Buying a car is a major financial investment, and today's car market can be particularly difficult for buyers. There is a lot of demand for cars, prices are high and interest rates are high. That's why it's more important than ever to know how to negotiate when buying a car.
Since traders have many strategies to maximize their profits, you should be ready with your own strategies. Equipping yourself with knowledge, negotiating skills, and bargaining power can help you get a lower car price, a better car, and more manageable loan terms.
Whether you're buying a new or used car, whether you're buying from an experienced car dealer or from a stranger you met online, approach your negotiations with confidence and plenty of hard data. In this article we share some tips to get the best deal on the car you want.
Are you looking for a car loan? Easily compare lenders below.
What can you negotiate when buying a car?
You can't negotiate every part of your car purchase, but you can negotiate many things. Here are some of the factors you can often negotiate when buying a new or used car.
Vehicle price
The most important thing you can negotiate is the purchase price. Dealers usually base their asking price on thisManufacturer's Suggested Retail Price (MSRP), the price the car manufacturer considers reasonable for the vehicle. But you may not always pay MSRP.
Dealer margins and demand in your local market can affect the car price you see at the dealer. However, you can always try to negotiate a lower base price, and you should.
Some dealers won't budge. Some even market themselves as no-haggle dealers, meaning they don't negotiate the sticker price at all. But it never hurts to try.
Interest
If you plan to finance your car, you can negotiate the terms of your loan, especially your interest rate. According toConsumer Financial Protection BureauDealers do not always offer their lowest price first.
In fact, they usually do the opposite. Even if you get financing from a non-dealer lender, get multiple quotes and use them as leverage to get the best possible interest rate from whichever lender you choose.
Cost
Dealers usually charge a lot of fees when you buy a car. These may include document costs, shipping costs and advertising costs. Some dealers also charge fees for inspection and preparation.
The basic principle is that you pay for the car to be in good condition. Sometimes you can convince dealers to forego some of thesedealer costsor reduce the vehicle price to compensate, especially if you have a good argument.
Insurance and guarantees
Some dealers may try to offer you additional insurance, e.ggap insuranceor credit insurance, by implying that these are mandatory. In reality, these policies are usually not required unless you are leasing. If your loan company requires additional insurance, you'll usually get a better deal outside the dealership.
The dealer may also try to get you to purchase an extended warranty. They can point out gaps in your manufacturer's warranty and emphasize the importance of additional coverage that kicks in after your original warranty has expired.
You can (and probably should) wait to purchase additional warranties. Research your options, learn more about the companies that offer them, and decide if you really need one.
Trade in value
If you are also selling your current car, it is important that you receive a fair offer. AlwaysEstimate the value of your caruse a reputable site before arriving. However, be honest with yourself about the condition of the car. Damage, even minor cosmetic damage, can seriously dent your vehicle's value. Look for imperfections such as:
- Scratches on wheels
- Changes in the body
- Paint chips or dents (even if you repaired them)
- Problems with heating or air conditioning
- Loss of tire pattern
- Internal odors
- Spotted or worn seats
- Unresponsive electronics
- Problems with the title
Tips for getting the best deal on a car
Use these tips to increase your chances of getting a good deal on a car in today's market:
Research dealers
Before you set foot in the dealership, do plenty of research beforehand. Find out more about the different dealers in your area and learn more about your local market. Consider reading reviews of each car dealer from people who have bought cars there. They can contain valuable information about their sales tactics and negotiation styles.
Stay objective
Buying a car is a big decision and you will likely experience a range of mixed emotions. Car shopping can be stressful, frustrating, exciting and exhausting all at the same time. But most people make better decisions when they have a clear mind.
Try to filter out emotions that can cloud your perception of the cars on the lot and the dealers' offers. Respond logically and take your time.
Work with different retailers
Let dealers compete for your business. Competitive offers can not only give you bargaining power, but they also give you a clearer view of the market. You might expect to work with a dealer you trust, only to find out there's a better price elsewhere. Shop around and be flexible.
Shop at the end of the month
Consider visiting the dealer at the end of the month. Car salespeople sometimes have to sell a certain number of cars before the end of the month, quarter or year. If you show up on September 28th and find a seller desperate to fill his quota, he might go for a lower price than on October 1st. This method is not foolproof, but it may be worth a try if you can wait.
Research incentives
If you're interested in multiple makes and models, check to see if any of the manufacturers offer incentives, such as a 0% annual interest rate for the first year or cashback incentives where you can get a discount on your purchase.
Sometimes there are also special promotions that apply to specific groups, such as soldiers or students. Research any manufacturer or dealer incentives you may qualify for to ensure you get the lowest price possible.
Focus on price instead of payment
The dealer may use a low monthly payment as a lure to get you to pay more than you should. If you want to save money in the long run, aim for a lower purchase price, not a lower monthly payment.
A low monthly payment often means you have a long-term loan, which costs you more in interest and increases the risk of developing negative equity as your car depreciates in value.
Get pre-approved for your financing
Work with a lender in advance to getpre-approval of a car loan. Talk to banks, credit unions and online lenders to find the best interest rate for you.
This will save you the time, energy and money you might spend working with the dealer's finance team. In addition, you will receive a pre-allocated budget for your car. Shiny new features and optional upgrades may not entice you if your loan doesn't cover them.
Know the invoice price
The invoice price is the amount the dealer paid to the manufacturer for the car. It's useful to know this number next to the MSRP because this is how the dealer calculated the sticker price.
They start at the invoice price and increase it to make a profit. You can usually find the estimated invoice price for the make, model, and year you're targeting on a site like KBB.
Trade in your current car
The upside of the dire state of the current car market is that your car may have increased in value. If you sell or trade in your vehicle, you can offset its value against the price of your new car. But be careful with your trade-in. To take advantage of market conditions, it is best to separate trade-in negotiations from negotiations on a new car.
For example, the dealer can use your car's trade-in value to make the deal look better than it is. They may give you a good deal on your trade-in only to increase the price of the new car. It may even pay to sell your car yourselfbefore going to the dealer. That way, you can maximize your down payment and focus on negotiating the actual price of the car in front of you at the dealer.
Don't spring for add-ons
Dealers usually try to make extra money by offering optional add-ons. These extras are usually not necessary and can significantly increase the price of the car. Say no to things like tire protection plans, anti-theft protection, infotainment upgrades, and VIN etching. Just like extra insurance and warranties, if you really want these add-ons, you can buy them later.
Start low
When negotiating with a dealer, your first offer should be the lowest you are willing to make. However, you should not write off an unreasonably low number. You want to show the dealer that you know what you are talking about and want a fair price.
Start with an offer that is at the lower end of your budget and based on your research. The dealer will usually reject your first offer for a higher price, and hopefully you can agree on a price somewhere in the middle.
Schedule an inspection
You should know everything about a car before you buy it. Take the car to a mechanic for an inspection before signing anything, especially if it has been used. Dealers typically inspect cars themselves, but it helps to arm yourself with additional information from outside mechanics who have no personal interest in the sale. If they discover any unreported issues, you can return them to the dealer as a reason for a lower purchase price.
Say no if you have to
Every experienced negotiator knows when the deal is over. Know your limits before you start negotiations, and walk away if the negotiator can't meet them.
Also, don't let the seller convince you that your limits are unrealistic or unimportant. If you've done your research carefully, you probably know what's out there and where to find it. If they can't give you a satisfactory deal, move on.
How to get a good deal with a private seller
Car dealers aren't the only options, especially if you're open to buying a used car. You can also buy a car from an independent third-party seller.
One of the benefits of working with a private seller is that they may want or need to sell their car quickly and be more willing to negotiate. The downside is that they have less incentive to close the sale. If you can't offer the price they're looking for, they might want to let you go.
However, it is still possible to negotiate with a private seller to get a good deal on a car you love. Much the same advice applies here. Do your research, request a vehicle history report and start with your lowest quote. If you plan to buy from an independent seller rather than a dealer, here are some things to consider:
- Make a cash offer:Typically, you'll have to pay cash when you buy a car from a private seller, rather than financing your purchase. Although you may pay a lower price overall, you must pay it all at once.
- Schedule an inspection:When you buy from an individual, you don't get the same quality control measures as you would from a retailer. Have a mechanic inspect the car before you buy it.
- Avoid scams:Selling cars to private individuals can be a scam. Be careful when working with independent sellers and never give your financial information to a stranger.
- Check chassis number:If the price of the car is incredibly low, there may be a reason for that. Check the car's VIN with your local Department of Motor Vehicles (DMV) to ensure the car is not subject to any liens and is legally owned by the seller.
Elizabeth Rivelli
Finance and insurance editor
Elizabeth Rivelli is a freelance writer with more than three years of experience in personal finance and insurance. She has extensive knowledge in various insurance areas, including car insurance and home contents insurance. Her byline has appeared in dozens of online financial publications, such as The Balance, Investopedia, Reviews.com, Forbes and Bankrate.
