Negotiating with a dealer to buy a new car can be time-consuming and frustrating at the best of times. Not everyone likes car sales men, no, I’m sorry let me take that back nobody likes car sales men. So, what should you do then? Don’t worry. Negotiating to buy a new car is not that difficult after all. What you need is a little background information and some tactics to keep in mind before trying to get that great deal. These tactics will help you negotiate a fair price when buying a car, plus the tips are suitable for both new and used cars.
1. Find out the original price of the car when it first appeared on the market. The purpose of this step is to calculate the total dealer cost, i.e. the cost the dealer paid when he bought the car from the manufacturer. This cost is made up of two parts, which we will take a little look at separately – the Dealer Invoice and the Holdback.
- Dealer Invoice is the actual cost paid by the dealer. Online resources, such as the Kelly Blue Book , Edmunds, and some others prove to be very useful to find out information about Dealer Invoices. You will be able to find information on new and used cars, including their market price plus various other features. You need to carefully assess the cost because the invoice sometimes also includes advertisements and certain other overhead charges which are not listed on the website. To be on the safe side, add around $300-400 to the listed cost to calculate total dealer invoice.
- The second part of dealer cost is the Holdback. This price is the rebate paid by the manufacturer to the dealer whenever a car is sold. Rebates usually depend on the make and model of the car, but mostly it’s up to 2-3% of the total cost of the car. Again, Edmunds is a good source to look for information about rebates on different kinds of vehicles. Remember that rebate or Holdback has to be subtracted from the dealer invoice to calculate the actual price paid by the dealer.
2. The Second step is to calculate hidden incentives to the dealer and any rebates that are advertised. Dealer Incentives are not known to a lot of people because they are hidden. If you know there are hidden incentives, you can bring them up during negotiation. Otherwise they will be kept secret by the dealer, you’ve heard of playing your cards close to your chest, well this is what the car salesman will do. The other thing to remember is the ‘Cash Back’ which is paid to you if you are going to buy the car. These rebates keep on changing every month, so you need to be aware of the current rates. Edmunds is a useful source to find out about these hidden incentives. Edmunds also gives information on both the hidden incentives and the advertised rebates. Now to calculate the dealer cost you should subtract these hidden incentives from the total cost.
3. The final step in calculating the original price of the car is to determine the ultimate dealer cost. Normally it is seen that the dealer asks for $5000-6000 more than the original price he/she paid to the manufacturer. Of course they have to take out their commission from the whole deal, but don’t you think $5000 is a little too much? Well, find out for yourself by visiting the above-mentioned sources and record that information somewhere. It will come very handy during your negotiations with the dealer.
4. Next step, yes you guessed it! Now you get to make your offer to the dealer, be prepared to hear the noise they always make by sucking air in through their teeth, now the most important thing is to resist smacking them, no matter how difficult it is. This is a tricky step and the offer that you ultimately make will no doubt differ from person to person, depending on your financial position. It is recommended that you start at $4000-5000 less than the price the dealer has offered. This might come as a surprise to most dealers, but keep your ground and show them all the facts and figures you collected from the different online sources. They might argue and try to raise you up a little bit. Well, going $1000-2000 higher won’t hurt if you really want the car. If the dealer still doesn’t agree, then move on. Remember not to let the dealer patronise you, you’re both equals here!
Dealer Negotiating Tactics
- A very common trick played by some salespersons is to have to ask a sales managers permission. Don’t allow them to ask anyone else after that, otherwise you will keep repeating your offer to everyone without ever settling down.
- Sometimes they make you wait for a long time before they tell you their final decision. This tactic works very well if you are not aware of it. Be prepared, take along some reading material or your laptop and make the best use of your waiting time.
- If one person is unable to bring you to terms, they change the negotiator. The succeeding negotiator – mostly the sales manager – might be hot-headed, quick on making decisions and God knows what else. So, again be prepared for this unexpected turn of events. Keep your documents ready and face the new negotiator with confidence.
- Sometimes they tell you a low price on the phone and when you actually go there to make the deal, they move higher. You should never let this tactic work, no matter how far you travelled.
- Another common trick used by car dealers is to ask for a check before making a deal. This shouldn’t be necessary, since there could be only two possible outcomes of this deal – either you buy the car or you leave.
Some other issues that should be dealt with while negotiating to buy a new car are listed below:
- Don’t fall for the add-ons many car dealers offer by calling them ‘packs’. They are usually things not related with the functionality of the car, but are somewhat attractive. If you want them, you will be able to buy them from other retailers at much lower rates. Similarly, don’t buy unwanted warranties and ask them to subtract their price from the overall cost.
- Remember that not all cars are negotiable. If you have tried many dealers and always gotten the same price then just go for it. There is simply no better deal available or possible for this particular vehicle.
- If you have been able to negotiate a fair price on a new car with a dealer, you will be asked to give a deposit to hold the car. You cannot get the car on the day of buying it, because they will need some time to prepare it and make any changes you’ve requested. Use a credit card to pay this deposit rather than a check.
- Try these tactics once, even if you are doing a fun survey on car prices and other dealer issues. If you are actually planning to buy a new car, then the above information is sure to come handy once you have chosen the make and model. Just relax and don’t over complicate things. Good luck with your negotiation with a car dealer!