The most nerve-wracking part of buying a car is often getting a good deal. We’ll show you how to negotiate a car’s price.
Perhaps it’s the bad coffee and stale popcorn, the long waits in uncomfortable chairs under florescent lights, or maybe it’s just the pressure of making major financial decisions with less than perfect knowledge, but car buyers consistently report they dislike their experience at dealerships. My guess is most of our collective unease when car shopping stems from the latter.
Trying to negotiate a fair price for your next car can be an intimidating challenge. Car salespeople are professionals. They’ve learned how to negotiate a car’s price for a living. For most car buyers, you’re entering into this process only a few times a decade. But the dealer doesn’t actually hold all the cards. In fact, we’ll show you how to negotiate, using a combination of diligence and patience, to get a great deal on your next car.
Knowledge is power. When it comes to negotiating the price on your next car, knowing the current market for the vehicle you’re looking for will go a long way. That requires that you take to the interwebs and do some digging.
As a first step, it helps to narrow your focus as much as possible. Some car buyers know specifically what they want, a 3-4-year old Mazda Miata for instance, while other buyers may only know that they want a moderately-sized SUV. Begin by making a list of your must-have items. Do you need four-wheel/all-wheel drive? Do you need room for kids, dogs, camping gear? Or are six cylinders an absolute minimum?
Once you’ve narrowed down to a handful or, even better, a single vehicle, then you should read up on it. Read reviews, comparisons, and the manufacturer’s website seeking to become something of a lay expert on the car you want. You’ll want to know all the trims and features.
Once you know what you’re looking at, you can start looking around for examples of that vehicle near you. Car listing sites like Carsforsale.com and dealer websites are invaluable resources in discovering what’s in your area and what the local market is for that vehicle.
In narrowing down to a single vehicle, it’s often helpful to take a test drive of multiple vehicles. Even if you think you’re sure what make and model you want, driving other vehicles in the segment can be illuminating. It also helps guard against becoming emotionally invested in a single car.
Importantly, separate your test driving from your purchasing process. Remember this is all part of your research and the purpose is to gain as much knowledge as you can about the vehicle in question. Avoid talking turkey with the salesperson and let them know you’re “just looking at your options.”
Another preliminary is securing financing pre-approval from your local bank or credit union. They can pull your credit and let you know what amount of money you have to work with. Knowing your ceiling will be vitally important in the negotiations to come. This doesn’t mean you shouldn’t consider a dealer’s financing offers. The past year has seen unprecedentedly low interest rates from most manufacturers. But already having pre-approval means you have another negotiating arrow in your quiver.
Another thing to do before you set foot on a dealer’s lot is get a value of on your trade-in. It’s important to do this prior to negotiation and to leave off the topic of a trade-in until after you’ve come to an agreed upon price. The fewer variables in negotiating your price, the better. Salespeople will often use financing offers, trade-in values, and other factors to complicate the negotiation to their advantage.
When getting a value, be honest with yourself about the condition of your trade-in vehicle, most will fall into the good to fair range. Kelley Blue Book and other services are good resources to help you get a value on your trade-in.
The next step is to start calling around to dealerships in your area to get quotes. It’s important to get multiple quotes to work with. Not only will this help you know exactly what the vehicle’s retail market value is, but it will also give you important leverage when trying to get the price you want.
Ask for an emailed list of the “out-the-door” price, making sure they include taxes and fees; if a dealer refuses to send anything in writing and instead asks you to come in, you can strike that dealer off your list. Serious and scrupulous dealers won’t have a problem putting an offer in writing.
It’s vitally important at this juncture, and later, that you ignore monthly payments. Concentrate on the final price of the vehicle. Longer term loans, which are becoming increasingly common, spread out the total price and lower monthly payments. But these also increases the chance that you could end up “underwater” on the vehicle. Meaning the vehicle depreciates at a faster rate that you can pay the loan, eventually leading to you owing more on the vehicle than it’s actually worth.
Negotiating a car’s price ranks right alongside root canals and DMV visits as some of people’s least favorite ways to spend an afternoon. But, now that you’ve armed yourself with information, the process can be much less painful.
Since you’ve already gathered other offers from other dealers and know what you can actually afford, it’s time to make your offer. Though you’re trying to save as much money as possible, don’t lowball the dealer. Depending on the price of the vehicle, a few thousand below sticker price is a reasonable place to start. With the multiple offers and the listings you’ve already seen, you should be able to know what’s a low, but fair, price for the vehicle.
It may take a few rounds of offers and counteroffers to come to a reasonable accommodation. During this process avoid being overly talkative. Remember, knowledge is power, and salespeople are trained to glean information from you to use in their negotiations. Don’t give them the ammunition.
The salesperson will likely come back with a counteroffer. This is where the back-and-forth that buyers detest begins. It’s important to remain patient and detached. Don’t allow yourself to be rushed into a decision or become too emotionally invested. You already know there are other similar vehicles out there.
You can have a better chance of getting the salesperson to snap up your offer if you time your purchase correctly. Shopping at the end of the month, quarter, and around holidays can often mean significant savings and a more reasonable negotiation.
Make sure to carefully read any and all paperwork surrounding your purchase. Take special note of all the fees the dealer is charging. Some, like documentation fees, can be exorbitant but are generally unavoidable. Other fees and services, however, are largely there to pad the final price and are spurious in nature. Double check when you’re actually completing your purchase to ensure no charges have been tacked on post-negotiation.
It’s important to remain firm but friendly. You can acknowledge the salesperson’s and dealership’s need to make money while also making it clear you’re looking for a fair deal based on the current market for that vehicle. If the dealer won’t budge, don’t hesitate to walk out the door. Sometimes a salesperson will balk and come to an accommodation, and if they don’t, there’s plenty of other vehicles out there to consider.