Being well-prepared puts you in a far stronger position to negotiate the best deal possible on a new vehicle. Remember what worked for you in prior negotiations, whether it was to buy a house, rent an apartment or purchase that new wide screen television. Once you get to the dealership, use all your experience and intuition to size up and get a sense of the salesman you will be working with. Your goal is to capitalize on your strengths and exploit his weaknesses, in order to get the best price possible. (Don't get taken for a ride. Learn the pros and cons before the salesperson makes a pitch. Check out Car Shopping: New Or Used?)
TUTORIAL: How To Manage Credit And Debt
Don't Show Your Cards
When you show up at the dealership, don't zero in on one car and tell the salesman you love that car and you have to own it. Once you do that, your negotiating leverage goes right down the drain. Take your time and look around a bit. If you see something you like, put on your poker face and talk about it with the salesman. Limit the discussion to the facts and keep any emotion out of it. Treat car-buying like you would any other business deal.
Don't mention a trade-in until you have agreed on a price for the new car. If you disclose the trade-in at the beginning, the salesman will likely entice you by reducing the price on the new car, but take that money back by undercutting the fair market value of your used one. Lock in the price of the new car first, then haggle over the trade-in. If you can't get a fair price, tell the salesman you will sell it privately. That might motivate him to give you more money for it. If he doesn't, take it home with you.
Ignore the Sticker Price
The manufacturer's suggested retail price (MSRP) is put on cars for a reason - to help dealers make a healthy profit. By its very nature, the sticker carries an aura of authenticity. But the reality is that it represents only a starting point for the dealer and is set high enough to allow him plenty of room to maneuver.
Don't be fooled by the dealer invoice price either. The dealer would like you to think that you might be able to negotiate down to that number from the MSRP, but it's an artificial starting point. Rather than negotiating downward from his number, you should start at actual dealer cost and be willing to move up from there.
Don't be afraid to make a low-ball offer to start things off. If you're afraid of offending or insulting the salesman by being too aggressive, wipe those thoughts from your mind. Salesmen expect to be challenged and assume you are going to bargain hard. If you don't, you are easy prey and will put free money into their pockets. Don't make yourself the next victim.
When making counteroffers, move in small increments and get a feel for what the salesman is willing to do. In negotiations, patience pays. The salesman may be in a hurry to get the sale, but you aren't.
Set up your own financing before shopping for a car. If the dealer offers you more attractive financing, take the offer home and study it carefully. Make sure the interest rate and amount is clearly spelled out and that you know what the total will be for the entire contract. Having your own financing allows you to avoid distractions and focus solely on the price of the car.
TUTORIAL: What To Know About Credit Cards
Only add the options you really need and will actually use, and avoid service contracts and extended warranties. Most new cars come with very good warranties as part of the purchase price and going past that is not usually a good investment. Dealers love to add options that cost them far less than what they will charge you for them. Examples are fabric protection, rust-proofing, undercoating and windshield etching.
For the options you do want, include them in your first offer. You will get a much better deal that way than adding them after the fact. Remember, everything is negotiable. (Being prepared before buying will save you thousands in the long run. See Used Car Shopping: How To Avoid A Lemon.)
Closing the Deal
If you can't get the deal you want, walk away. Sometimes that will be enough to extract a final offer from the dealer as you go out the door. If that happens, give it serious consideration. If you still walk away, that offer may be off the table if you decide to come back later.
The Bottom Line
Dealers know you have other places to shop, and letting a serious customer with money go out the door without a sale is a cardinal sin in the auto business. If you have done your homework and your final offer is reasonable, you are likely to get the car you want at the price you want.