Unlike most purchases, buying your first car usually involves some negotiation over price. In most cases, you're already apprehensive; you'll be making what might be the biggest purchase of your life thus far, and negotiating with someone who has far more experience than you doesn't make it any easier. However, a little preparation can go a long way to making you feel more comfortable with your first auto purchase.
Prepare before going to the dealership
Your negotiation starts long before you go to the dealership to buy the car. Don't go to the dealership unprepared; you could get drawn into a negotiation before you're ready. Begin by researching what similar cars are selling for and what they cost the dealer to purchase. You can get a pretty good idea of what the dealer's cost is and use that as a starting point for your negotiations. Also, make sure to have a meal before you go to the dealership - the negotiation could take a long time, and you don't want your appetite to sabotage your deal-making ability.
Know your financing options
If you're going to be financing your first car, explore your loan options before getting to the dealer's lot. Without a loan in place the dealer could (figuratively) take you to the cleaners when you try to finance on-the-spot. Don't worry; shopping around for a good rate on your loan won't hurt your credit. As long as you keep your car loan applications within a short period of time — between 14 to 45 days depending on the scoring model used — only one inquiry will affect your credit score. When you have other financing offers, you can negotiate more effectively against the F&I (Finance and Insurance) office because you're not forced to accept the dealer financing.
There are two schools of thought regarding opening negotiations. Under one, you make the first offer at the lowest price you think won't offend the dealer, such as the cost the dealer pays for the car, to make the dealer negotiate you up. Alternatively, you can say you've done your research and ask the salesman what their bottom price would be to try to get them to offer a lower starting point. If they throw out a high number compared to your research, don't be alarmed. There's probably room to negotiate. As you negotiate, don't immediately throw out your other offers because that could lead the dealer to slightly undercut the other prices, rather than focusing on your opening offer. For example, if you suggest a $16,000 price but mention you have other comparable offers at $17,500, the dealer is likely to focus on just beating the $17,500 offer rather than working up from $16,000.
Be prepared to walk away
Remember the absolute maximum price you're willing to pay. If you aren't prepared to leave the dealership without the car, you've already lost the negotiation. Be willing to walk out if you don't feel comfortable with any part of the process. Obviously, the bottom line is the easiest to identify, but there can also be another part of the negotiation that would make you skeptical, such as financing terms, features offered and additional charges that make you uncomfortable. If the salesman makes you uncomfortable, don't be afraid to ask to negotiate with a different person, or come back a different day. Remember, you're probably going to have this car for several years, if not longer — so don't rush it.