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.

The Trade-In
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.

Be Bold
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.

Financing
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

Options
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.

Related Articles
  1. Investing Basics

    10 Companies That Yuppies Love

    Learn about 10 companies loved by the modern Yuppie, including how this demographic's impressive buying power has boosted these companies' earnings.
  2. Personal Finance

    6 Tips for Investing in Antiques

    Historically, antiques are highly appreciating assets, but be prepared for a long-term investment.
  3. Home & Auto

    5 Cars That Will Save You Money in 2015

    Learn which cars will save you money in 2015, whether you are looking for a compact, mid-size or full-size car, or even a pickup truck.
  4. Stock Analysis

    Is the Apple Watch a Real Threat to Fitbit?

    Examine the potential for marketplace competition between Fitbit and the Apple Watch in the rapidly growing consumer wearables industry.
  5. Investing News

    How 'Honesty' Could Pay off for Jessica Alba

    Is it possible that Jessica Alba is one of the savviest businesswomen on the planet?
  6. Personal Finance

    JetSuite Simplifies Private Jet Rental

    Chartering your own plane just got a bit more affordable.
  7. Insurance

    How to Shop for Home Insurance

    Tips for getting the best protection for your place and possessions.
  8. Stock Analysis

    What Drives Ford's Profits? Not Just Cars

    Ford, an experienced legacy car manufacturer, sells a lot of cars around the world and makes a lot of money in the money lending and leasing business.
  9. Investing

    How Much Does a Super Yacht Cost – Really?

    Buying the vessel is just the beginning – then you have to pay for the crew, mooring and all those 'obligatory' toys....
  10. Personal Finance

    Invest in Costco? First Understand Its Balance Sheet

    A strong balance sheet sets a company apart and boosts investor confidence. How healthy is Costco based on an analysis of its balance sheets from the last two years?
RELATED TERMS
  1. Fast Fashion

    Definition of "fast fashion."
  2. Duty Free

    Goods that international travelers can purchase without paying ...
  3. Online-To-Offline Commerce

    A business strategy that draws potential customers from online ...
  4. Chargeback Period

    The timeframe during which a credit card issuer can dispute with ...
  5. Fast-Moving Consumer Goods (FMCG)

    These are consumer goods products that sell quickly at relatively ...
  6. Customer To Customer (C2C)

    A business model that facilitates an environment where customers ...
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. How can I invest in electronic retailing (e-tailing)?

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>
  3. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  4. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  5. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  6. What factors make it difficult to compare performance ratios between retail stocks?

    Companies that operate in the retail sector significantly differ in terms of their profitability and efficiency, making stock ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!