While much has been made in recent years about buying cars and trucks via the Internet, for the most part automotive transactions are still and will likely continue to be conducted the old-fashioned way. And we're talking really old fashioned here, with the sort of brazen huckstering that would make horse traders back in the Old West blush. Even if you consider yourself to be an expert haggler, there's a good chance you might wind up being a dealership's most profitable customer that day, yet drive off blissfully convinced you've gotten a great deal.
Unfortunately for the large majority of car buyers who approach the process with the same degree of dread usually reserved for having a root canal performed, you'll have to take the time to sit down and negotiate with a salesperson in order to obtain the dealership's "best" price on a given vehicle. While you might be offered a pretty good deal right off the bat or obtain a decent price bid via an Internet car-buying site, you can almost always do better if you roll up your sleeves and do some old-fashioned horse trading. Take these hints when you head to the dealership:
Don't curl up your fists. Keep in mind that your goal here is not to "beat the dealer." No matter how hard-nosed a haggler you may be, you'll rarely, if ever, find a new-car dealer who's willing to lose money on a sale, and you shouldn't feel insulted if a salesperson or his or her manager isn't willing to give away the store on your behalf. (And realize that some high-demand/low-volume cars will command full sticker price or above in some cases.) Rather, the idea is to determine through careful negotiations what is the dealer's absolute lowest price for a specific vehicle on that particular day. Understand that this is a peculiarly and almost constantly moving target that's subject to a wide range of economic, internal and external factors ranging from sheer supply and demand, to an automaker's retail incentives and promotions, and sales quotas that allow the dealer to obtain additional shipments of its most-profitable vehicles.
Set a target price. Before you set foot in a showroom you'll need to establish a "target price" for the car or truck you wish to purchase. Consult an Internet car-buying site or a printed new-vehicle price guide and base this figure on the stated invoice prices for the specific model and trim level you have in mind, plus any options or option packages you'll select, along with the vehicle's delivery charge. A dealer's true cost is actually a bit less than a vehicle's invoice price thanks to something called a holdback allowance. Typically, this is a percentage (usually two or three percent) of either the list or invoice price of a car or truck that a manufacturer pays to a dealer when a vehicle is sold to help assist with the cost of financing his or her inventory.
If a manufacturer's rebate is being advertised for a vehicle, be sure to deduct it from your target price. If you have a trade-in, research your present vehicle's fair-market trade-in value (its so-called "wholesale" price) ahead of time by checking with published or Internet guides, or - better yet - by shopping the trade-in to the dealer's own used car manager. Keep in mind, however, that you might get very little (if anything) for it in trade if it's several years old and/or is damaged or otherwise mechanically unsound.
Don't browse. It's a good idea not to spend much - if any - time at a dealership just browsing. If a salesperson determines that you are merely on a fact-finding mission you run the risk of being "low-balled." It's not uncommon for a salesperson to quote an unrealistically attractive price just to ensure that you return, at which point he or she will deftly back off from his or her original offer.
Stay in control. When it's finally time to begin the buying process in earnest, you should resolve to remain emotionally detached and in complete control of yourself and the situation throughout the process at hand. It's a good idea to leave the kids at home to avoid distractions, but you may want to bring your spouse or a friend along for moral support. Soon after you walk through the door a salesperson will introduce him or herself and will immediately begin to "qualify" you to determine whether or not you're a serious buyer. Don't discuss a vehicle's price just yet, and avoid answering questions like, "Are you willing to buy from us today if the price is right?" or "How much are you willing to pay per month?"
Don't buy the car they want - buy the car you want. Ask if the dealer has the vehicle you want in stock that's as or very close to how you want it equipped; if not, determine whether the salesperson can obtain one for you from another dealership. Depending on the make, model or time of year you may be able to order one from the factory, though you'll likely wind up waiting three months or more for delivery and you probably won't get a better price, since the dealership will have much less urgency to sell a vehicle that's not already sitting on the lot.
Keep the financing to yourself. If you've already arranged for or have been pre-qualified for a loan at a bank or credit union, don't tell the salesperson about it at this point - only acknowledge, if asked, that you'll be financing the purchase. Why? The sales manager may hold out for a greater "front end" profit on the vehicle's selling price if he or she knows the dealer will be losing a referral commission on the "back end" of the deal by not arranging the financing for you. And contrary to popular opinion, offering to pay for a car or truck in cash will not necessarily garner you a better deal for the same reason.
The same goes for your trade-in. Likewise, don't discuss your trade-in, if you have one, as yet - this should always be treated as a separate deal altogether. This way the salesperson won't be able to "inflate" the trade-in value by manipulating the selling price of the new vehicle. (Though this can sometimes work to your advantage if you need a larger down payment - which includes the trade-in and any applicable rebate - to qualify for financing.) If you do happen to mention your trade-in early on never give the salesperson the keys to your current vehicle - he or she might try and hold your current vehicle hostage as a negotiating ploy.
Make your offer. Once you're ready to sit down and start discussing the vehicle's transaction price, the salesperson will lead to you what's known as a "closing room." Bring a calculator, pad and pencil, and any pricing printouts, worksheets and/or new-vehicle price guides into the closing room for reference, necessary calculations and just to show you are serious. Never consider the price of a new car or truck based solely on a given monthly payment - focus only on the bottom-line transaction price to ensure you're getting the best available deal.
Start by making the first offer, which should be your target price, as discussed above. Tell the salesperson how you arrived at this figure, and that if he or she can meet it, then you'll close the deal on the spot. Pull out your checkbook and offer to write a deposit check for, say, $1000 if he or she will accept the offer, just for show.
Typically, the salesperson will typically come back with a counteroffer that will be slightly less than the vehicle's retail price. You should now raise your initial offer by incremental amounts, say, one or two hundred dollars at a time; the salesperson will likely lower his or her price in the same manner.
At some point the salesperson may leave to "present your offer to the sales manager" (though sometimes he may just be just grabbing a quick cup of coffee or a drink of water). He or she will probably return with a higher bid. If it's close to your last offer, try standing firm; if it's considerably higher, continue the negotiating process. If the salesperson won't budge at that point, just stand as though you are preparing to leave and say, "That's it, thanks for your time." The salesperson will then be facing the prospect of losing a sale, so it's likely he or she will make another (or a first) trip to see the sales manager. Either the salesperson or someone else, perhaps the manager him- or herself, will then come in with another offer and try to close the deal. By now you should be looking at the dealer's lowest price, and it will be up to you whether to accept it or seek a better offer elsewhere.
Now, it's time. Once you've reached an agreeable offer, bring up the subject of your trade-in and negotiate that price in a similar manner, based upon your research. If you've gotten a bid on your trade-in ahead of time from the dealer's used-car manager as recommended above, there should be little room for discussion.
Stay on guard when you sign. However, just once you've agreed upon a purchase price and trade-in value doesn't mean you'll be able to sit back and relax. You'll still need to protect yourself in the clinches because you'll now be handed off to the "F&I manager" (this stands for Finance and Insurance). This is where you will be asked to sign the necessary paperwork and otherwise participate in the often costly "back end" of the deal in which dealers can make up to twice as much (or even more) money than they can selling the car or truck itself. We'll show you how you can protect yourself during that phase of the car buying process in a separate article.