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5 Tips for Negotiating A Car Price

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The thought of haggling with a car dealer can be enough to keep some shoppers away from the dealership, but when you take the time to prepare before you buy, you can take the fear and anxiety out of negotiating a car’s price. Doing a little legwork before you walk into a dealer’s showroom can not only give you confidence, but may also help you save money on your purchase. We’ll explore five simple tips to help you successfully negotiate a car deal, and walk you through a car-buying scenario.

5 tips for negotiating a car price

Whether you plan to buy a new or used car, you can prepare yourself before visiting the seller by following these 5 simple tips.

Do your research 

Knowledge puts you in a better position to negotiate the price of a car. With so much information available online, buyers can easily find information about a car’s value before setting foot inside a dealership.

The manufacturer’s suggested retail price, or MSRP, is the estimated price that the car maker thinks the vehicle is worth. Also known as the sticker price, the MSRP gives you a baseline for beginning negotiations. But what you may not know is that few cars actually sell for the MSRP, which provides you with room to negotiate a better price.

Instead, your focus should be on the car’s fair market value. This value is based on the average amount paid for the vehicle by other buyers in your area, which is typically less than a car’s MSRP. The fair market value may be influenced by other factors such as supply, demand and optional features. Knowing the vehicle’s market value may help you secure a better deal when negotiating a car’s price.

You can find information on a car’s fair market value by visiting industry-recognized resources for accurate consumer pricing, like Kelley Blue Book, NADAguides and Edmunds. Although these guides may give you different prices for the same vehicle, this research should give you a clearer picture of whether a car’s sticker price is a good deal.

Keep your options open

If you walk into the dealership intent on buying a specific model or trim, your ability to negotiate a better price may be limited. When dealers know you have your heart set on a certain car, they may not feel as compelled to negotiate the price because they know your mind’s made up. Instead, choose a vehicle that best suits your needs and keep your options open so that you hold more power in a negotiation.

Many of us just want to get the car-buying process over with as quickly as possible; visiting a single dealer or speaking with one private seller may be all we can handle. By limiting yourself to just one seller, however, you won’t know if you’re getting a good deal. If the seller knows you’re not shopping around, they have less incentive to negotiate the purchase price with you.

If you aren’t in a hurry to buy a car, you may secure a better deal by doing nothing more than picking the right day to visit the dealer. Salespeople often have monthly, quarterly and annual sales goals they need to hit. If you visit a dealer near the end of the month, quarter or year, the salesperson may be more willing to be flexible on price.

Get preapproved

Getting preapproved for an auto loan before you walk into a dealership, or visiting a private seller can be a good idea. Whether you work with your bank or an online lender, getting preapproved can help you stay within your budget when buying a car. Plus, you can shop around for a reasonable interest rate.

Getting preapproved may help you when negotiating the purchase price of your car. If the salesperson knows you already have a loan lined up, they may be motivated to offer you an in-house financing offer with a better rate or terms than your preapproved offer.

Focus on out-the-door price

One of the first questions you may be asked is how much you can afford to pay each month. Salespeople often focus on how to make the monthly payment fit into your household budget, diverting your attention from the total cost of the vehicle. To keep the monthly payments in your price range, dealers may extend the length of your loan, actually increasing your total cost to own.

When you buy a car, your focus should be on the price of the vehicle, not the monthly payments. Negotiating the “out-the-door” price is the best way to get a good deal. Unlike a car’s sticker price, the out-the-door price is what the dealer is willing to sell the vehicle for, plus any additional costs, such as taxes or fees.

Be willing to walk away

A car is a big financial commitment. You should feel comfortable with both the vehicle you choose and the price you pay. Salespeople may talk quickly and place a lot of pressure on you to take their deal on the spot. They may claim that the deal is only good for a limited time.

As the customer, you always have the upper hand. You can walk away if you don’t like what they are offering or if you just want more time to think it through. This may not be easy if you need a car immediately, but it’s worth the time to come back another day or visit a different dealer.

A negotiation scenario

Once you finish your test drive and head back inside to the salesperson’s office, you may be wondering what to expect. When you follow the five tips above, negotiating a car’s price shouldn’t seem so daunting.

As you work through negotiating the purchase price, don’t be afraid to share what you know about the car’s value. If their deal is higher than what your research shows, let them know. Don’t be afraid to show the salesperson the industry guidebook page on your phone and ask that they match or beat that price. Avoid the monthly payment discussion and continue to negotiate the “out-the-door” price.

If they still won’t offer the right deal, simply mention that you need time to think and possibly talk to some more dealers. Be willing to get up and leave if you don’t get the deal you want.

How to negotiate with car salespeople

When you’re aware of the tactics that salespeople use, it’s easier to counter them. Here are ways to counter three popular dealership sales tactics when negotiating a car price.

Counter the waiting game: Take a break

Buying a car can be a long and exhausting process. Shoppers are easily worn down as they browse the dealer’s choice of vehicles, go on test drives, decide on a model and negotiate the purchase price. A good car salesman knows this and may intentionally drag out the process, hoping that impatience or hunger drives you to accept an offer that benefits them more than it benefits you. You can avoid this tactic by eating before you shop and bringing enough snacks to last you a full day at the dealership. If it takes too much time for the salesperson to get you an offer, let them know that they can text or call you – and then leave.

Counter the monthly payment conversation: Stay focused

Even before you start negotiating the price of a vehicle, a salesperson may casually ask what you can afford to pay every month. To keep the negotiations focused on the price of the car, avoid answering this question. Instead, tell them you are more interested in discussing the car’s purchase price and fair market value. You can always talk through financing later.

Counter the hard sell: Share your knowledge

Salespeople have a more challenging time pushing around an informed buyer. When the dealer presents an offer, counter it with what you know the car is worth. If you have a better offer from someone else, show it to them. The salesperson may negotiate your deal more seriously when you can justify a price drop.

No-haggle alternatives

If haggling for a better price is not your cup of tea, some dealers sell their cars at a set price. Dealership chains like CarMax and Carvana sell vehicles at fixed prices that are nonnegotiable. If you prefer to skip negotiations altogether and just pay what they ask, these no-haggle dealers may be a good option. Just remember that you may be paying more for the car than you would if you negotiated the price on your own.

Negotiating a car price: FAQ

How much should you offer when negotiating a car price?

If you’ve researched the vehicle and know its fair value, start with a lower price. This gives the dealer room to negotiate a counteroffer. Just decide ahead of time how high you are willing to go to avoid paying more than what you can afford and be willing to walk away.

How do I negotiate a car price when paying cash?

Wait to share how you plan to pay for the car after negotiating the price. Car salespeople make money when you finance your vehicle. If they know you plan to pay cash, the salesperson may be less willing to negotiate the purchase price of your car.

How can I get the best deal on a new car?

Before buying a new car, check out car manufacturers’ special offers and incentives. You may find that some makers offer better deals than others. Rebates and 0% APR financing offers can reduce your total cost to own.

How do I negotiate a used car price?

Whether you are negotiating the price of a new or used car, the process is relatively the same. Offer a lower price than its current value and negotiate up to the highest price you are willing to pay.

 

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