How to negotiate your car price

Couple buying a car from salesman.Image: Couple buying a car from salesman.

In a Nutshell

Learning how to negotiate the purchase price of a car can be relatively straightforward, but you have to be willing to follow some guidelines to improve your chances of getting a good deal. You’ll be up against trained salespeople who negotiate as part of their job, so you’ll need to do some research beforehand.
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If you’re looking to get a better deal on car, it’s good to prepare yourself with some negotiation tactics.

If you’re ready to buy a new or used car, walking away from the sale knowing you got a good price is important. But you might be unsure how to successfully negotiate your car price. Thankfully, negotiating a vehicle’s price isn’t too difficult — as long as you have a good understanding of the process and how it works.

Research the market value for the car you want

When you’re purchasing a car, you’ll need to do some research before you start the negotiating process. You’ll want to read up on everything you can find about the average price paid for the car you’re shopping for. (You’ll also want to check the value of your trade-in if you’ve got one.)

You can assess the value of the car you want by plugging in its information into a website that tracks and appraises car values, like Kelley Blue Book or Edmunds. This can help you figure out an estimated average price range in your area. Once you have a better idea of cost, you can set your ideal target price for the car you’re shopping for.

In some cases, the particular time of day, week, month or year can affect the price you pay for your car. Learn more here about the best time to buy a new car.

Keep emotion out of the transaction

When you’re ready to start negotiating a car’s price, remember that the goal of the transaction is to get the best deal you can. It might be easy to get attached to a particular car or feel like you’ve invested a lot in an individual deal, but take emotion out of the equation.

If you don’t, you could end up with a less-than-optimal sales price. Always be willing to walk away if you don’t get what you think is a fair price on the car you’re considering.

Also, try not to let a car salesman pressure you. If you’re prepared for the hard sell, you’ll be less likely to fall prey to it.

Negotiate each part of the transaction separately

Once you’re armed with pricing information, you can start negotiating with a car dealership or other seller. Unfortunately, the ideal way for you to negotiate isn’t the same for both you and the dealer.

Dealers may want to focus on the transaction as a whole — including the car price, trade-in value, financing and any add-on purchases. This allows dealerships to give you a great deal in one area while making money in the other areas.

Negotiating a car’s price this way can be risky, especially if you’re focused on the monthly payment rather than the total price of the car. A dealer may agree to lowering your monthly payment by stretching out the repayment period of the loan, but this can leave you in debt for longer than planned and likely paying more interest. So if you’re focused on one aspect, like the monthly payment, and not on the whole picture, you could end up paying more for your car in the end.

That’s why it’s important to consider negotiating each part of the transaction separately.

If the dealer insists on doing it their way, be polite but firm about what you want. If they’re not willing to work with you, find a dealer that will.

Negotiate the final, out-the-door price

When negotiating the price of the car, make sure you’re negotiating on the final price you’ll pay to drive the car off the lot, which is commonly called a “drive-away” or “out-the-door” price.

Tell the dealership you’ll only work with an out-the-door number and it needs to include all fees, sales tax and any other costs you’ll have to pay. If the dealer tries to give you a different number when you’re wrapping up the deal, seriously consider walking away.

Tips for negotiating the price of a new car

Before you start the negotiation process for a new vehicle, you’ll need to research a couple of items specific to new cars.

Research what incentives are available for the car you want

Automakers, like Honda, Toyota or Ford, might offer dealerships and consumers incentives to choose a particular car model. Know what these incentives are ahead of time to make sure you’re getting them included in your final price.

And if you’re planning on financing the car, check to see if there are any low-interest-rate offers available from automakers for the specific car model you’re considering. These offers could save you more money in comparison to a loan from a bank. But make sure you have a backup plan lined up in case you aren’t approved for the promotional interest rate.

Paying cash vs. getting dealer financing

The price you pay for your car could be influenced by whether you pay cash or finance the vehicle with the dealership. The financing department is another area where the car dealership can make profit. If you’re paying cash or using outside financing, the dealer might miss out on additional money on the financing part of the transaction, which may make a dealer less willing to negotiate on price.

Also, certain new-car incentives may only be available if you finance through the manufacturer. If you’re considering paying cash for a car, listen to the dealer’s financing options anyway — it might save you enough money on the purchase price to make it worth it. Check to see if there’s a penalty for paying the loan off early. If there isn’t a penalty and you’ll save more money on the car price by taking out a loan, consider financing to get the deal and then paying it off as soon as the loan allows. You’ll need to run the numbers to make sure any interest charges or fees from taking out the loan are less than the savings you’ll get on the total price.

Price shop with multiple dealers

Once you’re ready to start negotiating the car’s price, remember that new cars are a commodity. You may be able to find the same new car at your local dealership or at other dealerships within a few hours’ drive of your home.

Use this to your advantage by getting quotes from several dealers — even those outside your immediate area. Then, use those quotes to get the dealerships to compete with each other with counteroffers to get the lowest price possible.

Try negotiating over email

When negotiating with multiple dealerships, consider doing so over email. This way, you’ll make sure you have everything in writing.

Sonia Steinway, president of Outside Financial, suggests contacting several dealers and asking each for its best price.

This helps you make an apples-to-apples comparison when looking at different quotes. Negotiating over email may also make it seem less personal, which can help you keep emotion out of the process.

Tips for negotiating the price of a used car

Buying a used car adds more variables to the car-buying process. Unlike new cars, each used car is one of a kind and may not be easy to find at another car dealership. Or maybe you’re trying to buy a car from a private seller. Either way, there are some things you ought to think about first.

Realize each used car is unique and investigate its past

Each car will have a unique history, current condition and number of miles on the odometer.

For this reason, it’s important to thoroughly investigate any used car you may buy. Get a vehicle history report using a service like Carfax to see how many previous owners the car has had, whether it’s been in any accidents, and what maintenance or other work has been done on the car. These factors are important in both choosing a used car and negotiating its price.

Make note of imperfections to help in-person negotiations

You might find it more difficult to negotiate the price of a used car online because you might want to see and test drive the actual car to make sure everything is as expected. When evaluating a car in person, make note of all imperfections that you could use to negotiate a lower price.

You don’t have to point them out to the dealership or seller until you’re ready to negotiate. Instead, write down a list or take pictures of issues so you can refer to them when you’re ready.

Get the car inspected by a mechanic before making the purchase

Getting the car inspected by an independent mechanic is an important step in the car-buying process. You may have to pay for the costs involved, but the money is usually well worth it. The mechanic can give you peace of mind that there aren’t any obvious issues with the car and make note of any problems that need to be taken care of before you finalize the sale.

Ask the mechanic for a report and use any issues noted, like the car needing new brake pads or new tires, to either get the issues fixed or to help get a better price for the car before you purchase it.

Options if you don’t want to haggle

If you don’t want to negotiate on car price but still want to try to find a good deal, you have a few options.

You can use a car-buying service that pre-negotiates a price on your behalf. Sam’s Club, Costco and many others all offer this service. These services may get a referral fee from the dealer though, so you may not get the absolute best price possible.

Another option is shopping at a no-haggle program. These programs exist for both new and used cars.

“[N]o-haggle auto buying helps you avoid the time and hassle involved in haggling, which most people don’t enjoy,” says Steinway.

While these no-haggle programs can lessen the pain of the car-buying process, you may end up paying more for the convenience. And you’ll need to be careful if going this route — do your research first on what a fair price is for the car you’re interested in.

Bottom line

Negotiating the price of a car can be a long and frustrating process. Some car salespeople may use this to their advantage to try to get you to agree to their prices and terms. Every dollar you give up is another dollar of profit for the car dealership or car owner.

Being prepared for the negotiation of a car’s price is very important, so don’t forget the resources that can help you get a good deal. And the process of negotiating could take hours, so be ready for that, too. You’ll be glad you were prepared on all fronts when negotiating your car’s price, so that you can walk out happy and confident that you got a good deal.

About the author: Lance Cothern is a freelance writer specializing in personal finance. His work has appeared on Business Insider, USA and his website, Lance holds a Bachelor of Business Administration in … Read more.