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Updated on Friday, September 28, 2018
A car is only worth what someone is willing to pay for it. So it’s usually a salesperson’s job to convince you it’s worth a lot. Many Americans hate bargaining and rarely do it. So when faced with negotiating a major purchase with someone who negotiates as their job, it can be daunting.
We give you advice in negotiating car prices, tricks for the shy — or bold — and different tactics to try depending on what type of car you’re buying, new or used.
Car price negotiating tips for everyone
The first part of successful negotiation is doing your homework — looking up car values and doing some online price shopping. It’s an unpopular step. It doesn’t have the same feeling many people associate with negotiation: fast talking, slicked hair, Cuban cigars. But it’s definitely the starting point for a successful car search.
Look up the current values
No matter how you plan to get your car, whether you want to buy your car completely online with as little human interaction as possible or stride onto the car lot with your cowboy hat on, ready to duke it out, you should know what to fight for other than the vague idea of “cheaper price.”
A safe bet is to use what the lenders use to find the value of vehicles. Lenders price vehicles based on industry guides such as Kelley Blue Book (KBB) or via the National Automobile Dealers Association (NADA). Both are entirely free to use online. Once you narrow your choices to a couple of cars or the car, look up what it’s worth. That’s the fair market value, and you should aim for that or lower.
New cars will have a guide value and a manufacturer’s suggested retail price (MSRP). The two should be similar, but you could make the case you deserve to pay the lower price. See below for more on how to negotiate a new car price.
Shop virtually before shopping in person
Visit a few dealership websites or online marketplaces to see what’s out there. There are several auto-buying websites and phone apps such as Edmunds and VIN check by iSeeCars that will tell you how a car’s sticker price compares with its market value. You can also see how similar cars are priced in your area thanks to mapping features, which may be easier to navigate rather than clicking through search filters and numerous pages for each dealership.
If you find that a car you want is priced more cheaply in the next town, call your local dealership, tell them the other guy is selling that car for the lower price and ask them to beat it. And, if you want, you could repeat this call-and-price process several times to see how low you can get the price.
Be aware that many dealerships will do their best to get your personal information. It’s relatively safe to give your name and email, but we don’t recommend you provide your address or phone number unless you want them calling you back often. Tell them you’re shopping around and you need them to convince you by giving their best price before you go in or provide any personal information.
Do not focus on monthly payments
This is the most common and most costly mistake car buyers make. Focusing on monthly payments makes it easier for the dealership to keep the car price high and slip other things into your payment. Thinking about things on a monthly basis prevents you from seeing the total cost.
A common trick is for the salesperson to use a negotiation worksheet called the “four square.” On this four square, they may address everything with you but the car price. Instead of writing price negotiations in one of the four boxes, a salesperson might write reasons why the price is set, such as “newest model” and “moonroof.” Don’t let them get away with this. It’s feasible that anyone could sell you anything at any price and still meet your monthly payment requirement — they just make the loan longer. If you get a good price on the car, the monthly payment will follow.
After you decide on the price, when you do get to talking about monthly payment, ask what the monthly payment includes. It should only include the car, taxes, title and license fees, the APR and negative equity from a trade-in, if applicable. It should not include warranty, Guaranteed Auto Protection (GAP) insurance or anything else.
If it does include something else, ask what the charges are and their total prices, not their monthly prices. A warranty may cost $30 a month, which may not sound like a lot, but over your entire loan it can add up to more than $2,000. If you don’t want it, say so.
Always keep your eye on the APR
The dealership cannot change your APR based on whether you buy a warranty or any other add-ons. The best way to prevent them from increasing your APR period is to get preapproved loan offers from other lenders before you go to the dealership to shop for cars. This way you already have loan options and you know what APR you deserve. You can read more on getting an auto loan preapproval here.
Go with a friend
For the bold and the shy alike, going to negotiate car prices with a friend or family member can be a huge help. Having someone to talk to while the salesperson runs to check prices with a manager will give you something to do besides twiddle your thumbs and wonder silently what’s taking so long. An extra set of eyes may see something you don’t.
Be aware that whoever goes with you will probably get a window of insight into your finances. If privacy matters to you, don’t take a friend who won’t respect it. Let your friend know ahead of time if you don’t want them to share any of your information they may learn during the process.
Try to time it right
Sometimes when you need a new car, you need it right away. Other times, you may have the luxury of being able to plan out when to get another vehicle. If you have that luxury, here are the times when you’re more likely to negotiate a better deal.
- On a weekday. There is less business at a dealership during the workday. Things won’t be as busy, meaning the salesperson is less likely to pressure you to hurry up and buy the car so they can move on to the next customer.
- The end of the month. Most dealerships have monthly sales goals. If you go at the end of the month, they might be really pushing to hit that number and thus be willing to cut a better deal for you than they would be at the beginning of the month.
- The end of the year. With new car models coming in, dealerships want to clear out the older models. These older models are still new cars; they’re simply no longer the hottest thing on the market and are priced accordingly. Especially in December, dealers may be willing to sell them at a loss because these cars are only getting older, taking up space and decreasing in value.
While it can be annoying to spend hours at one dealership, not come to an agreement and walk away feeling like you wasted your time, you should be willing to walk away. Otherwise, you might waste a whole lot more time in the form of working a ton of hours to pay off an overpriced car.
Car price negotiating tips for the more timid
No matter how much the salesperson smiles at you, remember: Buying a car and getting a loan is all business, and you need to do what’s best for you.
Call ahead to set an appointment
You can call the dealership ahead of time and request an appointment. Some dealerships will even let you request the type of person you’d like to have as your salesperson. You could specifically say you would like to work with a person who is not pushy. And if you do get a pushy salesperson, ask for another or go to another dealership — you are not tied to a salesperson or a dealership.
Another benefit of an appointment is to request ahead of time the specific car or cars you’d like to see. This way, you won’t have to wait for an available salesperson if the dealership is busy. You can breeze past any salespeople that may be waiting by the door, and the cars you want to see may be lined up and waiting for you. It could make things more efficient, putting less pressure on you.
Take printouts or screenshots
Printouts can be useful as a tangible reference. Screenshots also make things easy to access (rather than searching and finding something online again). Both put prices in black and white. And, this way, if the salesperson asks, “Are you sure that’s what you saw?” you can say yes and show them.
Break up the process
You do not have to do everything in one day. Even if the salesperson tells you the car you like might be sold tomorrow, there are thousands of cars out there and it’s probably better to wait and choose another car rather than make a choice under pressure that’s not right for you.
Test-drive a couple of cars and then take lunch to talk about the vehicles with a friend. Or sleep on your options for a night and go back the next day or the day after that. As a general warning, do not wait weeks on end as the car is more likely to sell and any sales specials are likely to change. If you do find yourself putting off the purchase for that long, then it may not be the right vehicle or the right time for you to buy.
Car price negotiating tips for the more aggressive
If you like negotiating and you smile at the thought of playing hardball, here’s how you could negotiate car price.
Make a low offer
In most negotiations, you end up meeting somewhere in the middle. So “the middle” might be lower if you start very low. Don’t worry about insulting the salesperson by making a low offer. Once you name a price as the buyer, that price usually only goes up, not down.
If you ultimately want to pay no more than $17,000 for a car that’s priced at $20,000, don’t offer $17,000 off the bat. Offer $11,000 and see what they do. After a couple of rounds of “this price,” “no, this price,” they might end up saying yes to a lower price than what you aimed for.
But don’t expect the dealer to sell you a $20,000 car for $11,000. Just as you have many other dealerships as potential sellers, they have many other customers as potential buyers. If you are completely unreasonable, you won’t have to threaten to get up and walk away because the dealership will invite you to leave. Again, if you’re armed with a car’s current value from an industry guide such as KBB or NADA, you will be able, at the very least, to aim a bit below that price.
Negotiate with two dealers at once
An aggressive car negotiating tactic you might use is to be at one dealership talking with a salesperson while having another dealership on the phone. Doing this, you can play the two dealers off each other and get immediate answers. If you put the caller on speaker, Dealer A will be able to hear Dealer B give you a price and will likely feel compelled to beat it.
How to negotiate car price for new cars
The MSRP is the standard price on new cars. It’s the number you may hear in radio car ads: “Krazy Kevin is selling all new cars for $100 below MSRP!”
MSPR is not what the dealer paid for the car. The invoice price is what the dealer paid for the car and even then there is a “holdback” in the invoice if you know where to look. The holdback is a reserve profit, so a dealer could sell a vehicle at invoice and still make money. Contrary to what they would have you believe, dealers will not need to eat their shirt if they sell a car to you at a price under invoice, although a salesperson might have to eat their pride.
- If a salesperson tells you the car is below MSRP and that it’s such a good deal, ask what the holdback is and ask to see the invoice.
- If the car is in demand and priced above MSRP, then use some of the negotiating tactics in the “For everyone” section.
In both cases, look up the rebates on the vehicle, which could bring the price down even more. And for information on the specifics of what’s negotiable and what’s not when buying a new car, check out this story on dealer fees from LendingTree.
How to negotiate car price for used cars
A used car doesn’t have an MSRP. It also won’t have rebates (which come from the manufacturer) because the manufacturer isn’t selling the used car — the current owner is. But there are still ways to figure out the fair value and to get a deal whether you buy a used car from a dealer or a private seller.
Determining a used car’s price
To know what a fair market price is on a used car, consult industry guides such as KBB and NADA. (See the above section on looking up current values.) Sellers will sometimes say they bought the car for more than its current value, but that’s not your problem. Just because they overpaid for the car doesn’t mean you need to overpay for the car.
Of course, the guides are just that: guides. They assume the car is in “good” condition, but the car may be in worse condition. Look for any signs of damage, rust or excess wear and tear on engine belts or upholstery that you could point out to make the case that the car is not in “good” condition. It would be labeled in “fair” condition and thus worth less than the posted price and the guide price.
At a dealership
Used cars are usually the most profitable type of car at a dealership because dealers can buy them for cheaper than market value and sell them for over market value. The best way to avoid paying the inflated price is to know the market value. Use KBB or NADA and ask for a free copy of the vehicle history report to see if the car was in an accident, a factor that might be cause for a lower price.
Also be aware the dealer will try to sell you an extended warranty on the used car as it’s another big way the dealer can make money. Odds are, you won’t need it. But if you’re interested, you can check out LendingTree’s ultimate car warranty guide.
The dealer will also try to make money off your auto loan. No matter where you apply for an auto loan — at your bank, credit union or online lender — apply directly through them, not the dealership. If you apply to your bank through a dealership, the dealership may be able to raise the APR above what the bank charges. Applying to your bank cuts out the middleman. When you get to the dealership, you can still apply through the dealer to see if they can beat that rate. But if you don’t have a loan offer that you got directly from a lender, you might be convinced to pay an inflated rate because you wouldn’t know what APR you deserve. A good way to potentially see several APRs you deserve is to fill out an online form at LendingTree, which cuts out the dealer as the middleman.
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Private sellers may find it difficult to sell their cars because they probably don’t have experience selling or access to a deep pool of potential customers. Plus, time spent selling might mean time off work to meet would-be buyers. Because of these things, you can almost always get a car from a private seller for less than you could from a dealership.
Again, use a KBB or NADA guide, but with the setting on “buying from a private seller,” not “buying from a dealer,” as the value will be lower. If you’re serious about the car, consider getting a vehicle history report or having your mechanic inspect it before you make an offer. If you find anything, such as a history of accidents or major repair needed, use that as a reason to lower your offer.
And if the person seems reluctant to sell for the price you want, mention you have the money or the offer ready now. If they don’t take it, they’ll have to wait and repeat the process. List everything they may have to do: post another ad and wait until someone else expresses interest; arrange a meeting time and test drive; and allow time for an independent inspection and negotiation, all the while missing work and (another) family dinner. But you’re offering them the money now.
The bottom line when negotiating car price
A car is typically one of the most expensive purchases a person makes in their lifetime. Be aware that a vehicle is a tool, not an investment, in most cases. Unless it’s an expensive classic car that will only appreciate in value with age, your car isn’t going to be paying you back. So if you can’t negotiate an affordable price on a certain vehicle, look for a less expensive one and try again.