Cars are very expensive and especially in today’s economy, buying and selling a car is a major financial decision. Everyone wants a car, the prices are going up, and the interest rates are nothing to scoff at either.
While you cannot change the state of the market, you can come prepared and increase your chances at a successful negotiation. What you will need is a bit of market knowledge, some negotiation skills and bargaining power.
The most important thing is to be confident and objective. It doesn’t matter if you’re buying from an experienced car dealer or a stranger online, as long as you use factual data to make your arguments, you will be able to convince them.
Firstly, not everything is negotiable. Here are some things that are open to negotiation:
1.The price
It should come as no surprise that the price is the most negotiable aspect of a car sale. Dealers will usually look at the Manufacturer’s Suggested Retail Price (MSRP) of your car. This is the price that the car manufacturer has set for the car. However, you might not want to pay the full price.
The car price depends on many factors, such as the demand in your local market. You can try to negotiate the price if the car you are planning to buy is not in high demand. Some car dealerships will have a non-negotiable set price, but you never know until you try!
2.Interest rates
For those getting a loan, you can usually negotiate the terms and conditions. Interest rates are actually not fixed. Actually, according to the Consumer Finance Protection Bureau, dealers often offer a higher interest rate first. You may also consider working with a lender. In either case, you should ask around and learn about the quotes before you sign anything.
3.Warranty and insurance
First thing to know is that most warranty and insurance policies are not necessary. Many dealers will try to sell you extra warranties and extended insurance or credit insurance, but you do not need to accept any of these. They are not mandatory in most cases. In fact, you will likely get a better deal by reaching out to a lender outside the car dealership. Remember that you can always buy warranties later on, so do your research before you decide to buy one.
4.How much you get from your trade-in
Many people will sell their old car in exchange for a new car. You should check your car price before going to the dealership and know how low is too low. However, you need to be objective about your car’s condition. If you have any issues with the paperwork, any stains, if all the electronics are not working properly, if there are dents or scratches, if you have altered the car or lost anything, your car’s value will, unfortunately, go down.
5.Dealership fees
Dealerships charge a bunch of fees when selling a car. Some of the fees include documentation fees, advertising fees, inspection fees, preparation fees, freight fees, and so on.
In most cases, the justification is that the car dealership will clean the car and make sure it’s in a good condition and with appropriate paperwork. Based on the situation, you can sometimes convince the dealer to lower the price, especially if you aren’t using any of these additional services.
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Next up, we will discuss some tips to help you get better at negotiating.
1.Do your research
You should look into different dealerships around you. Besides their services and prices, we also recommend you read their reviews. You may learn important information about their selling style or names of particular dealers working there.
If you are interested in multiple car models, you can also look up whether the carmaker has any incentives, such as 0% APR during the first year or any cash-back deals. Special promotions, such as student discounts or military discounts might also be available. You can use this information to haggle down the price.
2.Don’t limit yourself to one dealership
As you’re doing your research, you will probably come across multiple dealerships. You can see the price at one dealership and use it as a baseline for your future negotiations. It’s important to be flexible and try different approaches.
3.Be careful about pricing
First, as you are doing your car research, you should look into the invoice price of the car. The invoice price is basically how much the dealer paid the carmaker for the car. This is the basis for the price that the dealership is offering, which may be different from the MSRP. This way, you will know how much the dealership is adding to the original price and you can ask about where those fees come from. We recommend using sites like KBB to look at invoice prices.
Next, always focus on the overall price instead of the payment increments. Dealers are skilled negotiators; they will use different strategies, such as offering low monthly payments to get you to buy from them. However, you should always focus on the final price if you want to save money in the long run. The longer you’re paying off your loan, the more money you’re losing on your car. Cars deteriorate over time, so you want to pay as little as possible.
4.Secure your financing
One of the easiest approaches is to do a trade-in for your current vehicle. However, you should be careful about the negotiation here. Make sure to negotiate separately: for the price of your old car, and for the price of your new car.
If you have an older car, they might offer a higher price for it to make the deal seem more lucrative, but then also increase the price of your new vehicle. That is why, even though it is easier to negotiate them together, it might be a better idea to negotiate your old car first, even at a different dealership, before you start negotiating for your new car.
Another approach is to contact a lender before you contact a dealership. If you can get your loan approved before-hand, the negotiations will go much smoother. You won’t need to discuss a loan with the dealership and you will have a set budget that the dealer can’t negotiate, so they won’t be able to offer extra add-on features or upgrades. You can contact online lenders, banks or credit unions and see which one has the best offer for you.
5.Do an inspection of the car
If possible, you should ask an independent mechanic to inspect the car before you buy it. Not only do you want to be sure about the car’s condition before you buy it, but knowing the exact condition of the car, including things that the dealer might not want to tell you, will make it easier for you to haggle the price. This is especially important if the car you are buying is second-hand.
This will help you stay objective and use data and facts when negotiating. It is vital that you avoid getting emotional. Being excited about a new car or frustrated about the price will only make it easier for the dealer to get what they want.
6.First offer should be low
Negotiating a car price is business. What the dealer wants is to sell the car for the highest amount possible. What you want is to buy the car for the lowest price possible. The ideal outcome is that you agree on a price somewhere in-between.
The general rule is to start as low as you can go while still being reasonable based on your market research. The dealer will answer with a price as high as possible, knowing that the price will get haggled down.
7.Secret tip: pick your date
Some dealerships have a monthly or yearly quota for how many cars each dealer has to sell. If you go at the end of the month, the dealer might also be more desperate to make a sale. You can also aim for deals such as Christmas or post-Christmas discounts.
8.Say no
If all else fails, remember that you can always say “no”.
In fact, you should say no to any add-ons or extra features that the dealer is trying to sell you if you didn’t want them from the start. These can include insurance, warranty, tire protection, infotainment upgrades, etc. You can always buy these later if you change your mind, so be firm.
Ultimately, not every negotiation will succeed. But remember that you have other options. You have researched different dealerships, so you can sell your car elsewhere. Showing that you are not desperate to sell and that you have boundaries might even convince the dealer.
Have realistic expectations and know what other dealerships are offering. That way, you will know if what you are asking for and what they are offering is a reasonable deal.
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Private sellers
Lastly, we will talk about negotiating with private sellers. If you are planning to buy a used car, a private seller is often a better deal than a dealership for the both of you.
Private sellers don’t have extra add-ons to offer and they won’t ask for a service fee, so you can get a good deal. Furthermore, private sellers often need to sell their car fast, so they might be more ready to negotiate. However, they might often have a good reason to sell the car or need a set amount of money, so there might be a limit to how much they are willing to haggle.
Most of what we’ve covered in the previous section also applies here. You should first do your research, ask a mechanic to check the car or see a vehicle history report, and start reasonably low. You should be particularly careful about the car’s condition as private sellers won’t have the same rules and standards for car inspection as dealers.
With private sellers, you may have to pay the full price in cash. You will likely get a better deal and pay less overall, however, you will have to pay up-front.
Be especially careful about scams. A reputable dealer will be safer to deal with than a private seller. You should never give your private information to anyone you don’t know. Scams can happen in many ways, such as the payment, the condition of the car, stealing information, improper paperwork, and so on. If the price of the car seems too good to be true, it probably is. You can double-check the car at your local Department of Motor Vehicles (DMV) using the car’s VIN.