How to Get a Used Car Bargain Part Three
Negotiating and Closing the Deal
In Part One of this series we stressed the importance of deciding on your price range and arranging financing before you shop. We also told you how to identify good used cars that could be bought at bargain prices.
In Part Two, we showed how to shop for used cars by locating several likely candidates you might want to buy. Then we showed you how to test-drive and evaluate the overall condition of these "target cars."
In this final installment, we'll look at how to negotiate for a used car. Then we'll show you how to cover all your bases before you sign on the dotted line.
Step 5: Negotiating for a Used Car
Just the word "negotiating" makes most people cringe. Add in "used cars," and some people run in terror. But negotiating doesn't have to be a grueling experience. With the right preparation and a few simple rules, negotiating can be fun and exciting. If you make a good deal, it gives you a great sense of satisfaction. And if you use Edmunds' True Market Value (TMV®) pricing, you can avoid much of the haggling.
Here are three simple rules that should carry you safely through the negotiating process:
- Know the numbers before you begin negotiating.
- Always be ready to walk away from a deal you don't like.
- Make a low (but reasonable) offer and sweeten the deal by small increments.
Rule 1: Know the Numbers
By now, you should know the approximate value of the used car you're considering. Before you leave for the car lot, print out the Edmunds.com TMV page for the used car you want to buy.
Just knowing this value will make you a better negotiator. After all, if a dealer is insisting it's worth $14,000 but you know the car is worth only $12,000, you'll be in a stronger position to negotiate.
Rest assured that the dealer will give you all kinds of reasons to justify his asking price: The dealership's overhead is expensive, they had to clean or repair the car, your Internet figures are "way off" and the like. But if you have looked up the TMV of the car on Edmunds.com (and included all options and allowed for the mileage) you should be very close to the right price.
Rule 2: Always Be Ready To Walk
Don't get your heart too set on one particular vehicle, no matter what the dealer says about the current "sale" going on at the dealership. There's always more where that came from. If a dealer thinks you're in love with the car you just test-drove, you'll be in a weak position to negotiate. But if he thinks you might walk away without buying, he'll treat you carefully.
Open negotiations by saying, "I'm ready to buy today if we can reach an agreement on the price." A dealer is more apt to give you his best price if he feels he might have a solid sale right then and there, as opposed to throwing a higher price out to someone whom he feels is just wasting his time.
Rule 3: Make a Low Offer and Sweeten the Deal Slowly
The best way to explain this rule is to use some real numbers. Let's say the price of your target car is listed in the ad or on the window sticker as $12,700. If you've discovered that the used TMV for that car is actually $12,000 (dealer retail), you can start by offering a bit under TMV — say, $11,700. Don't worry if the salesman acts insulted; it's just that, an act. Doing this leaves you some wiggle room to negotiate.
If after you've made your offer, the salesperson takes it to his manager, get up and leave the sales room. It shows that you don't feel under obligation to remain under his control. Go look at the cars in the showroom. Or go to the restroom. Or say you need to get something out of your car. It's a little show of force that will help you make a good deal.
When the salesman returns from talking with his manager, one of the ways he may try to "meet" your offered price is by selling you a lot of high-profit dealer add-ons, like a LoJack contract or an extended service warranty. Unless you know that you wanted these extras in advance, turn them down.
He will also offer you financing. If the rate he offers is better than what you've prearranged, great, but make sure you read and understand all the terms and fine print before agreeing, because this is where salespeople sometimes pull the wool over customers' eyes.
If the salesperson or closer still refuses your offer, raise your price to the TMV and show the salesperson a printout of the TMV figure. TMV is a far more accurate reflection of the market value of a car than the Blue Book, and dealers have indicated that TMV is a fair price for both parties.
Be Ready for the Closer
In some dealerships, a "closer" is brought in when the salesperson can't make a deal. Usually, the closer tries to add a few hundred dollars to the deal. Or he tries to get the customer to agree to the last offer made by the dealership.
While the name "closer" sounds frightening, closers are often personable, skilled salespeople. While some may apply pressure, most will attempt to make a deal by reasoning with a customer or cajoling them.
He may even bring out the Kelley Blue Book to show you what the car is supposedly worth, but those figures are only an estimate by Kelley of the "listing" prices being asked by dealers — not what they are really getting paid for the cars. So even if the dealer is asking "less than Kelley Blue Book," that doesn't mean you're getting a good deal. (See "What is the 'Kelley Blue Book' Price?")
The closer may also bring out what's known as a "four-square" sheet, especially if you have a trade-in. The four-square can be confusing for the customer. The dealer knows it and can use it to his advantage. But if you sell your current vehicle privately, secure your own financing and/or know what your maximum down payment and monthly payment should be, then you won't get caught off-guard by the four-square.
Step 6: Closing the Deal
It's likely that, at some point during negotiations, the salesperson or closer will extend his hand and say, "Congratulations! We have a deal!" Shake hands and agree to the deal, but keep in mind that nothing is binding until you sign the contract.
Several things need to happen before the deal is finished. First, depending on your state laws, you may need to show proof of insurance. This can often be arranged in advance or on the spot, by calling your insurance agent (bring the number with you to the dealership). Then, you need to review and sign the contract and several related documents.
Finally, if you decide to accept the dealership's financing, you may have to deal (again) with last-minute attempts to sell you on extra services as well, such as an extended warranty. Some people prefer the peace of mind that provides. But bear in mind that even extended warranty prices are negotiable, and many used cars still have the factory warranty in effect.
Finally, after what may seem like forever, your paperwork will be ready. You'll sign an agreement to furnish an insurance policy and a "Due Bill." The Due Bill would state what repairs, if any, the dealership had agreed to perform to the car during the negotiation process.
Then there's the actual sales contract. Here is a breakdown of the fees you can expect, with some example numbers plugged in:
- Sale price of the car $12,000
- Documentation fee $45
- Smog fee paid to seller $41.75
- Smog fee certification $8.25
- Sales tax $966.94
- License fees $216
- Total $13,277.94
For more details on closing fees, read our article, "What Fees Should You Pay?".
Part One: Decide Your Price Range, Arrange Financing and Identify Your Target
