By Mitch Rice
Negotiating car prices can be daunting. Haggling with a salesman trying to get you to pay the highest price possible (often because they work on commission) isn’t something most people enjoy.
Moreover, a car is probably the second-biggest purchase you’ll ever make. So there’s a lot of pressure to get the best deal possible.
If you’re uncomfortable or inexperienced in negotiating, here are ten tips to help you succeed.
- Know your budget
Never go into a negotiation without setting a budget. This gives you an upper limit on what you’re willing to spend, so you aren’t upsold on a car you can’t afford.
Your budget should take into account how much you can put down, how much you can make in monthly payments, and what you can afford to put toward car maintenance, car insurance, and other car expenses.
It’s also a good idea to know the trade-in value of your current car and estimate the fees and local sales taxes associated with it. You can check the value of your car on Kelley Blue Book.
Try to keep your total car expenses to less than 15% of your take-home pay.
- Do your research and know your numbers
Come prepared to negotiate by researching a car’s value beforehand. As a baseline, you should know what the manufacturer’s suggested retail price (MSRP) is, aka the sticker price. Few cars actually sell at the MSRP, but you definitely don’t want to buy for more than this.
The most important number you should pay attention to is the car’s current market value (CMV). This is the estimated current resale value as determined by factors like current supply and demand. You can find the CMV for any car by looking it up on sites like the Kelley Blue Book (KBB) or Edmunds. This gives you something to reference so you can rely on data in your price negotiations.
- Keep your options open
Another powerful negotiation tactic is to keep your options open. If a seller knows that your mind is set on a particular car, they may not feel as compelled to compromise on price. Similarly, if you limit yourself to one seller, this gives them the upper hand.
Instead, show that you have other options so that the seller feels like they have to work harder to earn your business.
If possible, stay flexible on timing, too. That way, you can shop for cars at the end of the month, quarter, or year when salespeople tend to be trying to fill sales quotas and may be more willing to compromise on price as a result.
- Get preapproved for a car loan
If you choose to finance your car purchase through a traditional car loan, get preapproved first. This helps you stay within your budget and lets sellers know that you’re serious. Plus, they may try to offer you in-house financing at a better rate to win over more of your business.
- Pay in cash (if you can)
If you can pay for your car in cash, you should. This also helps you stick to your budget, and it makes it harder for sellers to upsell you on a bigger monthly payment and other unnecessary add-ons.
- Focus on the out-the-door price
Above all, focus on the final “out-the-door” price. This is the total cost of the car over the lifetime of any car loan. A salesperson may try to lengthen the loan term to lower the monthly payment (and even help it fit your monthly budget). However, this will increase the total cost of the car in the long run.
- Negotiate remotely first
Instead of negotiating in person, try contacting the dealer by email or phone first. This can make the negotiation process less personal, and you won’t have to face an aggressive sales representative in person. Plus, you may be able to get a quote that you can shop around to other dealers to see if they can beat it.
- Don’t say too much
Whatever you do, don’t give away how much you’re willing to spend on a car. If you do, the salesperson will immediately aim to get you to pay your maximum budget, whereas they may have been willing to sell you the car for less otherwise.
Similarly, don’t let the seller know you’re in a hurry. Salespeople can sense desperation and will try to leverage it to their advantage.
- Ask the seller to sweeten the deal
In some cases, you may struggle to get the seller to budge on the car price but don’t want to walk away from the deal. Here, you may want to ask the seller to sweeten the deal by fixing a cracked windshield, throwing in some free car mats, etc.
After all, price isn’t the only thing that can be negotiated on a car. For example, you may be willing to pay more in exchange for a professional inspection.
According to Tiger Okeley at used car dealership Oak Motors, “The price you pay for a vehicle at a reputable dealership usually means you’ll get a car without serious problems, as the dealer will have already done their own inspection.”
- Don’t be afraid to walk away
Finally, don’t be afraid to walk away from a deal if you don’t like the offer or need more time to think about it. This is a big purchase, after all. You should feel comfortable with your decision. Any seller who tries to push you too much probably isn’t worth doing business with.
Data and information are provided for informational purposes only, and are not intended for investment or other purposes.