentives might be available only for vehicles in dealer inventory, while others might apply to factory orders as well. Researching current incentives is essential.
Dealer Markups and Discounts:
Dealerships have the flexibility to adjust prices based on market conditions, demand, and their own profit margins. They might offer significant discounts on vehicles they’re trying to move quickly from their inventory. Conversely, they might apply markups to popular models or vehicles with limited availability.
Negotiating Power:
Your negotiating power can be different when ordering from the factory. Dealers might be less willing to offer deep discounts on factory orders, as they know you’re committed to buying a specific vehicle. However, you can still negotiate the price and compare offers from multiple dealerships.
Hidden Fees:
Be aware of potential hidden fees, such as destination charges, documentation fees, and other administrative costs. These fees can add to the overall price of the vehicle, regardless of whether you order from the factory or buy from inventory. Always ask for a detailed breakdown of all costs before finalizing the purchase.
Potential Savings (or Lack Thereof)
So, is it actually cheaper to order from the factory? Let’s dissect the potential for savings:
Lower Inventory Costs for the Dealer:
In theory, factory orders can reduce inventory costs for the dealer. They don’t have to finance or store the vehicle on their lot. This could translate to lower prices for the buyer, but it’s not always the case. The dealer’s profit margin remains a key factor.
Avoiding Unwanted Options:
When buying from inventory, you might be forced to pay for options you don’t want or need. With a factory order, you can avoid these unwanted features, potentially saving money. This is one of the biggest advantages.
Price Protection:
Some manufacturers offer price protection programs. This means that if the price of the vehicle increases between the time you place the order and the time it’s delivered, you’ll be protected from the price hike. Not all manufacturers offer this, so it’s important to inquire about it.
No Guarantee of Savings:
It’s crucial to understand that ordering from the factory doesn’t guarantee savings. In some cases, you might end up paying more than you would for a similar vehicle in dealer inventory, especially if you’re not a skilled negotiator or if demand for the vehicle is high.
Factors that Can Increase the Price of a Factory Order
Several circumstances can actually make a factory order more expensive:
High Demand Vehicles:
If you’re ordering a popular vehicle that’s in high demand, dealers might be less willing to offer discounts. They know that someone else will likely be willing to pay full price, or even a premium, for the vehicle.
Limited Availability Options:
Certain options or features might be in limited supply, which can drive up the price. Manufacturers might prioritize production of certain configurations, leading to longer wait times and higher costs for less common options.
Inflation and Economic Conditions:
General economic conditions, such as inflation and rising interest rates, can affect the price of all vehicles, including factory orders. Manufacturers might increase prices to offset rising production costs.
Negotiating Strategies for Factory Orders
Despite the potential challenges, you can still negotiate effectively when ordering from the factory:
Research Incentives and Rebates:
Before you start negotiating, thoroughly research all available incentives and rebates. Check the manufacturer’s website, online forums, and automotive publications for the latest offers.
Get Quotes from Multiple Dealerships:
Don’t settle for the first offer you receive. Contact multiple dealerships and ask for quotes on the same configuration. This will give you leverage and help you identify the most competitive price.
Focus on the Out-the-Door Price:
Pay attention to the out-the-door price, which includes all taxes, fees, and charges. This is the total amount you’ll pay for the vehicle.
Be Prepared to Walk Away:
If you’re not happy with the price, be prepared to walk away from the deal. Dealerships are often willing to negotiate further to avoid losing a sale.
Alternative Strategies to Save Money on a New Car
If ordering from the factory doesn’t seem like the most cost-effective option, consider these alternative strategies:
Look for End-of-Year Deals:
Dealerships often offer significant discounts on vehicles at the end of the year to clear out old inventory.
Consider a Slightly Used Car:
A gently used car can offer significant savings compared to a brand new vehicle.
Shop Around Online:
Use online resources to compare prices and find deals from dealerships in your area.
Be Flexible with Your Options:
Being flexible with your options and willing to compromise on certain features can help you find a more affordable vehicle.
Making the Right Decision
Ultimately, the decision of whether to order from the factory or buy from dealer inventory depends on your individual needs and circumstances. Consider these questions:
How Important is Customization to You?
If you have very specific preferences for your vehicle’s features and options, factory ordering might be the best choice.
How Soon Do You Need the Vehicle?
If you need a car quickly, buying from dealer inventory is likely the better option.
Are You a Skilled Negotiator?
If you’re comfortable negotiating prices, you might be able to secure a good deal on either a factory order or a vehicle in inventory.
What is Your Budget?
Set a budget and stick to it. Don’t get caught up in adding expensive options that you don’t really need.
Weighing the pros and cons carefully, researching incentives, and negotiating effectively will help you make the most informed decision and get the best possible price on your new car. Remember, informed consumers are empowered consumers.
Is ordering a vehicle from the factory inherently cheaper than buying off the lot?
Generally, ordering a vehicle from the factory isn’t automatically cheaper. The price is still subject to negotiation with the dealership, and manufacturers often set a Manufacturer’s Suggested Retail Price (MSRP) that dealers usually adhere to, regardless of whether the car is built to order or already on the lot. Special incentives or promotions might apply to both factory orders and in-stock vehicles, making it difficult to claim one is consistently more affordable than the other.
The key factors that influence the price are market demand, dealership policies, and any applicable discounts or rebates. Ordering from the factory allows for greater customization, but this doesn’t inherently translate to savings. In fact, certain options or packages added during a factory order can potentially increase the overall cost compared to selecting a model already equipped on the dealer’s lot.
What are the potential cost benefits of ordering a car from the factory?
One potential benefit lies in avoiding unwanted features. When you order a car, you only pay for the specific options and features you desire, avoiding the cost of bundled packages or trim levels that include items you wouldn’t normally choose. This can lead to a more tailored, and potentially less expensive, vehicle compared to settling for one already on the lot with features you don’t need.
Another possible advantage stems from leveraging manufacturer incentives or promotions. Occasionally, manufacturers offer specific incentives for custom orders to boost production or clear out older model year components. These incentives, though not guaranteed, can result in significant savings that might not be available for in-stock vehicles.
Does ordering from the factory mean I avoid dealer markups?
Not necessarily. While ordering from the factory allows you to specify the exact car you want, the final price still relies on the dealership’s pricing policies. Dealers often mark up vehicles above MSRP, particularly for popular models or when demand is high. Ordering doesn’t automatically exempt you from these markups.
Dealerships can still add markup to the price of your custom order, regardless of it being a factory order. The key is to negotiate the price before placing the order, ensuring you’re comfortable with the final cost, including any applicable markups or fees. Don’t assume that ordering bypasses the dealership’s pricing strategies.
What role does negotiation play in the cost of a factory-ordered vehicle?
Negotiation is crucial in determining the final price of a factory-ordered vehicle. Just like buying a car off the lot, you can and should negotiate with the dealership to secure the best possible price. This includes discussing the MSRP, available incentives, and any potential markups or fees.
Don’t hesitate to compare offers from multiple dealerships, even for a factory order. Dealerships might be willing to offer different pricing or incentives to win your business. A strong negotiation strategy can significantly impact the overall cost of your custom-built vehicle, potentially leading to savings compared to the initial quoted price.
Are there any hidden costs associated with factory ordering a vehicle?
Hidden costs can sometimes arise when factory ordering. Carefully review the order agreement to identify potential add-ons such as destination charges, documentation fees, or dealer-installed accessories. These costs might not be immediately apparent but can significantly increase the final price.
It’s crucial to clarify all fees and charges with the dealer before finalizing the order. Don’t be afraid to ask for a detailed breakdown of all costs involved, ensuring transparency and avoiding any unexpected expenses upon delivery of your vehicle. Question any unclear charges and negotiate if necessary.
How does waiting time factor into the overall value proposition of factory ordering?
The extended waiting time associated with factory ordering significantly impacts the value proposition. While you get a customized vehicle, consider whether the wait (often weeks or months) is worth it, especially if you need a car urgently. The wait itself carries an opportunity cost, as you’re potentially delaying transportation needs or missing out on immediate deals available for in-stock vehicles.
Factor in potential changes during the waiting period. Interest rates could rise, incentives might expire, or your personal circumstances could change, affecting your ability or willingness to purchase the car when it finally arrives. Evaluate whether the benefits of customization outweigh the inconvenience and risks associated with a longer waiting period.
Can incentives and rebates be applied to factory-ordered vehicles?
Yes, incentives and rebates can often be applied to factory-ordered vehicles, but it’s essential to confirm this with the dealership beforehand. Manufacturer incentives, such as cash rebates or low-interest financing, are generally applicable regardless of whether the vehicle is in stock or custom-ordered. However, specific program rules may apply.
Dealerships can also offer their own discounts or incentives, which might be negotiated during the ordering process. It’s crucial to clarify which incentives are available and how they will be applied to your final price. Ensure that the agreed-upon incentives are clearly documented in the purchase agreement to avoid any surprises later.