Nov 2009
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And therein lies the key to negotiating a good price on a car. And perhaps, most things in life.
Frank Costa concurs. A 15-year veteran car salesman in Virginia, Costa observed, “If you walk into a showroom and demand that the salesperson give you his ‘best price’, you’re probably not going to get it. The key is to create a win-win situation for both you and the dealer.”
His first tip: Narrow down what car you want before you go to a dealer. Next, do your research. These days, thanks to the vast amount of information on the Internet, it’s easier than ever to prepare for a car buying negotiation. Costa recommends www.edmunds.com as the most reliable and comprehensive site to conduct your research. Here are a few details you can find at Edmunds:
- True market value—Edmunds factors in current inventory vehicle levels, local market sales conditions, and economic trends (such a rising gas prices)
- True cost to own—the full five-year cost of buying and owning a particular vehicle, including fuel, maintenance, repairs, taxes, financing, depreciation and resale value
- Unpublished incentives and rebates to reduce the price of the car
- Used Vehicle Appraiser will give you a specific trade-in price
- Dealer invoice price versus Manufacturer’s Recommended Price (MRP)
Dealer prices are influenced by supply and demand. In other words, if there are a bunch of the same cars on the lot, and/or lots all over your area, chances are good the dealer will give you a better price. If the car you want is unique and not likely to be found many places, you have less wiggle room to negotiate.
Supply and demand can also change rapidly. Incentives and deals are continually offered by manufacturers, so if you walk away from a lease deal thinking you can shop around for a better price, be aware that the deal may not be the same when you return.
Dealer prices are also influenced by the invoice price they paid—another bit of information you can get off Edmunds.com. This is an important component of the win-win scenario, because you can’t insist on a price that won’t allow the dealer to make any money. If it’s a new, hot car that everyone wants, he’s not likely to drop the price significantly. However, if it’s the time of year to reduce inventory to make room for new models, or even the end of the month when a salesman is working to reach his quota, he may be more inclined to negotiate a lower price to get what he wants. Win-win.
To negotiate a better price, Costa suggests a few ideas. Typically new car buyers are contacted shortly after the sale for feedback, known in the industry as the Customer Satisfaction Index (CSI). The better the feedback on this index, the more incentives and inventory that dealer receives. Before you get to a contentious part of the negotiation, mention that if you can drive off happily in the exact car you want and feel like you got it for a good price, you’ll give the dealer a good review in the survey. This is part of your offer—your way of incenting the salesman by giving him something in return for a few more bucks off the car price. Win-win.
Are You Browsing Or Buying?
This is important for the salesman to know—and he may well ask you upfront if you’re looking to buy a car today. That’s because he needs to know how serious you are. If he puts the time into negotiating the price you want, will you really buy? If you’re just running through the exercise and not serious, then he may invest some time with you but he’s not going to make his best offer until you’re really ready to sign the bottom line. If he knows he can sell you a car today, he’ll work harder on your behalf. Win-win.
Trade In?
Should you trade in your car as part of the negotiation process? Simple. Check out the approximate trade-in value at Edmunds. If it’s a goodly chunk of change, don’t trade it in. Keeping the trade-in out of the new car negotiation simplifies the process and, once you sell your current vehicle for a higher price as a private seller, you’ll come out ahead.
However, if your car is worth only a couple thousand or less, you may spend more time trying to sell it than it’s worth. A trade in when you buy your new car simplifies your life by simply taking the car off your hands. This may well be worth a lower price than advertising and selling it on your own.
Again, the key is to do your research and already know the ballpark market value of your current car before you go car shopping.
Be Prepared To Walk
Don’t bluff. If you’re really not at price you want to pay, just leave. Politely tell your salesman you’re going to shop around. Walk to your car, shuffle around once you’re inside, but don’t turn the key right away. If that salesman can make you a better deal, and believes that if he does you will really buy the car that day, and if he knows that there’s a good CSI or something else in the deal for him, then he’ll knock on your window before you can drive off the lot.
Salespeople really do want to sell you a car. The key to negotiating a good price is to let them know you really want to buy one.
Tools & Resources
Most and least expensive cars to insure
Kara Stefan is a freelance financial writer and author of Head of Household: Money Management for Single Parents. You can find her at Linkedin or her Web site.
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