How to Negotiate Car Prices

September 2022 update:

If you haven't shopped for a new or used car in the past couple of years, you may be in for a rude awakening. A perfect storm of a worldwide pandemic, supply chain issues, a semiconductor chip shortage and vehicle shortages has drastically changed the auto market since 2020. Where there were once markdowns, there are now markups. It is not uncommon to pay over MSRP, and discounts are rare. This seller's market means that shoppers don't have much leverage in terms of negotiation. These days, if you don't like the price you're being offered, salespeople know that there will likely be someone else who will pay that price.

The article below was written before these changes occurred, when the market was much more stable and predictable. Dealerships were flush with cars and were often willing to negotiate for a reasonable discount. Since that is not currently the case, much of the advice here may not apply. That said, the current situation may not persist indefinitely. The car buying tactics below are still helpful for anyone shopping today.

If you want to buy a new or used car this year and potentially through 2023, you'll need to reset your expectations for what a "good deal" is. If you manage to find a dealership that is selling the vehicle at MSRP or "sticker" price, that is probably a win for you, though it's always a good idea to shop around and compare prices. Just be prepared to cast your net farther to see what other dealers are charging for the same vehicle. Dealer websites may not always list the correct price, which is why we recommend contacting the dealer directly to determine if there are any markups or unwanted dealer-added accessories. If all you find in your area is a glut of marked-up new cars, stay the course and know that even these inflated prices may still be negotiable.

Read our Car Buying Tips for 2022 for more detailed information.

For many people, the thought of negotiating with a dealership car salesperson fills them with dread. This feeling is partly because people see negotiating as confrontational, and they would prefer not to haggle. But with a change of perspective and a few simple negotiation tips, you can potentially save thousands of dollars off the sticker price when you buy your next new or used car.

Where to begin?

You'll need to determine the market value of a vehicle before you begin to negotiate. This figure will serve as the backbone of your strategy and give you a reference point when you start getting price quotes from the dealership. Edmunds calls this the True Market Value (TMV) or Edmunds Suggested Price. The Edmunds Suggested Price is what we recommend you pay, not including taxes or fees. It is based on our analysis of millions of data points including supply, demand, incentives, options and recent nearby transactions.

Start by looking up the car on the Edmunds. Head to the Build and Price link about halfway down the page. Pay attention to the trim level and options on the car to make sure you're making an accurate comparison. If you're shopping for a new car, look at the Edmunds Suggested Price and see where it lies relative to the manufacturer's suggested retail price (MSRP) and the invoice. If you're shopping for a used car, look at what's called the dealer retail price. Keep in mind that Edmunds suggested pricing is an average. Your goal is to get a price below it. But if it is a little higher, that's OK too.

Things are much easier if you're already looking at inventory. You'll see the Edmunds Suggested Price on new cars and on used cars. There will be a price rating from fair to great, with a figure indicating how much below market the vehicle is.  

Next, we recommend calling, emailing or texting a few nearby dealers to get a range of prices. Ask for the internet sales manager and, in that discussion, verify that the vehicle is in stock and make sure it has all the options you want. You can also search Edmunds' new or used inventory and reach out to dealerships that will give you upfront prices.

Edmunds also has a price checker tool for new vehicles, which allows you to enter the details on a quote you've obtained, then get a rating to let you know if it is a fair, good or great deal. 

A typical negotiation scenario

Perhaps you like to shop at the dealership in person. Here are some tips on how to negotiate effectively. When you are sitting with a salesperson, a typical conversational opener might be something like: "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 you just want to discuss the purchase price of the car for now. The salesperson will usually check with the manager and then come back with a price. You may not like that price, however, and this is where the negotiation begins.

How do you ask for a lower price?

After the salesperson presents the price, you could respond with: "We've done a lot of research on the market value of this vehicle, and we have a good idea of what it sells for because we've shopped around a bit. If you can beat this price (here's where you present your best price quote printout from another dealership) we will have a deal."

A response like this accomplishes a couple things. First, it lets the salesperson know that you're an informed buyer. Your goal is to justify the drop in price rather than present an offer without context. Second, the salesperson knows there are offers to beat, so there is a good chance the salesperson is going to jump to the low end of the dealership's pricing structure. This approach works for both new cars and used cars.

Tips on how to negotiate the price on a used car

If you are shopping for a used car, where apples-to-apples comparisons aren't possible, your goal is to make an offer that is as low as possible but still in the ballpark. Use the vehicle's estimated trade-in value as a guidepost for what the dealership might have paid for the vehicle. Compare that to its estimated dealer retail value on Edmunds. Your goal is to land in between those numbers. You can also look for comparable used vehicles near you to see what others are listing. It's important to note that the miles and options are similar — otherwise, you won't be making an apples-to-apples comparison. Once you've done all this research, you'll have a better idea what a fair price would be.

If you're the first to make the offer, give yourself room for the dealership to make a counteroffer. In other words, if a vehicle is on sale for $20,000 and your research shows you should be paying $18,000, make an offer of about $17,000. You should know ahead of time what your opening offer will be, how you will counter the dealer's offer, and what your highest price will be. Then when you're in the heat of the moment, you won't get flustered. You will negotiate like a pro.

Many car buyers seem reluctant to make a low offer. Often people say they are afraid the car 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 starting with a higher offer and working down. Knowing that you've done some research should give you a bit more confidence in recognizing a good price and knowing when to counter.

Here are a few more tactics 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 car dealership unprepared. The salesperson may draw you into offer-counteroffer negotiations before you are ready.

• Check all the numbers and ask for the out-the-door price.

• Read online reviews of the dealership before you begin negotiating. Start with a dealership that has good customer reviews.

• Plan to spend a chunk of time at the dealership. With the test drive, a possible trade-in, the negotiating and the financing process, you might be there for four hours or more. Eat before you go: You want to be able to think clearly. You can speed things up by being prepared for all the car buying paperwork. Shopping midweek rather than on the weekend will cut down on the time you spend at the dealership.

• While it is easy to focus on the negotiation of the MSRP (also called sticker price), don't forget you can also negotiate your interest rate, trade-in and the other products that are available for sale, such as undercoating or an extended warranty. 

• If you're planning on financing, getting preapproved from a bank or credit union before visiting car dealers is a smart move.

• Don't enter negotiations with a car salesperson who intimidates you. Negotiating should be a relatively comfortable win-win process. If you get uneasy, ask for the sales manager and request a different salesperson. Or "test-drive" your salesperson before you even get to the dealership.

• Get quotes from several new car dealerships. Ask them to beat your best price.

• Always remember to walk out if you don't reach a deal you like.

• Don't forget to discuss details such as warranty limits, loan and financing offers, or any add-ons the dealership might have included in your pricing. Be sure to ask about any new vehicle rebates that may be available. These extra questions can help make sure you get a good deal.

And, finally, know your negotiating style and use your unique qualities to your advantage. You won't get what you want unless you ask for it. So don't be afraid to haggle. Because negotiating is just another way of asking for what you really want.

FAQs

Q: How to negotiate a car price when paying cash?
A: Paying with cash doesn't automatically mean the dealer will give you a killer deal. If anything, the dealer would prefer you finance the car so it could make a little profit from securing the loan. That said, it does simplify the process. You can ask for the "out-the-door price" instead of getting caught up in discussions of monthly payments and interest rates.

Q: What does a "no-haggle price" mean?
A: A "no-haggle" price is another term for a fixed price. It means you cannot negotiate for any discounts. You'll find this style of pricing at CarMax or a number of dealerships that might have their own name for it like "Sonic Price" or "Best Price." If you don't like the back and forth of a typical car negotiation, this style of pricing might work best for you.

Q: Can you negotiate a Tesla price?
A: No. Tesla does not offer any discounts on its vehicles. Everyone pays MSRP.

Q: How do I get the best deal on a new car?
A: Research the market value of the vehicle, get a number of offers from dealers, and go with the place that treated you well and offered a competitive price. That said, price isn't the only factor that determines a good deal. Read "What Are the Elements of a Good New Car Deal?" for more.