Despite the ease and convenience of getting free price quotes, many folks still prefer to negotiate the price of their new vehicle. And if you're buying a used car, you may have no choice but to negotiate. So here is your step-by-step game plan for negotiating the purchase or lease of your new or used vehicle:
1. Sitting at the car salesman's desk, he'll first ask you some basic questions such as your name, address and so on. Answer him honestly. And remember that it pays to keep the negotiating game as casual and friendly as possible. A sense of humor really helps.
2. Then he'll ask you the big question: "What have you budgeted for your monthly payments?" Or he may simply tell you what they'll be. You must be strong and firm. Tell him clearly: "I'm not at all interested in discussing monthly payments. I only want to talk about the selling price of the vehicle."
So he'll probably ask: "Then how will you be paying for your vehicle?" Your response will depend on your circumstances:
Tell him: "I've arranged my own financing. I'll be happy to discuss this with you later after we agree on a selling price. Perhaps you can give me a better interest rate."
Tell him: "I need for you to arrange financing for me. However I would like to discuss the selling price first. Once we've agreed to that, then we can discuss monthly payments and interest rate"
Your goal is to keep the negotiations for the selling price of the vehicle separate from your discussions about financing and monthly payments.
Tell him that you'll be paying cash. Then add: "Once we've agreed to a selling price, then I'll certainly consider financing with you instead of paying cash."
They are more likely to sell you the vehicle at a low reasonable price if they think that they'll also make some profit from the financing. So leading them to believe that you will finance with them (or at least consider it) will probably help you.
Don't let him know that you will be leasing yet. First negotiate the selling price of the vehicle as if you were buying it. The lower the selling price, the lower your lease payments will be. Once you've gotten it down to a reasonable price, then tell them you'd like to lease the car based on this lower negotiated price.
The one exception is if you will be leasing your vehicle on a manufacturer's "lease special." Factory-sponsored specials are usually non-negotiable.
Regardless of your financial situation, if the salesman starts asking questions about your finances and budget, take control. Repeat what you told him earlier: "I only want to talk about the selling price right now. We can discuss financing later. Fair enough?"
Remember, you are the one who will determine the way the negotiation goes. They may constantly try to steer you their way. It's up to you to keep things on track. You must stay strong and focused on your buying goals.
3. Tell him you're ready to make an offer. Then calmly add: "I'm certainly in no hurry to buy a car. However if the manager accepts my offer, I'm fully prepared and willing to sign the papers and drive the car home today."
FIRST RULE OF NEGOTIATING: Never appear anxious, worried or desperate. Always remain calm, casual and willing to walk away from the table at any point.
Tell him: "I'll buy this vehicle right now for $200 dollars (for example) over your invoice price (or wholesale value for used vehicles)." The actual amount you offer should be somewhat below your pre-set buying goal figures.
SECOND RULE OF NEGOTIATING Never negotiate down from the sticker price. Always negotiate up from the invoice price (new cars) or wholesale price (used cars).
Special Advice:
Tell the salesman: "I keep the rebate."
It's important that you make it clear to him that your offer is totally separate from the rebate. The rebate is free money given to you by the factory and has nothing to do with the dealership. Some dealerships try to offer the rebate as if it were their own discount. Others insist on keeping the rebate themselves. Don't let them.
The items on the "Dealer Addendum" sticker are often over-priced and unnecessary add-ons. If you do not want any of the items on the Addendum sticker, tell them so. If they tell you that the paint protection or whatever has already been applied to the vehicle, tell them that you want those items taken off the car.
Remember, these dealer-added extras are merely a ploy to get you to spend more than you intended. The ploy only works if you agree to it. If you stick to your guns, they may end up giving you the added items for free or at their cost just to make the deal happen.
4. Once you've made the offer, be quiet. Sit patiently and wait for his response.
THIRD RULE OF NEGOTIATING Whoever speaks first after an offer is made is in the weaker negotiating position.
The salesman will probably insist that your offer is too low. Respond by repeating your main point: "What I'm offering you is an opportunity for you to get another vehicle off your lot with a minimum of time and trouble on your part."
5. Now the salesman will do everything he can to get you to raise your bid. He certainly doesn't want to go to his Sales Manager with such a low offer. Regardless of how much he pressures you, under no circumstances should you raise your bid.
FOURTH RULE OF NEGOTIATING Never negotiate against yourself. Never raise your own bid until they make a counteroffer.
The salesman may tell you that no dealership can sell you the car at that price. Respond by saying, "I'm sure there's some dealership in the area willing to do the deal. But I'm here and I'd like to give you my business, so why don't you take my offer to your manager and let's see what he says."
The salesman may ask you for a deposit check. Write the check to show your good faith.
Regardless of whether you'll be financing with the dealership or not, at some point he'll probably ask you to fill out a Credit Application or the first five lines of a Credit Application (called a "five-liner").
The Sales Manager will use the information on your credit application to obtain your credit report. He does this to determine "if you are real" - credit-worthy of buying this vehicle.
Also, by checking your credit report's "inquiries" - the listing of institutions that have requested copies of your report - they may be able tell if you've been to other dealerships and, if so, which ones.
Then the salesman will walk over to the Sales Manager's office. Sit back and relax. You may have a long wait.
6. Sooner or later, the salesman will return. He may by himself or he may introduce you to his "Sales Manager," who may or may not be the real manager. No matter whom you talk to, your approach should remain the same: friendly and casual, but strong and focused.
Now the salesman and/or his "manager" will present their counteroffer. Show your flexibility and willingness to compromise by raising your bid. Tell him: "OK, I'll buy this vehicle right now for $300 over your invoice cost (or wholesale value), plus tax and license."
FIFTH RULE OF NEGOTIATING Always raise your offer in small increments of $100 to $200 at a time.
They'll shake their heads in doubt. And the game will go on. Back and forth. They'll keep coming down in their price as you keep coming up in yours. Along the way, they may try all sorts of lines, theatrics and ploys to get you to spend more money than you have planned.
Here are some suggestions for responding effectively to the lines that the car salesman and/or his Sales Manager may throw at you:
THEM:
It's impossible to buy this car at this price at any dealership.
YOU:
Maybe I should visit other dealerships to find out if you're right.
THEM:
We have overhead. We need to make enough profit to pay for the lights, the electricity, the salesmen.
YOU:
It sounds like this dealership is in financial trouble. Maybe I should visit another dealer.
THEM:
Where did you get the idea that you can buy this car at this price? Have you been visiting that "Beat The Car Salesman" website? It's wrong and filled with lies.
YOU:
I don't think it is, but maybe I should shop at other dealerships to find out if you're right.
THEM:
This car commands more money in the marketplace than what you're offering.
YOU:
Maybe I should visit other dealerships to find out if you're right.
THEM:
You want this car, don't you? Then step up to what it takes to own a vehicle of this caliber.
YOU:
I think maybe I should go to another dealership and see what they have to say.
As you can see by the suggested responses, threatening to leave scares them. They don't want you to leave and may do anything to get you to stay.
It's important to remember that what they are really doing here is testing you. They want to know:
Your negotiating strength
Your physical and emotional stamina
How easily you believe their lines
How much you know about their game
How much higher you'll go in your price
The point at which you'll give in
So don't fall for their lines and don't give in.
7. At some point, be sure to repeat your basic argument: "I am ready and willing to sign the papers and drive this vehicle home today." Then point out to them that you have everything arranged and ready to go: your financing, down payment, auto insurance and so on.
Special Advice:
Be sure that, at some point, you ask to see the vehicle's factory invoice to verify your figures.
The invoice price figures that you received from a pricing guide or on the Internet may be off a bit due to an unexpected price increase or advertising charge.
If you don't understand something on the invoice, ask them to explain it.
Contrary to what some folks believe, dealerships do not usually show phony invoices to customers. What they show you will probably be real.
If they insist on talking about several figures at once - such as the selling price, monthly payments and down payment - do your best to keep each figure separate.
Negotiate the selling price first, ignoring the other figures. Then discuss the monthly payments and down payment after you've agreed to the selling price.
You should probably be satisfied with getting the same price for your trade-in as the appraisals you received online or from used car lots. If the dealership offers you a lot more for your trade-in than the appraisal amounts, then they are probably playing a game by taking this additional money from the profit of the new vehicle.
Whatever the case, do your best to keep the negotiation for the price of your trade-in separate from the negotiations for the price of the vehicle you're buying.
8. Eventually, your offer will rise to your pre-set limit - your buying goal. When it does, freeze. They'll try everything they can to get you to raise your offer again. Tell them frankly: "I've reached my limit. I can't go any higher." They won't believe you, of course, and they'll test you some more.
Again, try to remain casual, positive and friendly, especially when they're putting on the pressure. It really helps. If they like you, they're much more likely to give you the deal you want.
Once they realize that you won't budge in your price, they'll either sell you the car at that price or they won't. If they do, congratulations. Next you'll go into the Business Office.
9. If they won't sell you the vehicle at the reasonable price you want, thank them politely and leave on good terms. Don't take it personally or think you made a mistake. (Maybe they had another buyer who was willing to pay more. Or perhaps the Sales Manager was trying to teach his salesman a lesson about negotiating. Or maybe your style just didn't mesh with theirs.)
Be sure to give the car salesman and/or his Sales Manager a call the next day. Sometimes a dealer will become surprisingly flexible in his price if you follow up with a phone call. Tell them that you're giving them one last crack at earning your business.
And of course, you should visit other dealerships. Unless the vehicle you're buying is "hot" and hard to find, the price you are asking for is not unreasonable.
Whatever happens, remember to use your intuition. If they get rude, if they cause you to feel uncomfortable, if things just don't seem right, then get up and leave.
And most importantly, don't forget to take it easy. Relax and try to have fun.
Insider's Tip: Before you head to the dealership, get some free price quotes. That way you'll have valid bottom-line selling prices with which to compare your negotiated price.
