Many people say they aren't good at negotiating to buy a car. This is partly because people see negotiating as confrontational and they dread conflict. But with a change of perspective and a few simple negotiating tips, you can save hundreds of dollars — maybe even thousands — when you buy your next car.
How much can you save? If you negotiate even a little, you can save $1,000 on most new cars. If you negotiate actively, you might save $2,000 with about an hour's worth of discussion at a dealership.
This article covers negotiating car prices when you are physically present in a dealership. Many people might prefer shopping through the Internet department. The prices are often so good that it requires little or no negotiating.
Where To Begin?
Many people are confused about how to start a negotiation, which usually takes place when you and the salesperson sit down in a sales office at the dealership.
In many cases, the car salesperson will start this way: "What monthly payment would comfortably fit into your budget?"
It's important that you sidestep this question because it's hard to track the price of the car when the salesperson presents it as a monthly payment. Instead, tell the salesperson you will talk about financing later and only want to discuss the purchase price of the car.
In response, or maybe as his opening move, the salesperson will say something like, "Make me an offer." Or even, "What are you willing to pay?"
Be careful of how you respond. There is an old saying that goes something like this: When negotiating, the person who speaks first loses. This simply means that if you are the first one to name a price, the other party might have been ready to name an even lower price — but you'll never know that.
Now, let's see how this plays out in our scenario. After the salesperson says, "Make me an offer," you could respond with: "We've done a lot of research on what this car sells for and we've shopped around a bit. But we would really like to hear from you first. After all, it's your car and you're the expert. So what's your best price?"
A response like this accomplishes several things. First, it lets the salesperson know that you're an informed buyer. Secondly, he probably assumes you have offers from other dealerships, since you've said that you've shopped around. He knows he has to beat these offers. So there is a good chance that he is going to jump to the low end of the dealership's pricing structure.
However, if you do decide to speak first in the negotiation, you had better be prepared with an offer that is as low as possible, but still in the ballpark. To do this, make sure you know the numbers behind the deal.
Zeroing in on the Right Price
Knowing the right price for a car is a simple matter of looking up the car on the Edmunds.com True Market Value (TMV®) pricing page). Knowing a vehicle's TMV is powerful, and it will make you a good negotiator.
TMV is based on actual sales prices of car deals across the country and it is the price at which a dealer will likely sell you the car. It represents a fair deal for you and a fair profit for the dealer. But can you get the car for less than TMV? Possibly. Should you try? It depends on you and your desire to negotiate. You can always test the water by throwing out a lower price.
Many car buyers seem reluctant to make a low offer. Often people say they are afraid the salesperson will laugh at them, or become angry or act insulted. And yet if you think about it, the salesperson is really doing the same thing with you, but in reverse.
In "Confessions of a Car Salesman," Edmunds shares the secrets of negotiating tactics at car dealerships. As part of the sales training process, a new salesman was repeatedly told to quote customers very high prices, then come down slowly: "Hit 'em high and then scrape them off the ceiling and make a deal." In other words, if the salesperson starts very high, there is a lot of room to drop the price and still make plenty of profit. You're taking the opposite, low-moving-up approach.
Use TMV pricing to create your negotiating strategy. Ahead of time, think of what your opening offer will be, how you will counteroffer and what your highest price will be. Then, when you're in the heat of the moment, you will negotiate like a pro.
Here are a few additional tips to help you get a good deal on your next car:
- Don't buy a car in a hurry (unless you have no choice). And don't go into the dealership unprepared. The salesperson may draw you into negotiations before you are ready.
- Check all the numbers, such as TMV®.
- Read online reviews of the dealership before you begin negotiating. Start with a dealership that has good customer reviews.
- Eat before you go to the dealership. With the test-drive, the negotiating and the financing process, you might be there for four hours or more, and you want to be able to think clearly. You can speed things up by being prepared for all the car-buying paperwork and also shopping midweek rather than on the weekend.
- Don't enter negotiations with a salesperson who intimidates you. Negotiating should be a relatively comfortable, win-win relationship. Ask for the sales manager and request a different salesperson. Or "test-drive" your salesperson before you even get to the dealership.
- Take risks. Treat negotiating as a game, and know that the car salespeople are doing the same.
- Get multiple quotes and ask the salesperson to beat your best price.
- Always remember to walk out if you don't reach a deal you like.
And finally, know your style of negotiating and use your unique qualities to your advantage. After all, you won't get what you want unless you ask for it. Negotiating is just another way of asking for what you really want.