Negotiate The Final Price Only
One good way to avoid fees altogether, according to Credit Karma, is to negotiate only the final price, sometimes called the out-the-door price or drive-away price. Tell the dealer from the beginning that youre only willing to negotiate the final price, and that all charges and fees must be included.
If The Problem Is Serious
A problem is considered serious if:
- it cant be repaired or fixed
- the cost to repair the vehicle is disproportionate to the purchase price, eg if the car was bought for $5,000 and the cost to repair the fault is $4,000.
If the problem is serious, you can:
- reject the vehicle and claim a refund or a replacement of the same type and similar value if it is available in stock
- keep the vehicle and claim compensation for the drop in value.
If a faulty vehicle has caused damage to your property, you can also claim compensation.
If a dealer doesnt agree that the fault is serious, get an independent mechanical report in writing and a quote for the repairs. If the report supports your claim that the fault is serious, go back to the dealer to reject the vehicle and choose a refund, replacement or repairs, plus compensation for the cost of your report.
Paying Cash Vs Financing
Do dealers prefer financing or cash sales and which is best for you? It all depends on your personal financial circumstances, the way the car dealership runs its business, the economic situation at the time you buy and many other factors.
One obvious advantage of paying cash is that youre not paying interest. Some dealerships love financing because they earn a commission from the lender, making an extra profit on the loan.
Other dealers may prefer cash sales because they immediately close the deal. They might even offer a cash discount. Ask the dealer about their preferred paying methods early on. Youll find that most private sellers tend to prefer a quick cash sale too.
If you prefer to put your spare cash toward offsetting your mortgage instead of paying for a new car, you could end up ahead. There are lots of variables to consider, so its sensible to consult a financial adviser to discuss the best options.
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Know How Long The Car Youre Interested In Has Been On The Dealers Lot
Once you have confirmed the local market conditions, I highly recommend you get a sense for how long each dealer has had their inventory in stock. Youll hear me call this the time on lot, and its of the utmost importance.
Why? Because car dealers do not buy their inventory in cash, instead they finance their purchase . This means that for every day a piece of inventory is sitting on their lot they are paying interest on that loan. Youll hear this referred to as floor plan from dealers.
If you know how long a dealer has held a vehicle on their lot, you can begin to get a sense for what their floor plan cost is on that unit. With that information, you can then negotiate more effectively. You can also pair this knowledge with the local market conditions to target your negotiation efforts on the vehicle that has been sitting on a dealers lot longest.
If a car dealer wont negotiate, one of the first things you should bring up is that you know how long the car has been on their lot. This gives you tremendous leverage in the negotiation.
Its worth noting that the Negotiability Score we provide in the YAA dashboard reflects this .
Its All About The Timing
Like any business, a car dealership has targets they want to hit by the end of each month and especially the end of financial year. This means that if youre clever with your timing , you could pick up a great deal as they look to hit their sales goals.
Each dealer will be a little different but if you search around in the last ten days of the month its one of the best times to shop!
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Learn The Games Car Dealers Play
While car dealerships may have an unsavory reputation, most salespeople are just trying to make a living in an industry where having to hit quotas and upselling are the norm. Stay firm in negotiations, but remember youre dealing with another human. Avoid being unnecessarily rude.
When you make an offer close to the wholesale price, the dealer will likely try every trick in the book to make you feel bad or uncomfortable for lowballing them. But sit tight: Its not about you. Be reasonable and firm with the dealer, and if they try to take advantage of you, remain calm. This is how the game is played. Remember: Youre the one offering money, so you ultimately set the terms, not them.
If you have trouble sticking to your guns, or your friends have said you can be a pushover, bring a more assertive person with you to help steel your resolve.
Tip : Time Pressure Is Definitely Bullshit
Car salesmen always pile on the pressure of time, usually by manufacturing some excuse to get you to transact now – even if it doesn’t suit you. If they let you leave, the odds that you won’t buy from them escalate dramatically. Don’t be conned. Take your time – the deal you get will be just as unbeatable next week.
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Dont Reveal How You Plan To Pay
A dealer is likely to ask if you plan to finance the vehicle through the dealership. Say you havent decided and youll discuss financing after you come to an agreement on the price of the car. If the dealer knows youve secured a preapproval, the salesperson might go higher on the price of the car to make up for the fact that they wont be making money on financing. If they know you plan to finance through them, they might go lower on the vehicle price because they know they can juice the loan rate.
Don’t Discuss Your Trade
Its almost always possiblewith time and effortto sell an old car privately for more than the dealer offers in trade. Many buyers nevertheless find the convenience of driving their old car in and their new one away compelling. If thats your aim, research the value of your trade-in beforehand but decline offers or pressure to discuss it until after youve settled the price on the new car. If it turns out that youre upside down on the old carthat is, you owe more money on it than youre getting in tradeyou probably dont belong in a new-car dealership yet. At the least, the car should be sold privately to pay off the debt. Yes, the dealer will offer to roll your old debt into a new loan. But that’s not a good idea.
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Never Turn Over Your License Or Keys
Although its rarer now than in years past, according to CNN, some dealers still resort to tactics designed to keep prospective buyers in the showroom until a deal is done. One of them is to ask for your license and/or keys as security during a test drive. If you return and decide not to buy, however, you might find that your collateral is in a managers office, in a secure room or somewhere else that keeps you in the showroom while the dealer makes a final pitch. Thanks to the rise of online reviews, however, these tactics have mostly been weeded out.
Should You Buy A Used Car Privately Or From A Dealer
The answer depends on your priorities. Do you want the process to be easier or cheaper? If you want it easier, then buying from a dealer makes sense. Theyll usually accept a trade-in. They have much more experience handling all the required paperwork than the average private seller. And aside from taking care of things like registration and transfer of title, dealers will also offer a warranty.
When it comes to price, however, youll usually do better with a private seller, especially one seeking an urgent sale. A private sale can produce amazingly good value for money – but there are potential pitfalls to watch out for. Sellers arent required to disclose possible problems or provide a warranty, so any mechanical issues will be your responsibility after purchase.
Thats why its so important when buying pre-loved through a private seller to conduct a test drive at all speeds in a variety of driving environments, ask to see a service history and roadworthy certificate, hire a mechanic to inspect the car and provide a written report and obtain a written receipt that contains full buyer and seller details, sale price and vehicle identification number .
You should also use Budget Directs free PPSR car history report. This will tell you if the car has any finance owing or previous insurance claims and whether it has been stolen or written off. And better yet the tool is completely free to use!
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What Affects A Car Salespersons Tactics
Salespeople are usually under pressure to maximize the profits on each vehicle they sell to increase their commission, and this influences how they interact with you.
The more a car salesperson convinces you to pay for a vehicle, the more profit they make. Their commission may be as high as 25 percent of the vehicles final sales price, says Burdge.
In addition, dealership management offers bonuses for selling cars that may have been sitting on the lot. There are still more bonuses from the car manufacturer for salespeople or the dealership when meeting a sales quota on a particular model year or vehicle model, says Burdge.
Dealerships operate on a monthly sales cycle, so at the end of the month the sales staff is particularly anxious to make more sales happen, says Burdge. At the beginning of the month its usually more about the profit made per sale so how much profit is to be made on each vehicle sold.
What Are Dealer Markups
For our purposes here, we define a dealer markup as a selling price above and beyond the carmakers MSRP. Often such markups appear as a second window sticker separate from the MSRP. Sometimes these markups include the cost of dealer add-ons like seat-fabric protection, VIN etching, undercoating, and pin stripping. You could often negotiate such traditional add-ons out of the final transaction price. Even that is tougher to do today.
Then there are those dealer markups often referred to as Additional Dealer Markup or Additional Dealer Profit . You might see it called a market adjustment. These costs are the ones to look out for and, if possible, avoid.
A dealer tacks these arbitrary amounts onto the MSRP to increase profit on high-demand models. Historically, you would find them primarily for highly anticipated all-new or redesigned models. Such dealer markups take advantage of a models high demand and short supply when first launched.
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Always Be Genuinely Prepared To Walk Away
Although some car sellers might try to convince you otherwise, deals dont evaporate when you turn around and walk out the door. If anything they might improve, since youve shown youre happy to look elsewhere. Always leave your number so they can get in touch if they change their mind about accepting your final offer.
Keep Calm For A Better Deal
Car sales staff are often genuinely very pleasant people, but bear in mind that enjoying a relaxed, convivial atmosphere can lead to you dropping your guard. These days, sales executives are increasingly well trained and the most effective ones can exploit a relaxed, cheerful customer to their advantage.
Never lose sight of your objective. You havent visited the car dealership today to make a new friend, although this can often happen as a happy fringe benefit. Your sole reason for sitting at the salespersons desk is to get the best deal possible while his job is to make as much profit for his company as he can.
If the first deal a salesperson offers you actually exceeds your expectations, try not to make this immediately obvious. Remember, youre about to spend thousands of pounds, so keeping a cool head is vital. Persistent negotiators can secure further discounts, so dont accept the first figure youre given.
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The Ben Franklin Close
This one is a classic. Heres how it works: The salesperson draws a line down the middle of a piece of paper, listing reasons to buy the car on one side and reasons not to buy on the other side. This is a very common sales gimmick in the auto industry and elsewhere.
The idea is that you will see that, on balance, you would be better off buying a new car. Of course, that actually depends on what they write down and how truthful it is in the first place, says Burdge.
Your strategy: The best way to defuse this tactic is to name it. Say, Thats the Ben Franklin close. Doing so will likely create an awkward moment with the salesperson, but it will also prevent the tactic from continuing.
You also want to maintain your focus on the numbers you care about during this tactic including your monthly payment, your down payment, the length of your loan, your interest rate and the overall cost of your loan. Know what those numbers should be, according to your budget, before you go into the dealership, and make sure you stick to those numbers, says Burdge.
Be On Guard For Common Dealer Tricks
Car dealers often get a bad rap but you cant blame them for trying their best to maximize profit. Their job is to sell a car as close as possible to the sticker price, while yours is to convince them to sell it nearer the invoice price.
Sellers use several methods to extract more money from you. Here are some of the main culprits:
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Tips On How To Negotiate The Price On A Used Car
If you are shopping for a used car, where apples-to-apples comparisons aren’t possible, your goal is to make an offer that is as low as possible but still in the ballpark. Use the vehicle’s estimated trade-in value as a guidepost for what the dealership might have paid for the vehicle. Compare that to its estimated dealer retail value on Edmunds. Your goal is to land in between those numbers. You can also look for comparable used vehicles near you to see what others are listing. It’s important to note that the miles and options are similar & mdash otherwise, you won’t be making an apples-to-apples comparison. Once you’ve done all this research, you’ll have a better idea what a fair price would be.
If you’re the first to make the offer, give yourself room for the dealership to make a counteroffer. In other words, if a vehicle is on sale for $20,000 and your research shows you should be paying $18,000, make an offer of about $17,000. You should know ahead of time what your opening offer will be, how you will counter the dealer’s offer, and what your highest price will be. Then when you’re in the heat of the moment, you won’t get flustered. You will negotiate like a pro.
Here are a few more tactics to help you get a good deal on your next car:
Don’t buy a car in a hurry . And don’t go into the car dealership unprepared. The salesperson may draw you into offer-counteroffer negotiations before you are ready.
Check all the numbers and ask for the out-the-door price.
Get Your Finance Elsewhere
Dealers often advertise low interest rates which are a lot lower than other loan products, but this doesnt mean your overall repayments will be lower. In fact theyre often higher because of upfront and ongoing fees! There are often better options than dealer finance so make sure you do your research and find out what loan product has the lowest overall cost over the lifetime of the loan.
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Should You Buy New Or Used
This is an age-old question with a very complex answer.
My personal recommendation is that you buy a gently pre-owned car from a manufacturer known for reliability, like Hyundai, Toyota, Lexus, or Mazda. Here are a few of my reasonings:
But thats just one opinion. To help you decide, check out our articles When To Buy A New Car and The Case For Buying A New Car.
I will say this dont let a dealership sell you last years model for this years price. In December, all current year models will instantly lose $4,000+ in value by simply being last years model. Yet dealers wont reduce the price until mid-March.
Your Rights If Something Goes Wrong
If theres a problem with your car after purchase and its not your fault, you have more options if you bought from a car dealer. This is because buying from a dealer gives you many more consumer rights than if you buy privately.
- comply with the Consumer Guarantees Act , which gives you guarantees for new and used vehicles
- comply with the Fair Trading Act and not mislead you if they sell online, they must tell you they are a car dealer
- be registered and comply with the Motor Vehicle Sales Act
- display an accurate Consumer Information Notice on used vehicles.
This applies whether you pay cash, get the car as a gift or buy on lease or on finance. You have these rights no matter if you buy from a car dealer online, from a car yard or at an auction. is not required to be a registered dealer.
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