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Buying Tips
How to Buy a Used Car
Step 5: Negotiating for a Used Car
By Philip Reed, Senior Consumer Advice Editor
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OK, you've found a used car you like, and you want to buy it. But first make sure
you adopt that attitude that you will only buy it if — and this is
a big if — you can reach an agreement on the price.
You might think we're splitting hairs here, but this is an important point. If
you retain the mindset that you will buy the car once the price is settled, this
will preserve your ability to walk away from the deal if it goes sour.
Walking away, being indecisive, appearing uninterested in the car are all signals
that will soften up the seller to give you a better deal. On the other hand, if
you are too casual, and seem uninterested, someone might buy the car out from
under you.
Clearly, you are walking a fine line here. You need to let them know you're a
"for real" buyer without seeming too eager. How can you do this? It's very simple.
Your Opening Move
Whether you are buying a used car from a dealer or a private party, let them know
you have the cash in hand (or financing arranged) to make a deal on the spot.
Preface your offer with a statement like, "I'm ready to make a deal now. I can
give you cash (or a cashier's check) now. But the price seems high."
At this point, you need to have a persuasive argument about why the price is too
high. You can pick one from the list below:
- You checked Edmunds.com True Market Value®
pricing, and the adjusted figure is lower than their asking price.
- You had the used car inspected, and it needs some work.
- The condition of the vehicle's body or the paint job doesn't justify the
price.
- You have checked the market yourself and found lower prices elsewhere (this
approach requires some creativity about why you want their car and not other
lower priced cars).
You might take a different approach if you like the car and just want to test
their price. Instead, try one of the reasons from the list below:
- This wasn't exactly the car you were looking for (or the color, or pick
some other feature of the car) but you like it well enough to buy it anyway
if the price is reduced.
- Their car might be worth the price they are asking, but you can only afford
a lower price.
- You weren't really serious about buying the car, but it has caught your
interest anyway. If they drop the price, you could justify this purchase.
You will have to adopt these "reasons" to suit your personal situation. However,
by having reasons, rather than just attacking their price, it supports your lower
offer. And it helps them save face when they come down on the price.
How to Price Used Cars
The foundation of successful negotiation is information. This is particularly
true when buying a used car. And yet, the condition of used cars means prices
will vary widely.
Edmunds.com has removed much of the guesswork in used car pricing by developing
True Market Value pricing. After you have gathered
information about a car you are considering, look it up on the Edmunds.com used
car pages. Make sure you click on the "Customized Appraisal" bar and respond to
the prompts. When you're finished, copy down the three TMV® prices: Trade-In,
Private Party and Dealer Retail.
There are situations that aren't covered by TMV. The car may be too old and
is not listed by Edmunds. There might be body damage or added aftermarket accessories.
In these cases, you have to use your own common sense about arriving at the right
prices. Certainly, it will depend largely on how much you want the car, what you
are willing to pay and how motivated the seller is.
Negotiating with Dealers
Dealers have lots of experience negotiating. Most private parties do not. Therefore,
buying a used car from a dealer or a private party will be two very different
experiences. But there is one overriding similarity -- they both want to sell
the car. In fact, the incentive to sell the car might be greater to the dealer
than to the private party owner. Why?
Many used cars on new car lots come from vehicles that were traded in. In order
to sell someone a new car, the dealer gave them credit for their used car as a
trade-in. In other words, the dealer has advanced money to make this transaction
happen. They will not reap the benefit of this arrangement until they turn the
used car into cash. This is where you come along.
If you walk into the used car department of a new car lot and let the salesman
know that you have cash (or prearranged financing) and you make a reasonable offer
on a used car, you just might get a bargain. You should, however, follow these
guidelines:
- Only enter into negotiations with a salesperson you feel comfortable with
- Make an opening offer that is low, but in the ballpark
- Decide ahead of time how high you will go and walk out when you reach this
price
- Be prepared to spend an hour or more negotiating
- Leave the dealership if you get tired or hungry -- don't be hurried into
a decision
- Don't be distracted by pitches for related items such as extended warranties
or anti-theft devices
- Expect a closer to try to improve the deal before you reach a final price
- Protect your good deal in the Finance and Insurance room by refusing low-value/high-priced
items
Negotiating with a Private Party
Buying from a private party is usually a more relaxed situation. Still, it is
often assumed that the "asking price" is not firm. This means you should try to
negotiate. However, this process will not be as extended as it would in the dealership.
It might be as simple as this:
Buyer: You're asking $3,600 for this car. I want to buy the car, but that price
seems too high. What's your best price?
Seller: How does $3,300 sound?
Buyer: Well, I'll give you $3,100 — cash.
Seller: You've got a deal.
There are, of course, many variations of this scenario. For example, some private
parties might hold firm on their first price if they are in love with their car
and really don't want to sell it. If you desperately want the car, you should
either pay their price or come back a week later.
Once you have a deal, you need to make sure that the transaction is completed
properly. The next section, which is the final step, will tell you what to expect
and what you need to do.
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