How to Negotiate a New Car Deal: 10 Ways to Tip the Odds in Your Favor

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The Power Is In Your Hands, Not Theirs, With These Negotiation Strategies

Who hasn’t done this: you’re watching TV and you see a beautiful car advertised for an unbelievable price, and you think, “it’s time for a new car; I’ll stop by the dealer this week and take a look.”

Stop right there.

You’re about to do exactly what the car dealers want you to do and exactly what you shouldn’t do: enter into a negotiation unprepared. Everyday I see people buy or lease a vehicle without really understanding how the process works and it costs them money.

Admittedly, it’s not a fun process: it can be long and drawn out, the process is antiquated and the haggling back and forth can be annoying. The process (and the sales team) can make you feel stupid, as if you’re not being listened to or respected.

Further reading: Don’t want to negotiate a new car deal? No haggle pricing is the Costco way.

First, Prepare Yourself for Success 

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One of the main reasons negotiating for a car is so painful is that people begin without preparing first. They are afraid of dealing with their finances, they are embarrassed to ask for what they want, they lack negotiating experience and they lack the understanding of how deals work. This leads many people to accept terms they don’t understand. But they are willing to do this because they HATE the process and just WANT IT OVER WITH.

Preparing to negotiate for a car—taking a hard look at what you can really afford and at your financial position—takes courage and honesty. If there is ever a time to look at your financial reality, it’s before entering into a situation that can become a financial burden.

We don’t want this to happen to you. We are going to put the power of negotiating in your hands by revealing the 10 things you need to know before negotiating for your next car.

Further reading: How to decode a new car’s window sticker

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Then, Follow These 10 Steps for Success

  1. Make a car purchase plan. Decide what type of car you need, what you can afford and what resources you have to put toward it. Have a clear purchase strategy and take time to decide if you should pay cash, lease, or finance. This takes thought about where you stand financially, how much cash you can put down, your budget, and your exit strategy, so that when you want to get rid of the car you don’t owe more than it’s worth. Then, think not just about what you want, but what you really need. You may want a sunroof, but do you need it? Are leather seats important? Cars are packaged with these items, so make a list of your necessities and what you can live without. Then, take a hard look at what you can really afford by assessing how your car payment fits into your entire financial picture.
  2. Know your credit score and finance options before you start shopping. Your credit score dictates what interest rate you qualify for;  if the dealer knows what your score is and you don’t, they can use it against you by charging you a higher rate. But if you know your credit score and what rates you qualify for, you are empowered to negotiate your rate. In addition, be sure to research outside sources of financing such as your own bank or credit union and know what interest rate they can offer you. Having outside financing available allows you to negotiate a better interest rate at the dealership if that’s the route you choose; knowing all your options allows you to negotiate from a place of strength. Also, you most likely won’t know what rates you qualify for until you’ve negotiated all the details on the car, and factored in your down payment and trade in. There’s no perfect science to this, but if you know your credit score and researched your options, you are armed with the information you need to know.
  3. Don’t fall for the advertised price. So often people have one focus: price. Price is very important, but focusing on price as the most important factor alone could cost you. Advertised prices on TV or in local ads are used for one reason and one reason only: to get you into the dealership. But there are caveats and exclusions (think blackout dates on airlines) and often an attractive price is offered on a car you don’t want, isn’t in stock or because of fine print details, the price goes up. You may end up considering other cars that are more expensive. You even may start to feel pressured. Price is only the beginning, not the end; focus on the entire deal, including dealer fees, taxes, possible tax deductions, tax benefits, trade in, finance rates, incentives and rebates. Make sure you are getting all you are entitled to and ask for fees itemized so you understand what they are for.
  4. Don’t be a dealership drop in. Some people decide to just “drop into” the dealership and  “take a look.” This is a bad idea if you haven’t done the necessary preparation work to determine exactly what you want and what fits into your budget. This can put you in a vulnerable spot. There are very persuasive salespeople whose job it is to get you to spend money you never planned on spending. Here are some things to help you prepare for your trip to the dealership: Have a game plan of what you can afford and stick to it; Know which car models and options you would be willing to purchase; Have an alternate choice prepared if the dealership you are visiting doesn’t have what you want; Be prepared to go to another dealer if you feel pressured, insulted or the dealer simply doesn’t have what you need (remember, you can always bring the car back for service there if you like the dealer; you don’t have to have the car serviced by the dealer who sold it to you).
  5. Lease or buy? Look closely at all deals. Many people think it is a great idea to pay cash for a vehicle, but sometimes a lease program with a rebate might be a better deal because it frees up your cash for other things. It is important to be open minded to all strategies and examine each one at the time you are planning your purchase. Make sure the deal fits all your needs. You want to be able to get the most out of the money you have to work with.
  6. Ask three times “Is this the best rate you have? “Are you sure you can’t do better than this?” “Is this the best you can do?” It’s a proven fact that if you ask the same thing three different ways you get further than asking once or not asking at all. This applies to finance rates, price, trade in and payment. This is where knowing your credit score is important, especially if you are credit challenged. Some dealerships may use your credit rating against you, thinking you’ll be afraid you won’t be able to get financing elsewhere and take the offer. It’s also important to know the value of the car you are negotiating for and your trade in. Be confident and don’t be afraid to ask for a better rate. Also, dealerships often mark up their interest rate with extra points for a profit, so there is almost always room to negotiate the rate.
  7. Get to the top fast. A huge mistake is thinking the salesman has the authority to approve a deal. Most don’t (maybe the superstar salesmen do, and they are few and far between). Most have to get final approval from the sales manager, finance manager, or general manager, so ask to see that person when you start the negotiations. Politely tell the salesman you are not trying to be rude, you just don’t have time to go back and forth and you would prefer to talk numbers directly with the sales manager. If they want your business, they will comply. If they give you a hard time, then you should walk away. There is always another car and always  another deal.
  8. Shhhh… keep your budget to yourself. Don’t tell the sales person what you are willing to spend right off the bat. Keep the monthly payment, price, and budget information quiet. Let them make you an offer first. This puts you the stronger negotiating position. If you mention a payment, they will “bump” you up, as they like to say in the business. If you do share your budget then understate your payment or price. You will be in a stronger position if you don’t say everything on your mind and they will work harder to get the sale. Usually, they will ask you to make them an offer. Just politely respond and smile and say “ no, no, no,” and laugh. Then, ask what they are offering you. They don’t like this but they will work harder to get your business.  Remember, every question is an attempt to get more information from you. And, don’t give out any personal information (such as credit information and social security numbers) unless you feel this is the place you are going to do business.
  9. Don’t get emotional. Purchasing or leasing a car can be very exciting and take on a life of its own. People often “fall in love” with a car and get swept up in the emotion or the frustration of the deal. The “I want it now” feeling can be very blinding, the information can be overwhelming and the pressure to “take the deal now” can be intimidating. It is important to understand a deal in its entirety and be comfortable and at ease with your decision. If you are not feeling that way, or the dealer wants to change the terms of the deal, walk away and do not sign anything. Give yourself the freedom of space to think confidently and clearly.
  10. Get the deal in writing and understand your paperwork and contracts. Don’t sign papers you don’t understand—ever. Take your time and read everything. It might feel like you are signing your life away, and you might just do that if you don’t understand the terms of the deal. Make sure all your information is on all the documents properly, and motor vehicle information is correct. Ask to take the paperwork home to review it, or schedule several hours to sit at the dealership and read and review all the paperwork. Don’t let the dealer rush or intimidate you, and let them know they will lose the sale if they do.

Negotiating for a car can be intimidating but rewarding: the feeling of being in a new car, one you love and that fits into your financial life, is a great one. If all this seems overwhelming, don’t worry. This is what I help clients with every day.

Nicole Markson is an automotive deal expert, a graduate of The National Automobile Dealers Association NADA Dealer Candidate Academy, ... More about Nicole Markson
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