8 Things To Know About Negotiating A Car Purchase
March 26, 2019One of my most vivid money memories growing up was when my dad took me in to the finance managers office to negotiate a car deal for the first time. We sat down and immediately my dad came out of the gate with a set price and would not budge. It set off a stare down with the car salesman who tried to look offended by his lowball offer.
What the salesman didn’t know was that my dad had done his homework and had a firm understanding of what the car was worth. He would also eventually learn that my dad would walk away from the negotiation unless the dealer budged significantly.
Negotiating for a used car in today’s environment
Unfortunately, these days that strategy may not work as well. I took a lot of good negotiating tips from my dad, but in my last few car negotiations I have not been able to extract the big price reductions on used vehicles that he was able to achieve 20 years ago. The fact is that car dealers are now advertising prices that are in close range of the Kelley Blue Book value on used cars. This means they know you know what the car is worth now too.
This also means that while you could get thousands off a used car sticker price in the past, it is more likely to only be in the hundreds today. As a result, dealers are more willing these days to walk away from a negotiation because their own research shows them that if I won’t buy that car at that price, someone else will.
There is still money to be saved in terms of how you approach your car purchase though – these tips are designed to give you the most bang for your buck.
How to negotiate for a car in today’s market
1. Negotiate from a position of confidence.
If you’re financing your purchase, get pre-approved for a loan before you walk into a dealership or meet with a seller. Sometimes dealer rates can be higher than other sources. If you’re paying cash, notify them of the ability to close a deal quickly if you believe that will give you a pricing advantage.
2. Know what you should pay for the car you want.
Most cars are sold below the manufacturer’s suggested retail price (MSRP) and some cars are sold below the dealer’s invoice price. Knowing the difference can help you.
The invoice price can be found on many auto websites and is a good target in your negotiations. It can be difficult to obtain a price that’s lower than invoice. It helps if you can find out the real dealer cost, which may be lower than the invoice price because of things like secret factory-to-dealer incentives, customer rebates and holdbacks (a payment made by the manufacturer to the dealership if it sells the car within 90 days of arrival on the lot — a guaranteed profit even if the vehicle is sold to you at cost).
Be aware of any repairs needed
For used cars, don’t discuss price until you know exactly what kind of repairs the vehicle needs. Arrange for an independent inspection by a reputable auto mechanic. Needed repairs may give you a bargaining chip.
3. Stay focused and tune out dealer tactics.
This is the part that a lot of people hate about car buying. Dealers are trained to distract you from the central task of negotiating the best car price. Avoid conversations about trade-in values before you agree on a firm price for your car purchase. Resist last-minute attempts in the financing office to add options or packages that you don’t want, don’t need, and never agreed to.
Recognize dealer tactics designed to intimidate you, such as:
- Demanding that you put down a cash deposit to show you mean business
- Changing salespeople in the middle of negotiations
- Holding your keys long after using them to test drive your car for trade-in purposes
- Asking for an unusually high down payment
Don’t be afraid to call these as you see them – it will hopefully make them stop once the dealer realizes they are working with an informed buyer.
4. Speak only to decision makers.
Countless hours have been wasted at dealerships where salespeople scurry between manager and customer. This practice is designed to wear you down and frustrate you. Tell the dealership up front that you want the manager in on the discussions because you don’t want to waste time. Leave (politely) if they won’t agree.
5. Be businesslike.
Few things are more vexing to car sales personnel than a customer who is level-headed, well-informed, friendly and calm. Never raise your voice, but don’t hesitate to repeat yourself as often as necessary to get your point across. Keep your interest in a vehicle free of enthusiasm. Remarks like “This is my dream car!” undermine your credibility and put the seller in a position of power. When a dealer tries to induce emotion into a car purchase, I am apt to remind the person it is just metal and plastic sitting on 4 pieces of rubber.
6. Know when to bend.
For my most recent car purchase, we learned of a private seller with a SUV that was not on our list. It ended up being the car that met our needs at the right price. Likewise, when dealing with dozens of cars on a lot, some flexibility is necessary for successful negotiation. Make small concessions wherever you can — it will appease the seller and allow you to stay focused on what’s important to you.
7. Get everything in writing.
Take notes about who said what throughout the negotiation process. Make people wait as you write. You’ll be glad you have a record of promises and figures as negotiations continue.
Once an agreement is reached, get it in writing. Don’t sign anything you don’t fully comprehend or have no record of discussing. Should the dealer try to raise the price on you later, point to the agreement as a reminder of the original deal. Take it slowly — there is no three-day cooling off period or right to cancel a car purchase contract, so you’ll want to get it right.
8. Know when to walk away.
Not happy with the way things are going? Feeling a little queasy? Not certain how to proceed? Just walk out. The alternatives include saying something you’ll regret, agreeing to something you don’t want, or getting emotional. Be polite and express your thanks, but don’t hesitate to leave and take your business elsewhere.
Hopefully these tips will help you start your own family tradition of getting the right vehicle for the right price for you and your family.