Buying a new car can be a stressful experience. In fact, some surveys have demonstrated that the public trusts car salesmen at a level similar to that of CEOs of tobacco companies. This uneasy relationship can cause the consumer to feel like a square peg in a round hole when the time to negotiate a new car’s price comes. To help you avoid feeling deprived of all bargaining strategy, here are some useful tips you should bear in mind in the process of purchasing your next automobile.
1. Be familiar with the car dealing vocabulary
If – like most consumers – your biggest fear is to leave the car dealership feeling you have paid too much for what you got, you should be prepared to speak the dealer’s language when it comes to discussing a car’s price:
– Manufacturer’s suggested retail price: Commonly known as the “sticker price”, this is your worst nightmare: you absolutely do not want to end up paying that much money for your car. This price was set by the manufacturer and therefore, it offers a lot of leeway between you and the dealer to negotiate.
– Dealer invoice price: This is your baseline since it is the amount of money that the dealer paid the manufacturer in order to get the car and sell it. In other words, it is off this price that the dealer makes a profit. How can you find it? Simply by looking it up on the Internet, as some websites offer interesting insights.
– Holdback: Most manufacturers pay their dealers a holdback amount for each of their vehicle that is sold. The holdback generally ranges between 2% and 3% of the “sticker price”. You can legitimately deduct that much money from the dealer invoice price: this is where the dealer truly starts making money.
2. Shop around as much as possible
Once you master the “car dealer’s language” and feel ready to go out there and have conversations with salesmen, you should see as many of them as you possibly can. The idea here is to get each and everyone of the salespersons you meet with to give you his or her best price. That way, you give yourself more negotiating power: you can tell Dealer A that Dealer B actually just offered you a much better price!
Remember that every single dealer on earth wants to sell you a car very badly. Nevertheless, an automobile salesman will only lower his price if he knows you could buy elsewhere for less money. Just like fishermen, dealers would be delighted to have a fish easily biting the bait at the other end of their rod. But reality is otherwise: if they all covet the same fish, and know that they face a bunch of serious contenders, they absolutely won’t mind spending the whole day on the lake working hard. All they want is the fish for themselves.
3. Ask questions and “talk price”
Dealers will only tell you as much as you ask. Don’t be afraid to question them about their holdback, their invoice price, or the reasons explaining why they can’t further compromise: they simply won’t voluntarily give you the information. You want to bring the dealer to make concessions and that just won’t happen if you remain silent.
Moreover, you should not follow a dealer who is trying to bring you to the land of “the monthly payment”. Stick to negotiating the actual price you want to pay for your new car. Lowering monthly payments often rhymes with financing the car over a longer period of time and ultimately paying more interests…
4. Negotiate from low to high
If you ask any dealer to lower the “sticker price” of your dream car, he or she just will not do it to the extent he or she really can. Just think about it for a second: if you want to sell your old couch and think it is worth is $500, you will probably post an ad asking $650 for it. If the negotiation turns out really well, you may manage to sell it for $575. Even better: someone could be willing to pay the stated $650!
The idea here is to show that you should always negotiate from low to high because the dealer wants to negotiate from high to low! Since any dealer’s baseline generally is the “sticker price” you absolutely want to avoid, you ought to begin the negotiations with your own baseline: the invoice price (minus the holdback). Bringing the dealer to cede some ground is the only way you can make the most out of your negotiations.
5. Beware of manufacturer’s and dealer’s offers and ask for freebies
Go through the manufacturers’ websites. Some very interesting offers that you would otherwise not even be aware of can be readily available to you. For instance, some manufacturers offer substantial rebates to students or enticing reward programs to those who drive their cars. Do the same with the dealers: you’ll find out that you may be eligible for some quite attractive discounts!
Finally, there is another way for you to get extra freebies: once you think you have brought the dealer down to his or her best price, ask for some hardware. In fact, the dealer might be able to provide you with free winter tires or floor mats, especially if he or she expects you to be a faithful client in the future. This certainly should not be looked down on; after all, it is more than what you would get if you did not dare asking, right?
Alexandre Duval is a blogger for Tower Chrysler Dodge dealer. He is also currently completing his master’s degree in political science at the University of Quebec in Montreal.