The Complete Guide To Buying A New Car: How To Negotiate Prices
Do Your Research
Like we just said, you should never pay sticker price for a new car. The asking price for a new vehicle is usually the maximum that dealerships think they can get away with charging. Not even accessories and premium packages are worth the MSRP. The true value of a new vehicle is actually determined by what other buyers in your area are paying for similar models. Consequently, you should do your research on the real value of any new vehicle before ever setting foot on the dealership lot. Here's a good way to get started.
Check Kelly Blue Book, Edmunds and the NADA Guide
The best place to start your research is the Internet. There are a number of value resources online that can give you a good boilerplate figure for what you should be paying. Kelly Blue Book, Edmunds and the NADA guide will all analyze the value of a particular new car in your area and give you estimates on what the dealer paid for the vehicle, the vehicle's retail price and what you should actually expect to pay. Check these sites first before you move on to the next phase of research.
Check Other Local Dealerships
Once you've finished your online fact finding, it's time to check out some other dealers in your area. Compare the estimate that the online resources gave you with the sticker prices of your dealership's competition. Tell the sales associate that you were going to pay that amount for a car at another dealership and ask if they can beat it. Even if they don't have the car you want, if you can take their lower offer back to your original dealer you can likely get the same price for the car you actually want.
There's always some sort of sales event going on at a dealership. Typically these promotions give you a certain amount of cash back or a limited period of 0% financing if you purchase a certain make or model of vehicle. If you're diligent – and a little bit lucky – you can use one of these events to knock a few thousand dollars off of your total cost or secure 0% APR financing for the first year or so of your loan.
The Newest Cars Have the Least Wiggle Room
As we previously mentioned, new cars aren't exactly the most elastic commodity on the market. If you're buying a brand new vehicle year that was just released last month, don't expect to be able to talk the price down by more than a thousand dollars, total. However, if you're buying a new car that's two years old, it will be cheaper and you'll have more room to negotiate. Because of this, it might be worth your while to consider a leftover vehicle before committing to the newest model available.
Negotiating the Price
After you've checked out multiple dealerships and have selected the perfect car for you, it's time to make an offer. Your dealer will attempt to pressure you into paying sticker price, because that's their job. Your job is to negotiate the price down to something more affordable. Here's how.
Set Your Floor and Ceiling
With your research complete, you should prepare a floor and ceiling offer for your new car. The floor offer is what you're hoping to pay. Typically, this should be 5-10% lower than the Fair Price given by resources like Kelly Blue Book. Your ceiling offer should be the most you're willing to pay for the vehicle. The amount of the offer is entirely up to you to set, but we recommend situating it at least $500 less than the sticker price.
Make an Offer
When you first sit down to the table with your sales associate, they will often ask you what you want to pay per month for your new vehicle. This is a common sales technique that they use to skew the total cost. Tell the dealer that you don't want to discuss financing until you've settled on a final price. Present them with your floor offer and tell them that you will take the car off the lot today if they accept it. It's important to stay tough here. Sales agents are used to pressing the hard sell, and any sign of uncertainty on your part could compromise the entire negotiation.
Make a Counter-Offer
Don't expect your dealer to accept your floor offer right away. They will most likely rebut with the sticker price or a slightly lower offer. This is when your research comes in handy. Inform the sales associate that you're well aware of the averaging selling price of the vehicle and that, after shopping at multiple dealerships you feel that your first offer is a fair price. If they refuse to accept it, then reluctantly increase it by a few hundred dollars.
Fend off the Gimmicks
In addition to the "pay per month" trick, experienced sales agents have a number of techniques that they can use to convince to accept a higher buying price than you have to. Among the most common of these is "employee pricing." Often, the agent will present you with a slightly lower number than the sticker price and tell you that this is the discount they would receive if they bought a new car. In reality, it's just an arbitrary number that they likely make up on the spot. Dealership employees pay wholesale for their cars, which is not something you're able to do. If you got the same discount as the dealership employees, the dealer wouldn't make a profit. If you're stern on your offer, expect the sales associate to enlist the help of his or her manager. The two of them will team up in an attempt to convince you that their current offer is the best that they can do. They might also try to offer you another pithy discount to make you feel better about accepting the higher price. Don't fall for it. Instead of bending to the dealership, slowly increase your offer until you reach your ceiling.
Seal the Deal or Walk Away
Once you've hit your ceiling offer, one of two things is going to happen. If the dealership declines your offer, then leave the table and walk away. Politely thank them for their time and mention that you'll be taking your business elsewhere. Leave them your number so that they can get in touch with you if they decide to lower the price. Expect to hear from them within a week, because if there's one thing a dealership hates it's to see money walking out the door. If your dealership accepts your offer, however, then it's time to celebrate! After a tense negotiation, you are now the proud owner of a new car! Now the only thing you need to do is secure financing for your new vehicle and you'll be finished!
SEE: How To Negotiate A Great Price On A Car
A Note on Additional Services
When you finalize the sale of a new car, you'll be forced to work with the dealership's finance officer to sign all your paperwork. This offer will try to sell you a number of additional services like an extended warranty, paint protection, gap coverage and more. You don't need any of these services. We advise you to turn them all down and simply purchase the car like you originally intended. The Complete Guide To Buying A New Car: How To Finance A New Vehicle