Negotiating a car deal: Step-by-step tips for negotiating with a dealer

When you’re negotiating a car deal, knowledge is power. The more knowledge you have — about the price of a car, about how dealers try to up their profits and about when to say no and walk away — the better car deal you can negotiate. So before you head to the dealership, check out these six steps to negotiating the best deal on your new car.

Step 1: Research the type of vehicle you’re interested in 
Our online auto marketplace at can tell you everything you need to know about your future vehicle. Check current car pricing, view vehicle specs and compare the cost of add-ons across different makes. Print out the information you find so you can compare it with the dealer’s offer when you’re ready to negotiate. If possible don't buy the first car you find. Make sure you are using timing to your advantage by going to the dealerships when it is the best time to buy a car.

Step 2: Get pre-approved for a car loan
Dealers are in a position to make a lot of money when they provide auto financing, potentially at your expense. For example, if you agree to a higher interest rate than what the lender is offering, they get to keep the extra cash. When you get pre-approved, dealers also aren’t able to use one of their favorite tools in negotiating a car deal: Selling the car based on monthly payments, which allows them to stretch out the payments and can cost you thousands in additional interest. If you have poor credit, you may have to look at other auto loan options for people with bad credit.

Step 3: Don’t start out telling the dealer you have a trade-in
You will probably want to negotiate the best price for the car you’re buying before factoring in your trade-in. Dealers can make it seem that you’re getting a bigger break on the price of the car by upping the supposed value of the trade-in when you’re negotiating a car deal. However, you’ll likely get a fairer deal if you talk about a trade-in after agreeing on a purchase price for the new car. (Remember that dealers will not pay more than wholesale for your old car, which is less than the private-market price.) 

Step 4: Offer between $100 and $500 over invoice 
Dealers are already making money on the “dealer holdback,” a discount that manufacturers provide dealers to help defray advertising and other costs. Also, remember that the Manufacturer’s Suggested Retail Price, or MSRP — the price listed in the printout in the car’s window — is significantly higher than the dealer invoice price. Here’s where that pricing research you did earlier will help you negotiate the best deal. 

Step 5: Be prepared to walk away 
Dealers know you are more susceptible to sales pressure right after you’ve driven the car, so they don’t want you to leave and think things over before you’ve closed the deal. If you feel like the salesperson is being unfair, threaten to leave and be ready to follow through. 

Step 6: Resist the back-end add-ons 
For many dealerships, the car negotiation is not the end of the road. They may try to sell you insurance, extended warranties, special coatings, detailing and other “services” that increase their profit. Experts say most of these add-ons are not worth the money, although some people like the peace of mind that comes with an extended warranty. 

Your final step? Drive home in your new car knowing that you’ve just negotiated a great car deal


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