Negotiating a Car Deal
Everybody wants to get a great car deal, but not everybody knows how to negotiate a car deal with a dealership. You may be a natural negotiator who is not afraid to haggle away with the car salesman. However, when you go up against dealerships and car salesmen who do this on a regular basis, you may lose the haggle because of one simple reason; when you are at the car dealership, you are out of your domain. The salesman is already a few steps ahead of you. So, while you may think you are on top of your game negotiating, they may flatter you for your negotiation skills, while playing you right where they want you. You may not even find out that the last “deal,” you thought you got left you upside down, until you try to trade your car in. So, if you feel like you could benefit from polishing up your negotiation skills, read on.
Have A Realistic Goal Before Trying To Negotiate a car Deal
To be fair, we have to remember that car dealerships are a business. And as a business, they have to make a profit to survive and pay their employees. With that in mind, when negotiating a car deal, you want to make sure that you have a realistic goal. What you want to achieve is getting a fair price on the vehicle you want. This of course will require that you do some research in a neutral automotive market to get an idea of fair pricing on any vehicle you may be interested in buying. Doing your research gives you a firm basis for negotiating, which you want to establish before you enter the dealership’s domain plus its unknown arbitrary variables.
How to Negotiate a Car Deal
Having the mindset for negotiations & doing your research
The basic purpose of negotiating is to find common ground or agreeable terms to forge relationships, do business etc. If your goal is to trick or overcome the “other guy”, you are not in the right frame of mind for negotiating. Using tricks or force in any negotiation, whether it is negotiating a car deal or wooing a girl, usually backfires by creating mistrust and resentment. The evidence is all around us! Mistrust and resentment don’t create an environment that is ideal for negotiating. So make sure you have your mind in the right place before you attempt to negotiate a car deal. Besides, trying to trick a dealership is a no win situation, that’s all there is to it. So you have to negotiate from a winning strategy.
There are two main things that you need to establish before you can negotiate a car deal successfully:
- What can you have
- What can you offer
What Can You Have?
Knowing what you can have is the first footing for successful car buying negotiations. When dealerships ask how much you have for a down payment, or run your credit, they are establishing what you can have and whether or not it will bring them a good profit margin. Now if you are unfortunate enough to deal with a greedy dealership, they can work the numbers and limit your car options until you may be thousands of dollars upside down from the cars market price.
You just can’t afford to be uncertain when you are trying to negotiate a car deal. Remember that you are the customer. If the deal feels confusing or you feel like you are at a disadvantage because of challenging credit situations, you have the choice to take your business to that dealership or not, be certain of that at least. Even if you have bad credit, you don’t have to feel like you deserve to be talked down on, or take a bad deal just because of your credit. You can still negotiate a car deal as long as you KNOW what you can have. So, in order to win the haggle of negotiating a car deal:
- Research your credit and what you can have loan-wise.
- Find out if you prequalify for a car loan through your bank or credit union.
- If you qualify, for how much?
- If you don’t qualify, what other reasonable financing options are available to you?
- What interest rates are reasonable for your financing and what is too much?
- What loan term can you have and how does that translate into monthly payments?
- If you are trading in, what is the reasonable trade in value for your car?
- How much do you owe on your current car?
- Is the balance lower or greater than your current car’s trade in value?
- Research the MSRP or the market price of the cars you can have within your budget
You see where this going? You want to be certain of what you can have before trying to negotiate any car deal. Otherwise, you will have no footing for your negotiations. Here is a little diagram to illustrate this concept further:
For the sake of simplicity, let’s say there are 3 zones. Zone one is the car buyer, zone two is the neutral automotive market, including auto financing and zone three is the car dealership.
- If you go to zone three without knowing what you can have, you will put yourself at the mercy of the dealership.
- If you set unrealistic expectations in zone one without research, it may be obvious to a trained salesman that you have not done your homework. So again, the dealership has the advantage.
So the safe zone for negotiating a car deal is zone two. This is the zone that you want to anchor yourself and negotiate from. Knowing what you can or cannot have will give you the power to choose which dealership to do business with, depending on how far they are willing to meet you in zone two.
What Can You Offer?
Since negotiating is a two sided proposition, your next footing in successfully negotiating a car deal is in what you have to offer. This step will be easy if you do your research well in phase one. If you want to get the dealerships attention, have something to offer! They will be more inclined to meet you half way if you have something to offer. A good down payment, a good trade in, good credit, a pre-approved auto loan, those are good things to offer. They will certainly not want to risk your business going to the other guys, when you are right there dangling easy money in their face. So having something to offer puts you in a very good position for negotiating.
Clearly state your reasonable terms at the beginning of negotiations and establish if they are willing to meet those terms to earn your business. Figure out the lowest reasonable offer you should make and the maximum offer you are willing to accept from the dealership. You may start low to give yourself enough wiggle room. So from that point, you just let the negotiations take place until you are happy with the deal. There is not a set dialog to use. You just play with the numbers to make sure that you are not blindsided into paying more than market price, which results in your car costing more than what it is actually worth (negative equity).
Despite all the workouts on paper that you do while negotiating a car deal, nothing is legally binding until you actually sign the financial paper work. So be prepared to end negotiations and walk out if you are not pleased with what you are being offered in return.
Stick To Negotiating the Final Cost
It should come as no surprise that some dealerships are masters at misdirection. If you don’t set a goal, an end result that you want to achieve by negotiating, you may end up paying thousands more over market price for your car than you realize. If you let yourself be bounced around negotiating between the car payment, down payment or your trade in value, you will become too distracted to see what’s coming.
Always negotiate from what you know you can have, not what the salesman is dealing in front of you! If you know what you are qualified for, what trade-in value to expect, what car payments to expect or the down payment you are willing to pay, there is nothing left to negotiate except the final cost you want at the end of that car deal. The final cost and the loan term determines how much your monthly payments are going to be. You should already know what the acceptable range of your monthly car payments should be based on what you know you can have.
If you do your homework, you may actually spend less time haggling, but closing the deal. A smart salesman can usually tell if you know your stuff, and they would not risk having you walk out of that deal. So research, research, research! Know before you go. That is the only way you can win the haggle, or avoid it completely when you are negotiating a car deal. Happy negotiating!