Try These Strategies To Negotiate A Good Deal On A New Car
Jodi Mohrmann, Managing Editor of special projects
If you have your heart set on buying a new car this year, be prepared to pay significantly more.
Consumer Reports says that inflation, shortages on parts and a recovering economy have caused prices to skyrocket. But there are some steps you can take to get the best deal possible.
Some vehicles are so hard to come by that many are paying well above sticker price. For example, Consumer Reports says it has seen the Jeep Compass selling for 15% over MSRP, the Chevrolet Silverado 2500 selling 17% over and the 2021 Kia Telluride is currently selling for 18% over MSRP.
Your best bet, according to Consumer Reports, is to choose a model that isnt in such high demand. And, when you are ready to go head-to-head with a salesperson at the dealership, be prepared to negotiate.
Let the salesperson know you have researched the transaction price for the car and trim level you want, said Consumer Reports Auto Editor Jon Linkov.
This means you should know approximately what the dealer paid for it and already calculated what you are prepared to pay. If the salesperson can meet your target price, let them know youll be ready to buy immediately and if not, you intend to visit other dealerships.
SEE WHAT YOUR TRADE IS WORTH: Consumer Reports car value estimator
Focus On One Price At A Time
The dealer wants to profit from the vehicle sale. Dealerships often try to make money by combining the individual pieces of the overall transaction: the car price, trade-in credit, financing details, and add-on purchases such as extended warranties. This negotiation technique is good for the dealer because they can provide a good deal for one piece while making money on the other parts.
The dealers tactic can be risky for you, mainly if you have concentrated on the monthly payment more than the total cost of the car. If you are using the dealers financing, they could agree to a lower price, but that comes with the cost of being in debt longer and paying more in loan interest.
Its better when you avoid upcharges and focus on negotiating individual pieces separately. Begin with the bottom-line price of the vehicle youre buying. When youve agreed to that price, shift to the value of your trade and then any add-ons. Consider finding another dealer if they arent willing to work with you using this method.
When Talking To The Salesperson
- Be friendly and polite, but avoid letting the salesperson know your top limit.
- If youre a cash buyer, dont tell the salesperson this straight away. Dealers make bigger profits on finance deals, so let them bargain the cars price on this basis. You can then decline the finance deal later in the process.
- Start off by stating an amount lower than what youre actually prepared to pay you can then gradually increase it if necessary.
- When you make an offer, dont speak again until the salesperson replies.
- Be as positive as possible about your aims. For example, dont say Can I have a discount? Instead, ask How much discount will you give me?
- Some negotiators start by saying theyre not prepared to pay the price advertised, but remember they ARE there to do a deal!
- If youre struggling to get a discount but you want the car, offer to close the deal there and then if you can both agree a price.
- Dont be afraid to walk out if the dealer isnt prepared to negotiate or move much on the price.
When youve agreed a deal, its still possible to get out of your car finance arrangement.
Find out more about ending your car finance agreement early.
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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.
Research What Incentives Are Available For The Car You Want
Automakers, like Honda, Toyota or Ford, might offer dealerships and consumers incentives to choose a particular car model. Know what these incentives are ahead of time to make sure youre getting them included in your final price.
And if youre planning on financing the car, check to see if there are any low-interest-rate offers available from automakers for the specific car model youre considering. These offers could save you more money in comparison to a loan from a bank. But make sure you have a backup plan lined up in case you arent approved for the promotional interest rate.
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Dont Forget Car Insurance Costs
When youre shopping around for a new car, a lot of people forget to factor in one big expense: auto insurance. If youre upgrading to a newer model of car or truck, theres a good chance you might see a bump in what you pay for coverage.
So, once youre done negotiating for your new ride, youll want to connect with one of our insurance Endorsed Local Providers . Our ELPs are independent insurance agents who will help you get the right coverage in place and shop around for the best deal on car insurance. They bring the options to you, so you dont have to go looking for them!
About the author
Ramsey Solutions
Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.
Focusing On Monthly Payments Instead Of Bottom
You may have noticed that car repayment terms are getting longer and longer. Twenty years ago, you could hardly find a car with a four-year loan. Today, maximum terms are up to seven years.
There are two reasons for this: cars, like everything else, are costing more and stretching out payments makes the car loan seem more affordable.
Focus on the total cost of the vehicle, not the monthly installments. A lengthier loan may create smaller individual payments but means youll tend to fork out more in interest. Try to keep the term of the loan to three years if possible: youll save money in the long run.
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Contact The Internet Sales Manager Or Fleet Sales Manager
Once you have lined up two or three vehicles that you believe could be the right car for you, contact the Internet Sales Manager or the Fleet Sales Manager of the dealerships with the individual cars in stock. People in these two positions are typically experienced in online vehicle sales. They can cut through much of the back and forth you would get if you dealt with a traditional car salesperson at the dealership.
You can initiate contact by email, by chat on the dealer’s website, or by telephone. Just by seeking contact with the Internet or Fleet Sales Manager, you have separated yourself from the average car buyer, and you can cement that impression by being straightforward in what you say.
You can start by telling them you noticed a particular vehicle the dealership has in stock, that you are strongly interested in buying it, that you are a “cash-buyer” , and that you are willing to listen to the dealer’s financing options.
Again, you can do this by email, chat, message/text, or telephone. No matter which of these communication methods you choose and there is no reason not to use several you avoid the face-to-face sales pressure you’d experience in the dealership.
After you initiate contact, be patient as you wait for responses. You might get a very enthusiastic and helpful response from some and no response at all from others. That alone should guide your search.
Dont Get Attached To One Car
Buying your next car is a significant investment, and the process can bring stress that pulls your emotions. Remember that buying a car is a business transaction. Your goal is to obtain the best price for a vehicle that suits your needs.
In todays market, its more important than ever to avoid becoming attached to a vehicle. Always keep a backup plan in case a deal doesnt go through as expected. It isnt always possible, but its best to purchase a car when you dont need it immediately because you have the time and ability to step away from negotiations.
Also, remember that automobile production slowed during the pandemic, and manufacturing hasnt returned to its previous volume. If you do find the model youre looking for at the dealership, you may have to pay more for it than you initially expected.
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Negotiate A Better Price With Car Guide
If you want to save time and money during the process of buying a used car, check out Car Guide today.
Car Guides Buyers Report enables you to access a mix of proprietary and industry data relating to the car youre considering buying. Our Buyers Report which also includes true cost of ownership, will provide you with all the information youll need to confidently negotiate a better price.
Dont Be Afraid Of Finance
If youre planning to buy your new car outright, it may be wise to initially conceal this from your car dealer. Its usually in a dealers interest to sell cars on finance, as there are often manufacturer-subsidised incentives that can make these packages quite attractive.
While being receptive to the idea of finance can pave the way to an improved offers, dont be completely dismissive of the dealers financial packages. In some cases it really is cheaper to use finance provided by the dealer than to borrow money from your bank. Our guide to car financing explains the options open to you.
Remember that until you sign for anything, you can walk away from the deal at any point. An equivocal Im not sure yet can often help negotiations until the contracts come out, how youre going to be paying for the car is your business, not the dealers.
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Determine Your Budget And Financing Options
The first thing to consider when buying a new car or used car is figuring out what fits in your budget. There are many factors to consider for the car you want to buy and how you’re going to pay for it but they all stem from “What can I afford?”
If you are purchasing a car you are likely going to be buying it with cash or financing it with an auto loan. Determining your budget for the car price depends on this decision.
If you are going to buy a car with cash make sure that it will not deplete your savings completely. For example, if you want to buy a $20K car in cash and have exactly $20K in savings, you may want to reconsider using all of your cash for the car purchase and either finance part of it or lower your budget for the car. It’s always good to have a sufficient amount of savings available for a rainy day.
If you are planning on financing the car, make sure you understand how much you can afford to pay in monthly payments. Ideally you want to keep your debt-to-income ratio as low as possible for your financial health. If the monthly payments fit in with your monthly budget and you are not overextended, that will help you determine the car price you should be looking for.
Lastly, don’t forget to account for the costs associated with vehicle ownership such as car insurance, gas, title fees, sales tax, etc. They may seem manageable independently, but together they can add up significantly.
What Is Msrp And How Much Off Msrp Can I Expect For A New Car
Before learning how to negotiate a car price, it’s a good idea to get familiar with how dealerships price their vehicles. For starters, MSRP stands for “manufacturer’s suggested retail price.” The MSRP is also often referred to as the “sticker price,” and it’s often the price buyers see displayed on various vehicles on the lot.
While manufacturers can set MSRPs, they cannot set the retail prices that dealerships actually use. Instead, MSRPs function simply as suggestions for dealerships to either follow, raise, or lower as they see fit. Since an MSRP is not necessarily the final going price of a vehicle, it is a good starting point for negotiations. Dealerships are looking to make a profit on their vehicles, so they generally want to make sure a vehicle sells for more than the invoice price they originally paid for that vehicle. This invoice price is lower than the MSRP, and there’s usually wiggle room between these two points that a buyer can target successfully.
To do so, buyers should look into the market value of the vehicle they are interested in before starting any negotiations. The market value is an average that usually falls somewhere between the MSRP displayed on a vehicle and the invoice price a dealership paid for the vehicle. A successful negotiation for a buyer involves using this information to their advantage, resulting in either lowering the going price from the MSRP or by getting other types of discounts or cash rebates that work in their favor.
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Used Car Negotiation Tactics
The following tactics apply to both negotiating with a dealership or a private seller. Completing these steps will give you the upper hand when the time to discuss the price of the car. Use these negotiation tactics and read my section on how to buy a used car to make sure you get the best possible deal on your next vehicle.
Be a polite and respectful negotiator
Theres plenty of advice on the Internet telling you to walk into a dealership with guns-a-blazing saying things like thats my offer, take it or leave it or you better do this price or Im walking! This is very bad advice and salespeople tend to stand their ground and not want to do business with you.
Your goal is to buy a car at the price you want to pay. Dont be rude, obnoxious, or demanding with a dealership or private seller. The last thing you want them to do is to become aggressive or standoffish. Be polite and respectful as you expect them to be with you. Remember you will catch more flies with honey than vinegar.
Dont be afraid to walk away
This is the best piece of advice I can give you during the negotiation process.
Dont get attached to the car, be flexible in your choices, keep your emotions in check and be ready to walk away if something doesnt feel right or not going your way. I promise you, the manufacturers will make more cars, there will be many other vehicles to choose from.
Visually inspect the vehicle
Ask the seller these questions:
Check the vehicles history report
How To Negotiate The Best Price On A Car
7 Minute Read | September 24, 2021
Its the last big hurdle of every car-buying experience. Youve already met with the seller or used car salesman. Youve finished the test drive. Everythings gone smoothly so far, but now you have to negotiate on the price of the car. Dun-dun-dunnn.
We get it, the idea of going back and forth with sellers on car price is about as enticing as stepping into a boxing ring with Mike Tyson. But you know what is fun? Driving home with a new-to-you car that you know you got for a bargain!
Whether youre negotiating for a car or a new sofa, Dave Ramsey says there are three rules to remember:
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Try Negotiating Over Email
When negotiating with multiple dealerships, consider doing so over email. This way, youll make sure you have everything in writing.
Sonia Steinway, president of Outside Financial, suggests contacting several dealers and asking each for its best price.
This helps you make an apples-to-apples comparison when looking at different quotes. Negotiating over email may also make it seem less personal, which can help you keep emotion out of the process.
How Can Car Guides Vehicle Check Help You Negotiate A Better Deal When Buying A Used Car
If the Car Guide Vehicle Check identifies an issue, consider whether this is a deal-breaker for you. If it is, youll have saved yourself the time and effort of taking the car for a test drive and negotiating on the price. Time to move on to the next car!
If youre still interested in the car despite the highlighted issue, research the likely cost of resolving it. Dont forget to account for the hassle of not being able to drive the car while its being fixed.
When negotiating on price with the dealer or seller, explain the information identified on the report and set out the amount of discount you are looking for. It is worth setting this amount higher than you would be willing to settle for, as theyre bound to try playing you at your own negotiating game!
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