The average person absolutely dreads purchasing a new car for one simple reason; negotiating for the price. The truth is that successfully negotiating an excellent price on a new car isn’t a mystery but it does entail some research, commitment, the right attitude and more than a little bit of patience.
Coming to an agreement on a new car price can be done with honor and honesty, and really should be, because at the end of the day it’s just a business negotiation and nothing more. That being said, people who don’t purchase new cars on a regular basis can find the thought of “matching wits” with a professional salesperson a bit intimidating, to say the least.
Because of that we’ve put together a blog with some of the best car price negotiation tips to help you “level the playing field” and walk away with not only a brand-new vehicle but with your pride, dignity and hard-earned money intact.
One of the most important bits of information that you need to know if you’re going to successfully negotiate a lower price on your new car is the dealer’s actual cost and not just the manufacturer’s suggested retail price (MSRP). In order to get this information you need to know a few things, including;
- The Dealer Invoice Price. This is the actual price that the car manufacturer charges the car dealer. Before any negotiations begin you should ask the dealership to show you their invoice on the car that you are interested in purchasing. Even before you show up at the dealership you should do some online research to find out the typical dealer price for the car you want.
The invoice will also tell you how long the particular vehicle you are interested in has actually been on the dealer’s lot. As a rule of thumb, if it’s been there for more than a month they will be more willing to lower your price so that they can get rid of it.
- What Dealer Cash Incentives were given to the dealership? Most manufacturers give their dealers cash incentives in order to get them to sell specific makes or models. Most of the time this is information that the customer will never know about unless they research, ask questions and do some digging.
- What’s the Destination Fee? This is the charge that the manufacturer charged to the dealer to deliver the car or truck and its itemized on the MSRP. Many times you can negotiate to lower this cost.
- What are the Regional Advertising Fees? All dealerships pay advertising costs and these fees are what they have paid to advertise in your market.
- What, if any, was the Dealer Holdback? After you have taken delivery of your new car the dealership is sometimes reimbursed a percentage of the MSRP by the manufacturer. Akin to profit-sharing, this is money that a dealership will receive from the manufacturer that’s over and above the profit they made from you. If you know about it, you can use it in your negotiations.
One of the best tactics to use is, before you enter the dealer’s showroom, decide the price that you want to pay for the car that you want (based on your research) and pick a number that’s 10% below that. In this way you can “increase” what you’ll be willing to pay (usually in $500 increments) and end up at the price you want.
Other negotiating tips that you can and should use:
- Don’t just go to 1 dealership but instead go to several and play one off of the other.
- Purchase a car when the dealership is not busy. For example, never go on a Saturday.
- If possible, line up your financing before you walk into the dealers showroom. This makes you basically a “cash” customer and allows you to circumvent any attempts that the dealer makes to negotiate your monthly payment.
- Always be prepared to get up and walk out if you don’t get the price you want, no matter what.
If you’re keen on doing research (and we do suggest it) you can use several websites including Edmunds.com, Kelly Blue Book (KBB.com) and TrueCar.com to do so. These websites can provide you the MSRP on practically any new car as well as the dealer invoice price. They can also give you an estimate of what the real world price should be but keep in mind that the actual cost on your new car will fall somewhere between the MSRP and the dealers invoice price.
If you can fall somewhere between these two numbers, but of course as close to the dealer invoice price as possible, you will have negotiated a good price on your new car.