Just the word “negotiate” might make your stomach churn. But it’s not as difficult as it seems, and a few simple concepts can save you a lot of money when you buy your next car.
Back in the day, most car-buying negotiations were done face-to-face, on the car lot. Today, many people negotiate for a new car by requesting quotes via email. We highly recommend this alternative strategy. However, if you prefer to go old school and negotiate in person, read on.
Arm yourself with essential information on which to base your negotiations. Look up the current market value — what other buyers have paid for the car — in pricing guides such as Edmunds or Kelley Blue Book. Current pricing information will give you confidence and guide you through the negotiation.
Also, get preapproved for an auto loan even if you think you might choose dealership financing. Here’s why: At a dealership or independent used-car lot, you’ll be greeted by a salesperson who will probably ask, “What kind of monthly payment will fit into your budget?” Negotiating as a “monthly payment buyer” is a mistake since it obscures the price of the car. If you’re preapproved, you can instead politely tell the salesperson you’ll be paying cash and just need to settle on the sale price of the car.
Making an opening offer
With the monthly payment trap neatly avoided, it’s time to open negotiations. There’s a rule in negotiating that advises “The first person who speaks loses.” It means that once your opening offer is on the table, it sets the tone for the rest of the negotiation. So, ideally, you’d like the salesperson to make the first offer, because it could be well below what you’re prepared to pay.
One way to prompt an opening offer is to say, “I’ve done some research about what others are paying for this car. What kind of a discount are you offering?” If the salesperson won’t bite, it’s up to you to kick things off.
Look at the current market value price and set your opening offer a good deal lower, but still in the ballpark of what the dealer might accept. If you know that the current market value of the car is $25,000, offer well below that, perhaps $23,000.
After delivering your opening offer, say nothing more — but watch the salesperson’s body language, tone of voice and facial expression. Salespeople may groan and complain and do all kinds of playacting; but if they take your offer to their manager, you’re probably in business.
If the salesperson makes a counteroffer that’s close to the current market value you found in your research, you’re getting close to a good deal. If the counteroffer is ridiculously high, you might want to just leave, since it’ll be tough going. But leave very slowly — this might prompt a better offer.
In a new-car dealership, when the salesperson takes your offer to the manager, it’s a game that can go on for a long time while you stew in a cramped sales office. If you feel you’re being played, put an end to it immediately. Tell the salesperson your time is limited and you need an answer immediately or you will leave.
Reaching an agreement
Raise your opening offer by smaller and smaller increments. For example, if the current market value price is $23,000 and your opening offer was $21,000, you might want to offer an additional $500, or a total of $21,500. But the next time, bump it up only $250, then only $100.
As you near an agreement, the salesperson might try to complicate the deal by offering extras such as a free maintenance plan. The problem is, the value of these extras is hard to quantify, so you really don’t know if one has improved the deal. It’s better to keep the deal simple and stick to just the price of the car.
If you’re satisfied with the price, don’t accept the deal until you review all the numbers. Ask for a breakdown of the fees or an out-the-door price, which will smoke out any extra fees. You should be paying only the price of the car, sales tax (in most states), a documentation fee and registry fees.
Inking the deal
The smiling salesperson is apt to jump up from the desk, extend a hand and say, “Congratulations, we have a deal!” However, it’s essential to understand that everything so far is just verbal promises. Now you need to get your “good deal” in writing. That will happen in the finance and insurance (F&I) office.
The “F&I guy” will create the sales contract and offer you extra products such as extended warranties, additional alarm systems and even paint protection. At this point, you can compare any financing offered by the dealer against your preapproved loan terms.
Negotiating with a private-party seller
The flow of a car negotiation with a private party is similar but easier. The private-party seller isn’t a pro, like the car salesperson, and, in most cases, you’re dealing with the decision maker, so there’s no back-and-forth to clear the deal with the sales manager.
Often, a private-party seller might arbitrarily choose a price that has no relation to the car’s current market value. This makes it especially important to check pricing guides beforehand. Then, when the negotiation begins, you can depersonalize your offer by saying, “Kelley Blue Book has it listed at a much lower price.”
When you make an offer that’s lower than the “asking price,” it helps to justify the price with a reason. For example, you can say, “I was just looking at another car, and they were asking less than you.” Or “This is really out of my budget, but I would be willing to make an offer anyway.”
More negotiating tips
Ultimately, you’ll need to adapt your negotiating style to your personality. However, here are a few more tips to get you started:
- Keep it light. Don’t make negotiating personal. Stick to numbers and facts.
- Avoid hairy-knuckle negotiators. Don’t even begin negotiating with a salesperson who attempts to intimidate you.
- Don’t start until you’re ready. Avoid being led into negotiations at a dealership with invitations like, “Let’s go inside and take a look at some numbers.”
- Negotiate slowly and repeat the numbers. It’s easy to get confused, so write down or repeat the numbers thrown at you.
- Be ready to walk. This is the classic advice for negotiating — but it’s true. If you aren’t making progress, or you don’t like the way you’re being treated, it’s time to walk.
Updated Sept. 12, 2017.