Buying a new car is something most people do several times in a lifetime but not a lot of people take the time or have the know-how to negotiate the best deal they possibly can. People drive off the car lot every day with cars that they could have saved thousands of dollars on.
You may have done the same and even felt as though you paid too much.
By following some of the tactics listed below, you can put yourself in a position to better negotiate the price of a new car. Of course, all dealerships and sales associates are different and the results of these tips will obviously vary.
Regardless, I’m sure you will have fun getting a better price on your new car and you will definitely feel much better when you do.
- Start by determining what type of vehicle best suits your needs. If you buy a car based on what you want instead of what you need, you’ll likely end up with something impractical and may need to buy a second vehicle sooner than you think. If you have children or are planning a family, then a minivan might be more suitable than a sports car. If you use your vehicle mainly for work, then you’ll need something more suited to carrying tools or supplies. Think about how the vehicle will be used in terms of practicality. This will become your starting point for shopping for a new vehicle and will narrow down your options and keep you from spending money on the wrong car.
- Don’t be in a hurry to buy – shop ahead. Take your time when shopping for a new car. Watch the car market for a year to get a feel for the seasonal trends. When new models hit the market, the current models will drop in price, and there will likely be dealer and factory incentives to get them sold quickly.
- Shop manufacturer websites before going in person. Most major car manufacturers have a link on their website to local dealerships in your area. This gives you the opportunity to shop for current inventory in your area and to see what the prices are and what colors and options are readily available. You can browse all the vehicles and select different options without having to talk to a high-pressure sales person.
- Don’t view buying a vehicle as an investment. Classic cars are collectable for a reason. Buying a car and adding all the extra features hoping that someday it will fetch a fortune on eBay is not a wise spending move. Cars depreciate rapidly and the lifespan of cars made today is typically 10 years. Don’t ever expect to get your money back in the future from any new car you purchase today. A vehicle purchase is an expense, not an investment.
- Keep an eye out for manufacturer rebates. Once in a while, if the car market is slowing down, manufacturers try to increase sales by offering factory rebates. Make sure you do your research on these. The rebates are from the manufacturer and not the dealer and some dealers will pretend it’s a discount that they are offering you. It happens a lot. Dealers are obligated to provide the rebate and can still reduce the price further to give you a better deal. Sales people will use rebates to pretend they are giving you the best deal and it will often appear that way. For instance you’ll get $3000 off with a rebate and think you’ve done really well and won’t push to haggle much more, when in fact you can still go thousands of dollars further. Be shrewd in negotiating, no matter what incentives are presented up front.
- Shop for a previous year’s model. Every year cars get redesigned, improved, have newer features and so on, making them more appealing than the year before. So what happens to the cars from the previous year that don’t get sold? Most of them eventually get sold off through some promotion or other, usually with huge manufacturer rebates, but for those that remain on the lot when the shipment of the next year’s vehicles arrive, the price can drop dramatically, but only if you ask for it. These vehicles present the least amount of available options and colors, but offer the highest amount of negotiating room.
- Always be ‘just looking’. Whenever you enter a dealership, always tell the sales person that you are just looking at the moment. Feel free to ask questions but never let them know you are in the market to buy a new car. When talking to a sales person, mention other dealers that you’ve been to and other manufacturer models that you are interested in. This will give you more negotiating power if you do decide to buy, since the sales person will want to sell to you at a lower price just to keep you from going to the competition.
- Buy a new car before you NEED one. Don’t wait until you have to abandon your current car by the side of the road before you are forced into buying a new one. This will only increase the need for a car and reduce your power to be able to negotiate the best possible deal. You will not only be desperate for a new car but you will also appear that way, and you may not act as rationally as you would if you were ‘just looking’.
- Get an insurance quote on the car you are thinking of buying. A mistake made by some car buyers, usually first time buyers, is not considering all the costs involved in buying a new vehicle. Insurance rates are based not only on age and driving history, but also on the value and style of the car itself. Depending on where you live, insurance rates can factor in such things as engine size, number of doors and crash-test ratings. So, insurance for a sports car can run a little higher than for a sedan or minivan. Pick a few types of vehicles you are considering buying, get a car insurance quote on each of them and do a comparison. If you do get a higher quote for the vehicle you want to buy, use that in your negotiations, and say, “I would really like to buy that car but the insurance is really high – if I could only get it for another $2000 off, I might be able to swing it”.
- Do not get emotionally attached. This goes for both the car and the sales person. With the car, you may see it and experience a sort of ‘love at first sight’ and then just have to have it. It doesn’t matter that you can’t afford it; the car just has to be yours. This is a wrong approach to car buying, but it happens often. It’s just a hunk of metal and plastic and is not really yours until you sign on the dotted line. Be able to walk away from the car and accept the fact that someone else might buy it the minute you walk out the door. With the salesman, you may get a seemingly kindly old gentleman that shares the fact that he’s working two jobs to make ends meet and can hardly feed his kids, but that is not your problem to resolve. Don’t fall into that trap because then you lose the power within yourself to negotiate an even better deal. If you feel badly for him, then put a gift certificate in a thank you card for him after he’s saved you $8000.
- Don’t reveal how you are planning on paying for the car. No car dealer knows you financial situation. Whether you are planning on leasing, financing, or buying outright, never reveal your terms of payment until you have a deal you are comfortable with. Then review the options and make your decision. A cash deal versus a lease will play heavily into the price the dealer is willing to sell you a car for.
- Play the same game. Commissioned sales is sometimes a dirty game and unless you’re in that line of work, it’s hard to know all the dirty little secrets. And the game keeps changing. One thing for sure, though, is a sales person will always have to go to the sales manager to get ‘the best price’. This could go on for 2 or 3 times with a little chipped away at the price each time but never enough to satisfy you. They’ll come back after the last try and say, “That’s as low as he’ll go”, and then most people will accept that as fact. Don’t fall for that trick. Instead, when the sales person first gets up to go to see the sales manager, give him a deadline measured in minutes, and tell him that he only has one chance to come back with the best price, and if you don’t like the price, you will leave. And make sure you do leave. You’ll most likely catch the sales person off-guard and get a very astonished look. Be in control – it is your money and your deal.
- Shop for two cars. Or even three. Though you only intend to buy one car, take a walk around the lot with the sales associate in tow and look at the first car and say, “This is the car my wife was thinking of buying last week but had to go out of town because her aunt was sick”. Then look at a truck and say, “I’m changing jobs in a month and I need a truck like this to carry tools and supplies”. Then look at something else and say, “My kid is done with college in the spring and I’m going to give him one of these as a graduation gift”. You’ve now set the stage for some real negotiating room. The associate will think that he’s about to start a relationship with a repeat customer that will guarantee him a commission check for the next 2-3 months. Don’t commit to buying more than one car, however, but ask him to consider how much he would knock off the price of the first one if you decide to come back and buy another one or two later.
- Do not buy off the lot – build your own. When you shop for any new vehicle, you’ll see an advertised ‘starting at’ price. However, when you visit any dealership, you’ll have a hard time finding a car that comes anywhere near that price. Why is that? Well there are few reasons. First of all, it’s expected that the average person will request additional options, such as an automatic transmission and air conditioning, so it’s practical to have those vehicles on hand. But then there are the nice-to-have but sometimes unnecessary options that the dealer wants people to see, hear, and feel first hand: heated leather seats, satellite radio, off-road packages, power everything. People ‘need’ these things in their car once they’ve experienced them. Overall, the dealership loads up its vehicles with high-priced options mainly for the purpose of increasing profits. Stay away from the car lot and go online and build your own car with only the options you feel you really need. There you’ll be able to begin with the ‘starting at’ price and increase the price with the options that YOU choose.
- Avoid buying extra toys. If you rarely leave your own neighborhood, then you’re likely not going to have a need for a GPS. Even if you live in a large city that you know very well, having a navigation system will be a costly novelty item that will lose its appeal very quickly and will go unused. The same goes for in-car DVD players. These are better used for long distance driving with children than for a trip to the grocery store, and can be purchased at any department store for around $200. If you express interest in having one installed, you’ll likely hear the sales person say something like, “Yeah, those go for about $1000, but we can put one in for you for $800”. Don’t fall for it – technology changes rapidly.
- Establish a deal and then walk away. This may sound like a waste of time but it puts the ball in your court and wears the sales associate down. You may spend an hour or two discussing the vehicle and haggling over the price, and even have the contract drawn up. Stare at the documents, read them, ‘hum and hah’ a little, discuss it with a spouse or a friend, make a phone call if you have to. Do this as close to closing time as possible. The associate will be on edge thinking he’s about to close a deal before the end of the day. After you’ve done this, get up and tell the salesman you need the night to think about it and that you’ll call him in the morning – but don’t call. If the salesman is hungry, he’ll call you. This will give you an opportunity to have the price dropped a little more. When he does call, say something to this effect: “Well, I went through my budget last night to make sure I could afford this but I’d need my payments to be closer to $350 a month instead of $390 to really make this work. If you think that is something you might be able to do then great, otherwise I’ll have to keep looking”. Let them give you a better offer or really keep looking.
- Don’t let them talk you into it. This is obvious. Don’t fall for high-pressure sales tactics. Always be willing to walk away. Stand your ground. Don’t be afraid to speak your mind and don’t be afraid of fast-talking sales people – they are human too. Always keep the negotiating power in your favor. Always give yourself 24 hours to think about any deal you are given, no matter how good it is. Keep your vehicle spending in perspective and buy on your terms when you are ready and comfortable with the deal.
- Don’t put any money down when you lease. This article doesn’t get into helping you determine whether to buy or lease, but I will tell you that if are going to lease, there is no point in putting any money down. It’s not required and it doesn’t help reduce your payments by much. The point of a lease is to pay for what you use and to be taxed on only what you use, so why bother shelling out extra money for something you aren’t going to use right away? Spend that money on insurance up front instead of having monthly insurance payments on top of vehicle payments.
- Avoid the no-haggle car manufacturers. I won’t tell you directly who they are, but I’ve bought two cars from one branch of a manufacturer that has a no-haggle policy. They make good cars but they don’t negotiate on the price. When you shop around, you’ll likely find out who they are. It’s not a bad thing, it just means that everyone pays the same price and that it’s not the place to shop if you are looking to negotiate a deal and save
- Play “bad guy, good guy”. Always go into a purchasing situation with someone by your side, preferably a spouse. If you are single, bring a friend of the opposite sex to play the role. This way, both sexes can play an opposing view of the vehicle being purchased. Always have the female play the role of the bad guy (since from a salesman’s perspective, it’s usually the male wanting to buy the new car). For the male, be interested in the car, but not overly excited – be apprehensive about spending the money and don’t ever appear as if you need a new car. For the female, hate everything about the car – the color, the style, the way it feels – find anything to complain about during and after the test drive. You’ve now set the stage for being able to walk away from the deal and you will motivate the salesman to lower the price since they expect the female to talk the male out of making the purchase.
- Finally, set the price YOU want to pay and go for it! Know which vehicle you want ahead of time by searching the dealerships’ inventory on-line and determine a reasonable price you are willing to pay for the vehicle. Go to the dealership a few minutes before closing time and demand to see a sales person. Take him directly to the vehicle you’ve chosen and tell him straight out, “I’ve been given a great deal on this very vehicle at another dealership. You have one chance to give me a price that will beat it, otherwise I’m going back and buying it from them first thing in the morning.” Without revealing the price you want to pay, wait to hear what the salesman has to offer. If it’s not the price you want to pay, then say, “Not good enough” and simply walk away. You’ll be surprised how the price drops without the salesman even going to the sales manager for approval on the price.
The points listed above have personally saved me over $8000 on one truck alone.
I shopped around and kept my eyes open for a little over a year, waited until the next line of trucks came on the market, kept checking online until there were only a few previous year’s models left in stock, walked onto a lot 5 minutes before closing, demanded the best price or I’d walk away, and on top of that, I even had them throw in a chrome gas cover. I won!
Think of buying a new car as a game with the object of the game being to get the car you want for the price you want to pay – don’t sign on the dotted line until you feel that you have WON.
- Don’t be won over by a fast talking sales associate.
- If you do get offered a great deal unexpectedly, be prepared to accept it.