How to Negotiate a Car Price

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Do you want to negotiate a car price with a dealer, or would you rather perform an appendectomy on yourself without using an anesthetic? When presented with this choice, many Americans almost seem ready to choose the latter over the former. But it shouldn’t be that way. Quite the contrary, if you approach negotiating the price of a car with the right mindset, it can be stimulating, interesting, and even — dare we say it — fun. Fun, you might scoff... How can it possibly be fun?

But the fact of the matter is, it can be fun if and when you realize that you as the car buyer are in the catbird’s seat. In poker terms, you have all the high cards. You have money to spend on a new car, but you don’t have to spend it. And you absolutely don’t have to spend it at any one particular dealership. Car dealers are everywhere, and one of the beauties of our economic system is that they must compete tooth and nail for the business they get. If you’re smart — and you are reading this article — you will use that fact to your advantage when you negotiate a car price. In the next several slides, we will tell you how.

Decide on What You Want to Buy

Before you even think about negotiating for the purchase of a new car, you determine exactly what you want. Sadly for them, many car buyers don’t approach the process that way. They set out to “look at some new cars,” then they suddenly find themselves negotiating on one — or worse yet — in simultaneous negotiations to buy two or three, depending… Anything that creates doubt or confusion is the enemy of a good negotiation, so don’t fall into that trap. Online research on autobytel.com can enable you to construct a very short shopping list of vehicles that will meet your needs. Using that list, go to an auto show or some dealerships to confirm your decision on what you want to buy. You must decide on the model year, make, model, and trim level of the vehicle you want to buy — before you take the first step in negotiating a car price.

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Know the Equipment You Want

There are many online tools and configurators that can help you “build your vehicle.” The difficulty with those tools is you might well assemble a vehicle that doesn’t exist in the real world. Your best bet is to use an online tool to get a close approximation of what you want, complete with pricing information, and then search the inventories of various nearby dealers for vehicles that match your mythical “build you car” creation. While you can order a car built to your specifications, you are much more likely to negotiate a great deal on a car that is already at a dealership. Other things being equal, dealers would rather sell a vehicle on their lot than order one from the factory for you.  

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Finding "A Real Live Car"

In conducting your online search of various dealers' inventory of vehicles, you are apt to discover very close approximations of the vehicle you want. Choose three of them at different dealerships to begin the "shopping around" phase. Armed with the "asking prices" of those real cars and the transaction prices of vehicles you have "built," an online configurator will provide you with important information on the market price of the vehicle you intend to buy. Like stocks on the Nasdaq, vehicle prices fluctuate. A key step you should accomplish before you begin to negotiate is to discover the "market price" — the price real car buyers are paying — for vehicles identical or nearly identical to the one you want to purchase. Look at the asking prices of the cars you have discovered in your search and look at the pricing data on the car you have configured using an online tool to come to a conclusion on what the market thinks that car is worth. Once you've done that, you need to decide if you think the car in question is worth that price. If you don't think so, you might want to rethink your target vehicle because the chances of purchasing a car at a price well below market are not very realistic no matter how skilled a negotiator you are.

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Know How Much You Are Willing to Pay for It

Before you begin a vehicle price negotiation, you need to establish in your mind — and probably on paper — how much the vehicle you want to buy costs in terms of market value and, importantly, how much you are willing to pay for that car. The two numbers might be one and the same, or they might differ depending upon how eager you are to purchase just such a car. In any case, you should be firm in your mind on what the car is worth TO YOU. That number should become and remain your North Star in the negotiation that will follow.

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Shop Around Online

In the research phase we just described, you will have done some "shopping around" as you discover vehicles in dealers' stocks that meet your criteria. You can then target these vehicles and these dealers with a round of Internet price comparisons. Using email or an online chat, inform each dealership's Internet sales manager that you are very seriously interested in purchasing a particular vehicle they have in stock. Let them know that you plan to purchase just such a vehicle and that you are prepared to purchase the vehicle today if they meet or beat the price your research tells you the vehicle is worth. What you want from them is their very best "out the door" cash price for that specific vehicle. You can also make it clear that you expect a direct answer; you won't respond to a suggestion to "come on in and let's talk about it." The answers and potential lack of answers to your straightforward queries will suggest your next steps — entering into serious negotiations with the dealership that you feel best about negotiating with. It might be the dealership that gives you the lowest price quote or it might not.

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Have a Plan

On some occasions, a dealership's sales manager will respond with a price quote that meets or even exceeds your expectations. If that happens, you could be well-advised to solidify the deal with that dealer and leave your highly developed negotiating skills for another situation. Or you might discover that none of the dealers have met your target price — the price you are willing to pay — in their replies. If this is the case, begin a telephone or face-to-face negotiation with the dealer you sense will give you a deal you will be satisfied with. Your expectations are realistically set because you know how the market is pricing the vehicle in question. And you know how much you are willing to pay for that vehicle. The negotiations that ensue are designed to get you there… or let you discover quickly that you will never get there.

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Stick to the Plan

Through the price quote they provided you, each dealer has made you an offer. If none of those offers meets your price, it is time for you to make a counteroffer. But don't counter with the price you are willing to pay. Make your first counter somewhat lower — perhaps $1,000 or $2,000 lower — so that it will be viewed as a "good faith" offer that indicates you have done your homework and you are a skilled negotiator. The sales manager might accept that offer, but the more likely scenario is a little bit of respectful give and take — offer and counteroffer — until you and the dealer arrive at the price you are willing to pay. If that doesn't happen, don't doubt yourself, your research, and especially your personal determination of what that car is worth to you. Instead, politely disengage, thank the salesperson for her or his time, and leave.

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Resist Confusion

During the negotiation process, it is critical to avoid confusion. Your goal is to negotiate the cash-out-the-door price of the car in question. Period. All other discussions and negotiations can and must wait. Confusing the buyer is a well-worn negotiating tactic, and it is easy to become distracted by the complex nature of the typical car deal. Discussions of financing and trade-in can wait until the cash price is negotiated. Whatever you do, don't wade into a discussion of monthly payments. The monthly payment, if there is one, should be the result of the deal, not the driver of it.

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Success Is Inevitable

If you have set your expectations correctly based on good research, you will very likely come to a deal that satisfies both you and the dealer. Should you not reach that deal with the dealer, walking away is the next step. And it is a strategic step. I personally have walked away from negotiations only to be followed out into the parking lot by a salesperson and sales manager who accepted my purchase price offer on the spot, even after saying no just minutes earlier. And I have walked away from negotiations on another occasion only to be phoned by the salesperson who was now ready to accept my final purchase offer several days later.

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You Are in Control

The key thing to remember in a car negotiation is that you are in control. The car dealer needs to sell you a car more than you need to buy one. Dealerships are plentiful and cars are everywhere even in this current era of inventory shortages and rapidly escalating vehicle prices. The competitive nature of the car business can be your best negotiating tool… if you let it. Negotiating a car deal that works well for you and the dealer is entirely possible. Deals like that happen every day. So walk into a car negotiation with the confidence that comes from knowing what you want and what that vehicle is worth. With those two items front and center — and with the clear understanding that you don't have to buy a car today — you can negotiate in a respectful, satisfying way that will leave you proud of yourself.

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