How to Negotiate a Car Price: 11 Steps to Getting the Best Deal
Negotiating a great car price doesn't need to be a war. These 11 steps can help simplify the process.
Contributing Writer at Tally
September 16, 2021
When some people go car shopping, they prepare for a battle. It's them versus the salesperson and the sales manager. But it doesn't have to be that way.
With the right research, determination and ability to walk away from a deal, you can get the best price for your next car with minimal tension.
Below, we'll outline some key steps on how to negotiate a car price with as little stress as possible.
How to negotiate a car price
When searching for a new car or a used car, there are various ways you can save money — from getting the lowest available price to scoring the best financing deal. Let's uncover all the ways you can save on your next car-buying experience.
1. Find out what a good price really is
The first step to finding the best price for your next vehicle is learning what a good price is for the vehicle you want. Check the market value for your desired vehicle and its specs on pricing websites like Kelley Blue Book or TrueCar.
These sites will let you know what shoppers are actually paying for new cars — not just the Manufacturer's Suggested Retail Price (MSRP)— plus the market value for the used vehicle you want to purchase.
2. Start your car shopping online
Rewind back about a decade or so, and car dealerships were hesitant to put their inventory online, as that would make it possible for car shoppers to find the best prices without coming into the dealership. This meant there was little opportunity for a salesperson to convince the shopper that the dealer’s price was the best possible price out there.
Today, most car dealerships have websites with current pricing posted. This has led to some price parity, but you can still find some special offers on new cars or an unusually cheap used car by starting your search online.
If you're searching for a new car, you can begin by visiting the nearest new-car dealership that sells the brand you're interested in, then move to farther-away dealers to see if pricing is better at their locations.
You may think all dealerships offer new cars at the same price, but there are often unadvertised cash rebates manufacturers give dealerships. They can either use the rebates to lower the vehicle's price or keep the cash as profit. The dealers that use these incentives upfront will show a significantly lower price on their website, making the negotiation process easier for you.
If you're shopping for a used car, there may simply be too many options to shop on individual dealers' websites. Instead, you can head to a car listing site like AutoTrader, Edmunds or Cars.com to find the lowest pricing in your area. Beware of excessively inexpensive models, as they may have high mileage or some other issues that make them less desirable in the long run.
Compare the prices you find on the car listing site to the actual market value you found in the first tip. Then, choose several dealers with list pricing closest to the value you found online and set appointments to visit them.
3. Value your trade-in vehicle
These sites show the estimated value a dealership will give you as a trade-in in various conditions. Choosing the actual condition your vehicle is in can prevent any surprise low-ball offers at the dealership.
With this trade-in value in hand, you’ll know what a dealership should be offering you, so you can balk at any unusually low offers.
4. Secure your own financing
Yes, you can get financing at the dealership when you buy the vehicle, but securing your own auto financing ahead of time can help in a few ways:
You’ll know what amount you're pre approved for, allowing you to shop without wondering if you'll be approved.
You can shop like a cash buyer, negotiating the selling price instead of the monthly payments (we'll get into why this is important later).
It gives the dealer a best offer to beat. If you already have a great offer from a bank, credit union or online lender, the dealership has to beat that offer to earn any bonus or commission on the financing. This limits the dealerships' ability to hold points — the act of adding percentage points to the rate the banks offer and pocketing the difference as commission — so you get a stronger interest rate and save money throughout the loan.
5. Negotiate like a cash buyer and don't show your cards
Many dealerships will still try to play what's called the “4 Square Method,” which is a tactic that attempts to find out your key negotiation point — price, monthly payment, interest rate or trade-in value — and stick to that.
Generally, a dealership's goal is to get you to negotiate based on the monthly payment, as they can mess with any of the other numbers to make their profit and still meet your monthly payment expectations.
One common tactic is to lower your monthly payment by stretching it out over a longer term, but the dealer increases the interest rate to pad its profit. So, you think you're getting a better deal, when you're actually getting a far worse deal.
Instead of going through this game, negotiate the price of the car as if you're a cash buyer. This means starting with the purchase price.
Using the pricing data you got online, negotiate the selling price as close to the fair market price. Don't be afraid to go under the dealer's invoice price — the price the dealer pays for the car — on a new car, as the incentives and kickbacks the dealership gets from selling a new car often make up that lost profit.
There’s no reason to give the dealership more information than it needs. For example, it’s not wise to walk in telling the dealership you're pre approved for a loan and have a trade-in vehicle. Simply tell the salesperson your budget and the vehicle you want to look at.
6. Check financing options
After settling on the dealership's best price for the vehicle, you can start discussing auto loan offers. The car dealer will conduct a credit check and lay out what offers they can extend to you. Compare these offers to the preapproved offer you received before.
If the dealership's offer has a lower interest rate and the same or more favorable terms, you could be better off going with the dealership’s financing versus your pre approved offer.
If the dealership's offers are worse than the one you received, show the dealership the better offer you received and see if they can beat that offer. Chances are, the dealership added points to the interest rate and has some room to bring the rate down.
7. Negotiate your trade-in offer
Now that you've secured the best price and best loan terms, you can bring your trade-in vehicle into the fold.
Tell the salesperson you're considering trading your vehicle and would like to get it appraised to see how it impacts the deal. The sales manager or used-car manager will whisk your car away for a test drive and inspection and return with an offer.
If the offer is on par or better than the trade-in value you saw online, note the offer. If not, counteroffer with a higher trade-in value based on the information you have. If the dealership balks at your attempts, ask them if they can explain why they are below market value. There may be a legitimate reason, such as the market being saturated with your vehicle or you simply overestimated your vehicle's condition.
If the dealership won't increase the offer, notate it and let them know you'll think about whether to trade it or not.
8. Review the entire deal and eliminate any unnecessary charges
At this point, the dealership should have an entire deal written out for you, including your out-the-door price, interest rate, monthly payments and trade-in offer. The offer will also include some extra fees. Some of these fees are legitimate, but others are mere profit pads that you can negotiate off.
According to CarsDirect, some of the fees you can demand the dealership remove may include:
Dealership fees: Dealers will sometimes affix a secondary window sticker on a car that includes a range of dubious fees, like shipping and handling, pre-delivery inspection or dealer prep. These are all fees included in the destination fee on the main window sticker and do nothing but increase profits. It’s wise not to pay these fees.
Advertising fees: The dealership may sneak this fee on a sale, but it's the dealership's responsibility to cover its own advertising. There’s no need to pay this fee, either.
Market-adjustment fee: If the vehicle you're buying is especially popular and hard to find, a dealership may add an adjustment fee to the sticker price in an attempt to capitalize on the car's popularity. Fight this extra markup and refuse to pay any more than MSRP.
Add-ons: Dealerships may attempt to push add-ons like VIN etching, fabric protection, extended warranties or tire-and-wheel protection by slapping them on the secondary window sticker as if they're part of buying the car. If you see these and don't want them, simply tell the dealership to remove them.
At the end of the negotiation process, look at the dealer's bottom line, which is the total price you are financing and the financing terms — interest rate, loan length and monthly payments. You're looking for the lowest amount financed, the best interest rate and a monthly payment you can afford.
9. Go to your other dealerships
The dealer will likely attempt to keep you in the deal by telling you it's only good for that day or the vehicle you want may sell. Don't let this convince you to stay — the dealership will typically give you the same deal any other day.
Take the details of your deal and shop it at the other dealerships you found online with the same vehicle you want.
Repeat all the same tips listed above to see if the dealership can meet or beat the best bottom line pricing you've received. If the dealer doesn't beat the pricing initially, show the salesperson the offer you already received and see if they’re willing to beat it somehow.
The dealership can beat the deal in many ways — lower interest rate, lower sales price, higher trade-in offer, etc.
You can check online car retailers, such as Carvana or Vroom, for lower pricing, too. There's no haggling involved — the price you see is the price you get — so this should be a quick and easy process.
10. Return to the original dealer
Return to the original dealership with the best bottom-line offer you received from the other dealers and determine if the salesperson can beat it. If so, you can rest assured this is a fair price.
If the dealer can't beat the best price you received, return to the dealership that gave you the better price and complete your car purchase there.
11. Read the final sales contract thoroughly
When you agree to buy the vehicle, you’ll go through the finance and insurance (F&I) process. This will usually involve a new salesperson whose job is to secure the final financing, attempt to sell you add-ons and have you sign off on the final loan paperwork.
When reviewing the final paperwork, compare it to the deal you agreed to with the salesperson to ensure the F&I team isn't trying to sneak fees or a higher interest rate into the deal. If you spot these differences, alert the salesperson and have them removed.
Don't sign anything until you've verified the final paperwork 100% matches the agreed-upon deal. And don't be afraid to walk away from the deal if it doesn't match what you agreed to earlier.
Get the best overall deal on your new car
Negotiating a car price goes beyond what's on the window sticker. It's all about the bottom line offer. This includes negotiating a higher price for your trade-in vehicle, bringing the sales price as low as possible and getting the best possible interest rate and loan terms.
With a firm understanding of how to negotiate a car price by focusing on these variables, you'll leave the car dealership with the best possible overall price on your next car.
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