How to Negotiate With Car Dealers
When buying a new or used car, price negotiation is very important. As a car buyer, your goal is to get the best value for your purchase. On the other hand, the salesperson aims to sell as many vehicles at their highest possible prices to hit quotas and earn commissions. Negotiation helps you meet halfway and find a value that both works for you.
Unfortunately, not all salespeople are fair. The shrewd ones prey upon those who lack knowledge of cars and the car market. They use various selling tactics to fool unsuspecting customers into buying a vehicle that they cannot afford or are way above its retail price. Thus, it is important to come to the dealership or car seller’s location prepared for the negotiation.
Below are some tips to help you haggle smartly and get the offer you deserve:
1. Do your research before visiting a dealership
Learn about every phase of the buying process before doing your car shopping or talking with any car dealer or seller. If you do not have a family member or friend to guide you, you can use various online resources to learn about car deals, trade-in and financing, and the negotiation process.
There are also many car-focused sites that provide car reviews and discuss the pros and cons of nearly every car on the market. Some even have comparison reviews to help you see how one vehicle measures up against a competitor. A few sites also report on the latest deals that carmakers are offering.
Know the market value of the car you intend to buy
Knowing the market rates gives you an upper hand in the haggling process. By getting the price estimates of the car from different dealers and online marketplaces, you have a price to base your negotiation on.
2. Know the latest car deals
Check out car deals from various car manufacturers and dealerships before doing your car shopping. These companies frequently offer and advertise car deals to boost the sales of vehicles that are slow-selling or are about to be replaced with the latest models.
Car deals include:
- Interest rates that are below market rates
- Low monthly payments on car loans and leases
- Zero-interest financing
Armed with the knowledge of the ongoing car deals, you can avoid settling for a “negotiated” price that’s actually a promotional deal.
Be aware, however, that some car deals are exclusive to buyers with good credit scores or to specific groups, like veterans and AAA members.
3. Get pre-approved before visiting dealerships
If you’re buying a car through a car loan, get a loan pre-approval from a bank, credit union, or other lenders before doing your car shopping or talking with dealers. This pre-approved offer will give the dealership's finance officer an incentive to find a better financing deal for you.
Before saying "yes" to a financing deal, know the terms of the loan, including the length of the repayment period, prepayment penalties, and other associated fees.
4. Buy a car on specific times of the year
There are certain times of the year when car prices are at their lowest. Two of these periods are in the last week of June before the End Of Financial Year (EOFY) when most dealerships launch mid-year sales and the last week of December when clearance sales are offered to make room for new models.
Other great times for car shopping is towards the end of the month and at the end of each quarter of the year when most car dealers and salespeople are driven to sell cars to hit their sales goals and earn commissions. Take note, however, that only those who have not yet reached their goals are likely to give the best offers.
Showing up before closing time during the weekend may also be favourable. This gives dealerships that had a bad weekend or salespeople who haven’t hit their weekly quotas the opportunity to do one more deal even if that means lowering the price of the car.
This strategy, however, doesn’t work in your favour all the time. While a motivated salesperson may be willing to negotiate with you, an unenthusiastic one will simply tell you to come the next day.
Bad times can also be a great time for car buying and negotiation. These include days after terrible weather and during national crises, like the current coronavirus pandemic that causes historic fall in car sales and car loan interest rates.
5. Focus on the driveway price
The “drive-away” or “out the door price” is the total amount of money you need to pay for a car before you can take it home. When you are negotiating for the price of a car, ask the dealers to calculate the full amount. This should include all the fees, sales tax, importation duty and any other costs you need to pay. If the dealer gives you a different value at the end of the negotiation from what you initially agreed on, walk away.
As a buyer, your primary goal is to negotiate the lowest price you can on the vehicle. Though the salesperson will likely want to mix your trade-in and financing into the equation, your focus is always the price you will pay for the car.
The dealer is expecting a certain amount of profit, so your opening offer should not be too insulting. The final price will be somewhere between the dealer cost and the manufacturer window sticker (not the addendum sticker next to the real one). Any counter-offers should remain in that range. Make sure the price you get includes any applicable car deals and rebates.
6. Do not focus on the monthly payments
If you’re financing a car, salespeople will do almost anything to keep you focused on the monthly payment. It’s easy to make you think you got a deal when you’re only looking at one number. Instead, you need to look at the price of the car and the total cost of purchasing it, including financing.
To find the total cost of the car, use the calculator on your phone or computer and multiply the monthly payment by the number of months in the car loan. Then add anything you are paying at the time of purchase, including add-ons, taxes, and fees. The total is the actual cost of the vehicle.
You’re simply not getting a good deal if you have to extend your loan out to six, seven, or even eight years to fit the payment into your monthly budget. Every month that the length of your car loan exceeds the vehicle’s warranty puts you at risk for having to pay both your car payment and for costly repairs in the same month.
7. Negotiate each part of the transaction separately
When you have researched extensively, and you have all the price data for the car you want, negotiate for the price in parts. What this simply means is, negotiate for the trade-in value, financing and add on purchases separately. Doing this will reduce the overall cost of purchasing the car.
Most dealerships may insist on negotiating for the car as a whole package. For instance, if you are interested in asset financing and want to be paying your loan back monthly, the dealership may be willing to lower your monthly deposit. However, you will end up paying more money and for much longer.
8. Don’t let emotions overpower you
Car buying can be an emotional roller-coaster. First, you probably have some emotional attachment to the vehicle you're considering. Second, you're dreading the stressful negotiation process. It’s best to remember that it is simply a business transaction and any emotions will get in the way of a good deal.
Go into the car negotiation with an open mind. Do not be overly attached to a particular car. If you find that the car you can afford the car you want, pick a different model or walk away. Throwing a tantrum and insulting the sales representatives at a dealership won’t get you the car. It may, however, get you thrown out of the premises.
9. Know what you can and cannot negotiate
You likely won’t be able to negotiate the destination charge or license and title fees, but advertising fees, documentation fees, and other miscellaneous costs are open for negotiation. You shouldn't pay for anything that's added to the car at the dealer if you didn't want or agree to it. That includes window etching or nitrogen in the tires.
10. Talk with several dealers or sellers
One of the worst things a buyer can do is to only shop at one car dealership. By shopping at multiple dealerships, including those some distance from your home, you’re more likely to get a good deal – especially if the salesperson knows you’re shopping at more than one dealer.
By chatting with a dealership’s online sales department, you don’t even have to travel to individual locations. Be sure to look at dealers where the car you are considering might not be too popular. For example, if you’re shopping for a hybrid or electric car, check out a rural dealer. On the flip side, if you want a full-size truck, check with urban dealerships.
Even if you have emotionally locked onto a model that you’ve only found at one location, it’s a good idea to seek the same model from other dealers. They frequently trade vehicles with one another, so you may get offers from multiple dealerships on the same car.
Information is Key
The process of buying a car is difficult but price negotiations are harder. Sales representatives know this and can use this fact to tire you out and make you agree with their terms against your better judgement. The process can be simpler if you’re armed with the right resources and the will power to stick to what you want.
Remember that most car salespeople are trained negotiators who handle hundreds of deals per year and are skilled at moving you at increments into the deal that they want. The typical car shopper only gets a chance to haggle over the price of a couple of cars per decade, so the playing field isn't level from the start. Information, resilience, and a willingness to walk away are a car buyer's best tools.