Buying From a Dealer
Doing the Research
There are two competing interests involved in the car-shopping process. You’re motivated by a desire to get the best price for a vehicle and save money. The salesperson is motivated by a desire to earn more commission—and that means selling the car at the highest price you’re willing to pay. To make sure you get the sales deal you want, you’ll need to do some research.
Determine what you can afford to spend. There is no point in looking at cars that are out of your price range. Before you shop for a car, meet with a loan representative at your credit union or bank to get pre-approved for a loan.
Decide on a vehicle and features. Spend some time online comparing the safety and reliability ratings of your preferred vehicles before you go for a test drive. Look for recent safety recalls and check out consumer reviews.
Check car prices online. The great thing about researching cars online is that there is no salesperson to pressure you. Plus, you can easily narrow down your search by car make, model, year, features and even color. Use these online prices to negotiate a better deal at an actual dealership.
Find out your car’s trade-in value. If you plan to trade in your current vehicle, use NADA Guides or another online service to get an idea of a fair price for it. You also should have at least two different dealerships appraise your car. Bring all of these results with you when you’re ready to buy.
Know the new car’s invoice price. Invoice price is the amount the dealership paid the manufacturer for a car. Any amount over invoice is profit. You can find out a certain car’s invoice price at online consumer research sites, such as NADA Guides.
Preparing to Negotiate
Sales negotiations shouldn’t be all-or-nothing propositions. Both parties usually have to make some concessions in order to reach an agreement. These tactics can help you come out ahead in the negotiating process:
Focus on your goals. Before you head to a dealership, make sure you’re clear about what you want to achieve. What aren’t you willing to back down on? Next, identify several alternative plans you’d be comfortable accepting. Try to come up with as many scenarios as possible. Write everything down and bring the information to the negotiating table to serve as a reference.
Identify weaknesses. You should also note what you have that gives you the upper hand. For instance, maybe you learned that car sales are in a slump, and since it’s the end of the quarter, you know the dealership needs to make a sale.
Determine how your offer could benefit the dealership. Be prepared to explain to the salespeople why they should consider your offer. For example, it will help your salesperson reach his or her sales goal or the sale will open up room on the floor for new inventory.
Get ready to listen for verbal cues. Use what a salesperson says to formulate your next move. Words that leave ambiguity, such as “possibly,” “perhaps” or “acceptable” can indicate a salesperson is open to your proposal.
Be prepared to counter. When a salesperson makes an offer, understand that this is when you can start negotiating so that your priorities are met. You may not be able to get exactly what you want, so to reach a compromise, consider alternatives that may be favorable to you and the dealer.
Making the Deal
Striking a deal with a salesperson may be the most stressful part of the car-buying experience. As well as arming yourself with research and going over the negotiating tactics you’ll use, these eight tips can help the process go smoother:
- Don’t show your hand too soon. You can let the salesperson know that you’re pre-approved for a loan, but don’t share the full loan amount. Instead, start with your rock-bottom price and work upward, if needed.
- Focus on car price, not monthly payments. A dealership’s finance department can get you practically any monthly payment you want by extending the length of the loan or adjusting for fees. In the long term, you’ll end up paying more for the car. Always negotiate the price of the car first.
- Don’t get emotionally attached to a vehicle. Even if you really want that certain car, don’t let on that you do. Let the salesperson know that you can find another car elsewhere—because it’s true.
- Hold your ground. If the salesperson goes quiet after you’ve explained what you want, don’t break the silence by making a slightly higher offer or by allowing for some concessions. Wait until the salesperson comes back with an offer more in line with what you want.
- Bring a backup. The salesperson has his colleagues and manager to support him. You should have someone, too. Ideally, this person will be someone who points out flaws in the salesperson’s offer and says, “Let’s try the other dealership down the road.”
- Take time to think it over. Don’t make a hasty decision, even if a salesperson says an offer is good for one day only. Chances are good that the offer—or an even better one—will still be on the table when you return.
- Save the trade-in talk for last. You should always negotiate the price of a new vehicle first and then talk about your trade-in. Otherwise, a dealership may offer you the price you want for your trade-in, but at the same time, raise the price of the new car. To be sure you’re getting a fair offer, get a trade-in appraisal from multiple dealerships.
- Review the numbers. Check the sales contract carefully for discrepancies on the agreed purchase price, loan terms, down payment and trade-in value. Also ask for a breakdown of the monthly payments. Look for add-ons, such as service contracts, extended warranties and fabric protection, which may be incorporated in the payments. Make sure they’re what you agreed to purchase.
Section Complete! Here's how you did: