How To Buy A Car – Part 3: Negotiating the Price

Today’s third part in our car buying series is on that dreaded hassle – negotiating.  But here are strategies to make it easier.  Our last two parts emphasized doing your research, so it should be no surprise, that the keys to negotiating are to do your research, know your facts and data, comparison shop, and have multiple dealers compete against each other rather than you.   

The most important data in car buying is:  what is the price?  Actually, cars have several different prices.  Get an idea of what they are for specific cars by researching the web, especially at the websites listed in Part One.  The “sticker price” is what’s on the car’s window and is 5-10% above the dealer cost/invoice price which is theoretically what the dealer paid for the car; except that there are many other kinds of incentives the dealer gets from the auto manufacturer.  The car research websites will give you an idea of what the dealer paid for the car and this should be your bargaining point as it is for the dealer.   Unless you are buying one of the hottest cars, your goal is to pay less than 5% above the dealer cost/invoice price which is always less than the sticker price on the window.  Try for the invoice price plus $500, especially if the car has been sitting on the dealer’s lot for more than a month.  Sometimes you can get near the invoice cost because the dealer is still making money from the manufacturer incentives.  The window sticker may list plenty of fees, but try to avoid most of the ones not listed on the dealer invoice which the dealer should share with you.  Then there are all the add-ons such as options, packages, and warrantees.  Options packages can make it difficult to compare prices among dealers.

Only after you have done your research and are ready for a test drive, should you head to the dealer showroom.  Take your printouts and prices with you to use as the basis of your negotiations.  You could even do your negotiating before going to the dealer for the test drive.  After completing your research, if you find a specific car on the dealer’s website that you want, you could call the dealer and ask to speak to the “internet manager”.  Negotiating a price over the phone may be easier and more convenient than in person.  Just make it contingent on a test drive, then go in for the test drive and paperwork.

Most Americans do not look forward to haggling, especially when you are up against someone who does it for a living, but you will do fine if you go prepared and remember a few things:

  • Haggling is a time-honored custom from ancient times and still today in many places around the world.
  • Success here could save you several thousand dollars.
  • Before going to the dealer, get bids from at least three sources. Many websites enable you to get multiple bids emailed to you from local dealers.  You may also get bids from dealers by calling or emailing them.  First search the dealer’s inventory on their website and find several cars with the exact options package you want.  Then you can negotiate with a dealer over the phone for a specific car.  Don’t be shy about going multiple rounds – give your best quote to several dealers to see if they will beat it until no one will.
  • First negotiate price without any discussion of potential financing or trade-in value, so the sales person can’t give something in one area and take back in the other area. Secondly, discuss what the dealer will give for you trade-in car, which will be less than what you could get if you sold it yourself.
  • Don’t reveal your “cards”, they already have enough advantage as it is. Specifically, don’t reveal how much you are willing to pay per month or for the car which lets them know where to start bargaining or adjusting terms to fit.  Just tell them you want to discuss the price before financing.
  • Ensure you shop around and do your homework before hand.
  • Don’t be pressured to “get this deal that is only good today”. Always get quotes from multiple dealers and don’t be afraid to threaten to walk away and apply some pressure of your own.
  • Don’t be emotional – focus on price, your research, and multiple bids.
  • Once you are close to a price, ask for one of these discounts paid by the manufacturer to the dealer: “loyalty” if buying the same brand as your current car or “conquest” if buying a different brand.

You can probably minimize much of this when you know exactly what model and options you want.  Here is where you can have multiple dealers compete against each other for your business.  Take your specifications to multiple dealers, specify what you want, inform them you are going to multiple dealers, and ask them for their best price.  If you prefer a specific dealer, ask if they will beat your best offer.  If the offers are still more than 5% above the invoice price, then unleash your negotiating strategies.

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