One of the scariest parts of the car buying process for many consumers is negotiating the price. Many would rather not negotiate at all and leave the numbers as they are. The problem with this approach is that you may end up paying for something you do not want or need. For instance, if the price quote contains rust protection, VIN etching or some other undesirable fee, then you may want to remove it – as it can cost you up to $1,000 or more. The only way to do so is to speak up.
You should also consider negotiating the sticker price, because many dealers are open to lowering it if you ask them the right way. If you feel a bit apprehensive about doing so, then this guide should help you become a little braver.
Before you negotiate, you need to know your payment method, which vehicle you wish to buy and the invoice price, which you can find out in our free dealer cost report.
The best way to select a vehicle is by picking the most appealing option from a carefully constructed “top-five” list. You can learn how to put one together in this article. When selecting a vehicle, evaluate your test-drive impressions, pricing options, ownership costs and personal needs.
If you also want to know the exact amount the dealer will charge you for the car, obtain a price quote from them directly before you start the negotiation process. Once you have everything, make your way to the dealership!
As soon as you are at the dealership, let the salesperson know right away that you have carefully researched the vehicle you want, including your desired trim level and options (and it should not be a lie). You should then tell them that you have calculated what you are prepared to pay for the car and reassure them that your offer will be fair. If they can meet your price goal, you will buy the vehicle immediately – and if not, then you will visit another dealership.
In most cases, the salesperson will start negotiating by asking what monthly payment would suit you best. Since it is difficult to track the price when it is presented as a monthly payment, avoid answering the question altogether. Instead, tell the salesperson that you would rather discuss the retail price of the car and talk about financing later. The salesperson will know right away that you mean business and ask you to give them your offer. Do it, but make sure the number you provide is a carefully selected one.
Your price should be the lowest number you can reasonably name. The easiest way to do so is to name the invoice price and ask the dealer for the lowest mark-up they can give you, which is usually three to seven per cent of the cost (always aim for three). You should already have your target price range in mind by adding three and then seven per cent to the invoice price. So, if the cost is $33,000, then your price range should be $33,990 to $35,310.
Be sure to sound friendly and self-assured, not confrontational or angry. After all, you are asking them for a favour, so treat it as such. If at any point, the salesperson tries to discuss something you are not ready to handle yet, like financing, features or something else, then steer the conversation back by saying that you want to deal with the vehicle’s price first.
The salesperson is unlikely to accept your lowest offer with much enthusiasm. In fact, they may dismiss it altogether by saying that their sales manager will not accept your numbers. Show him a printout of the PDF form that you can access via our free dealer cost report, with your numbers written in as shown below:
To download the form, click on the appropriate button as shown here:
If your calculations are accurate, the salesperson should accept the printout as a clear indication that your information is correct. You should also show the price quote you have obtained from them or another dealer and compare the numbers in front of them to prove the accuracy of your paperwork. If you have talked to other dealerships, then let the salesperson know (to show that you are willing to negotiate with other dealers), but do not disclose their prices. This would increase your chances of scoring a lower price right away. If you do disclose other price offers, then the dealer may latch onto the lowest one and claim that they cannot go any lower.
Keep in mind that even if the salesperson cannot find any errors in your numbers, they may still find reasons or excuses to raise your offer. Listen carefully to what they have to say and try to determine whether they are indeed excuses or actual reasons. After all, three per cent above the invoice price is not always the most reasonable offer – especially when it comes to pricier vehicles.
As such, for your own knowledge, be sure to check out something called the “average cost” in our dealer cost report, which is the amount most consumers should pay for the vehicle, and then make sure that the salesperson does not go above that. If you have the dealer cost report in front of you, look for this section to find the average cost:
The column to the right shows the dealer cost, so if you want to know how much a dealer would make from a sale like this, you can subtract the average price from it.
If your conversation ends up taking you nowhere, with the salesperson refusing to meet your target, then there is no reason to keep at it. However, you should NOT back off as soon as they refuse to agree to your requests, because you may still be able to push back and obtain what you want. Here are the best times to tactically quit a negotiation:
If you walk out of a dealership without a car, then your next step should be finding another one. Return home and compile a list of dealerships for your specific brand by relying on the process detailed in this article.
After that, call them and confirm if they have the trim level and options for the vehicle you want. If they do not, then avoid visiting them until you know for sure that your specific price and vehicle configuration are not attainable.
Go through each dealer one by one, asking them for quotes and using the same negotiation tactics as before – until you reach your ideal offer or close to it.
Once you have convinced the right salesperson to give you the price you want or close to it, you should take a step back and evaluate what you have on your hands. If the very first dealership you visit gives you an amazing offer, while appearing to be very pleasant, then by all means, take the offer.
However, if you really want to lower the price, it is far more likely that you will visit multiple dealers, some of which may not be pleasant or geographically close enough to be convenient. Since you will have to work with them at some point in the future (for maintenance and repairs), you may want them to be as pleasant and geographically-convenient as possible. However, if a very unpleasant dealer gave you the price you want, then you may still consider buying a car from them.
So, if the offer from the last dealer you are visiting is the best one, explain to the salesperson that you need to take some time to think about it and go back home. This is when you may want to contact specific dealers and discuss the prices you have attained from others. Ask if they can meet or surpass the offers and then assure them that if they do, you will buy the car right away.
Once you are sure which dealership will make the offer you believe you deserve, you should calculate your exact monthly payment – with the negotiated amount factored in. After that, return to the dealer and sign the necessary papers.
Updated on March 26, 2013
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