Negotiating the Price of Your Next Car
You walk on the lot, and almost immediately you’re attacked by the powerless lot rat. He welcomes you to the dealership and asks you what you’re looking for, to which you inevitably reply, “i’m just looking”. At this point he says, “ok” and just walks away to let you look, right? If you’ve ever bought a new car before then you’re probably laughing too hard to read this after that last question. Understand that the ultimate goal of the salesman on the lot is to get you inside the dealership, so he’ll be right there with you, asking questions the whole time, until he gets you to follow him in. Once you’re in there his manager will talk to you and prequalify you a bit before sending you on a test drive. After you get back from the test drive it’s time for the salesman to get on your side and help you fight the evil manager for a price you can afford, not a price that you want, and they’re very good at getting every penny out of you. At this point you’re telling the salesman that you have to leave soon to try to hurry him up, but who cares if you’re already in love with the car you’re getting and you’ve already agreed on a price. You don’t really have to leave and they know it, and since they have the keys to your trade in and they’ve driven it around to the other side of the building, they know that you’re not going anywhere until you talk to a manager that will assure you that it won’t be much longer.
From the dealer’s end of it you’re not paying the price of the car, so why even talk about it. He’ll keep you so concerned about the down payment, the monthly payments, and how much you’re getting ripped off on your trade in that you forget all about the price of the car. If you ask for a better price on the car, he can afford to give it to you because he knows he can get that thousand dollars back when he sells your trade in. If there’s no room in the trade then he’ll make it up by adding a couple extra points to your interest rate since you already told him how much you wanted your monthly payments to be. Nevertheless, when you ask for a better price the lot rat will go to the manager, and will come back to you with a price that’s only a few hundred dollars off the sticker price. This is his way of making you feel like there’s no profit in the car you’re looking at, so if he comes down anymore you’ve done a great job of negotiating, and now you’re happy about the price that you paid for your new car.
If you truly want the best deal on a new car, then you need to skip this whole process. The first step is to figure out which cars you’re going to look at. This will help you determine your price range so you can get a loan from your bank. Now, obviously, you can’t just get a loan without having all the details on the specific car that you’re going to buy, but you can get an approval for a certain dollar amount. You already know how much money you’re comfortable putting down on a car, so take that amount and add it to the approval to figure out how much you have total before you start shopping. This way you can tell the dealer that you intend to pay cash. Every deal is a cash deal to the dealer. They either get the cash from you or they get it from the bank that financed it, but this keeps you focused on the actual price of the car, not the payments or down payment. Truth be told, you may get a better interest rate at the dealership, but if you want the best deal then you have to maintain control of the sales process and keep the focus on the price of the car. Once you have the price you want then you can offer to let the dealership run your credit to see what kind of interest rate they can offer. Your payments will fall into place on their own once you have the price and the interest rate.
The next step is to refuse the test drive. The managers hate this, and the salesman will probably get chewed out for it, but since they’re not paying for the car, and you are, this is one more way for you to stay in control. If you simply refuse the test drive they’ll think you’re being unreasonable, and they’ll stop taking you seriously, but if you just explain to them that your time is valuable, and that you could test drive Ferrari’s, but if the price wasn’t right you still wouldn’t buy them, then you’ve shown reason for your refusal. Now you can bring them back to the price of the car. Once again you’re in control of the sale.
After that you’ll tell them that you’re not trading in a car. You can always sell it to them after you’ve settled on a price, but for now just keep that in your pocket. You want to keep that manager focused on the price you’ll pay for the car you want. After that’s done you can ask him what he’d give you for the car you drove up in, and by this point he really wants you to trade that car in so he can mark it up and make some money off of it since you’re not letting him make that money off you, and you really want to trade it in because you don’t pay taxes on the money they give you for your trade. Ideally you should be able to buy the new car without trading in, but if you have to then do it at the end of the sale. He’ll still try to lowball you, but not as much, and you can just work him up on the value of your trade just like he tried to work you up on the value of the new car.
Remember, all you need from this dealership is a price. The car can come from any dealership. If they don’t have exactly what you want, since you’ll probably be in it for the next four years, then they can order it, transfer it from another dealership, give you an even better price on one of the cars they have on the lot, or they can watch you leave as you head to the competing dealer. Since you’d like to only have to go through this process with one dealership, and you want the best price, all you have to do is know which dealer has what you want before you talk to the salesman, stay in control of the sale, and make the dealership feel like they don’t have what you want, because dealers hate ordering cars and transfering cars, and if they don’t have what you want they’ll have to make you a better deal on one that they have in stock.
Go to the dealership the night before and walk the lot. Look at stickers, find the color you want, take note of whether the dealer has an addendum package with the undercoating, Scotchguard, and paint sealant. You’re going to use this information to get the best price when you go back and talk to the salesman the next day. When you go to the dealership don’t drive around the lot looking at the cars. Buying a car is psychological warfare, so let them know that you’re there to buy a car, not “just looking”. Park right in front of the dealership, and walk straight in the door. If you don’t see a salesman right away don’t walk around the showroom, go directly to the receptionist and have her page one for you, then stand at her desk until he arrives. Buying a car is a very long process, and if you take this direct approach it tells them that you’re serious about buying a car, that your time is valuable, and that they had best skip the game if they want to earn your business. When they ask you what color you want, always say that you want a color that they don’t have in stock, and when they ask for a second choice you can tell them the color that you really want. That way when the price is negotiated you can always say that you’d really prefer the other color and ask about ordering it. The manager will come out and say, “What if I can make you a better deal on your second color choice?” There’s nothing wrong with saying yes, because he will go back and get a better price.
To get the price you want you have to play the game, and if you want to win that game then you need to play like they do….Dirty. When you tell them what car you want, they’ll find one on the lot that meets your criteria and come back with a price. Because you were there the night before you already know if that price includes an addendum package. Dealers love the addendum package because that undercoating, Scotchguard, and paint sealant cost them about $25 and they sell it for around $1000. If you refuse to pay for it, then they say they won’t charge you for it, but it looks like they’ve just knocked a grand off the price when it was really only $25, so instead tell them that you don’t want it and are willing to order a vehicle to save that thousand dollars, that way when you start negotiating price you’ll be starting from the MSRP (Manufacturer’s Suggested Retail Price) instead of the inflated price they had set. The next step is for you to make them an offer for their car, don’t ask them what price they can give you. When you make your first offer lowball them hard, and when they ask how you came up with that price just tell them that you didn’t walk onto their lot, so you don’t need their car, you’re just willing to take it if you get a good enough deal. If you tell them the price you want they’ll work you up from there, so hit them low and work your way up to where you want to be. They’ll still come back with only a few hundred dollars knocked off the price, so only come up a little on your price. Go ahead and play this game a couple times, then remind the guy that your time is valuable and tell him to stop insulting you with theses pretend discounts. Make him a serious offer (still a couple grand below what you’re willing to pay) and tell him that if he can get you that price, after tax, title, and license, that you’ll buy the car and drive away in it. At this point the manager should send him back with a number closer to what you were willing to pay. Offer to stop playing this game by meeting him half way. He’ll come back with a number that is just a few hundred dollars over the half way point, but stick to your guns. If he can come down that much then he can come down the rest of the way, or maybe he can offer to pay for all your scheduled maintenance for the first year, but he can cover that cost in some way and you’ve settled on a price. Now sell him your trade, and offer to let them finance the new car if they can get you a good enough deal on the interest, and if they beat the deal your bank was offering then go for it, but even if they don’t you still have the approval from your bank, so just tell the dealer that you need him to fax over the worksheet with all the info on the car to your bank and he’ll know what to do from there.
If you try to leave in your old car they’ll keep telling you that the paperwork is almost ready and you’ll be there all day, so tell him that you want to drive the new car to your bank to do the paperwork, or to lunch if the dealer is arranging the financing because you know it’s going to take an hour for them to be ready with the paperwork. This is your test drive. You haven’t signed anything, so you can still back out at any time, plus if you leave in their car they’ll be willing to let you go since they know you have to come back with it. If the dealer insists that the salesman go with you since you still haven’t officially taken delivery of the car, then insist that he buy your lunch. Just make every step of this process a negotiation. They enjoy it, that’s why they do it, but it also keeps you in control throughout the sale.
