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Tips for Negotiating the Purchase of a New Car

It’s tough to resist the combination of new car smell and the bells and whistles that the next model of your favorite car includes. If you get to the point where you've weighed your options and decided that you want to purchase a new car, you will also have to decide whether or not you want to buy or lease it.

Here's how you should proceed if you decide to buy the new car. Negotiating with a salesperson can be uncomfortable. You might have the uneasy feeling that the dealer is going to take advantage of you. Fortunately, the process has changed in recent years and there are other purchase options. (For related reading, see: The Complete Guide to Buying a New Car.)

Car Buying Programs

American Express, Costco and AAA have all established car buying programs for members. These programs have negotiated pricing with local dealerships in exchange for program referrals.

You won’t completely avoid the dealer sales pitch in this process, as the dealer may still try to sell add-ons like extended warranties, but the price of the vehicle itself will be fixed. The details of the buying program will differ from vendor to vendor, but Zag is actually the company behind the car buying services that American Express, Costco and AAA offer their members.

Negotiating Services

Another option for those who want to avoid the car negotiation process is to pay someone to negotiate for you. Two services that do this are CarBargains and AuthorityAuto. Both services determine what make, model and options you want and will then negotiate with multiple dealers to get the best price. Unlike car brokers, neither service receives any compensation from dealers which reduces conflicts of interest.

No Haggle Dealerships

A final option is no haggle dealerships like CarMax or newcomer Carvana. While the no haggle approach can make the purchase process less stressful, it doesn’t mean you’re getting a good deal, so do your research if you go this route. (For more, see: 10 Tips for Buying a Car Online.)

Do Your Research

If you do decide to negotiate a new car purchase on your own, do a bit of research first. One of the first things you’ll want to determine is a reasonable price for the car you want to buy. Edmonds, True Car and Kelley Blue Book all provide information about the (manufacturer’s suggested retail price) MSRP and invoice price to dealer, and your price will likely be somewhere between those two numbers.

Several of the sites above provide specific information about the prices paid in your area. If you’re planning on trading in a car as well, follow a similar approach to determine the trade-in value of your car. Just bear in mind that you need to be realistic about the condition of your car as it does have a fairly large impact on the trade-in value. Both Edmonds and Kelley Blue Book provide estimates on trade-in value.

Finally, if you’re planning on financing the car, research loan rates as well. While the dealer may offer the most attractive financing, identifying other options will provide a good deal of leverage when it comes to negotiations. When your research is done, instead of going directly to the dealer, consider starting the process via the internet. You can get quotes from CarsDirect.com and TrueCar.com, or you could contact the internet sales department of local dealers and work out a deal via e-mail.

If you really would just rather go to a dealership, be prepared for a lengthy process and a good deal of back and forth. After you’ve finalized negotiations, check the paperwork closely to make sure it reflects your agreement and no unexpected fees have been added. If everything looks good, congratulations - enjoy your new car. (For more from this author, see: 3 Questions to Consider When Buying a Car.)