It may be a little extreme to view car buying as war, but as in any conflict the same rules apply. You have your own goals in the negotiation and you’ll be sitting across the table from someone whose goals are diametrically opposed to yours. Sun Tzu’s 2500-year-old advice might be the only real advantage you’ll have, but we’d like to give you a few other pointers that can’t hurt.
Know the battlefield
There is a world of difference between buying a NEW car and a USED car. The vehicles you’ll be looking at are radically different, as are the motivations of the sellers. Mechanical issues, financial issues, trust issues, and more will all play a part. The advice below is for buying a NEW car, so not all of it will apply to the used car battlefield. We have an article in our Information Archive called Used Car Buying Advice that will help if you find yourself going to war with a used car salesman.
Don’t look at real vehicles before you look at them online. Write down what you want or need from a vehicle, how much you are prepared to pay to buy it, and how much you are prepared to pay going forward. Find out everything you can about the few models that interest you most. Information about reliability, performance, safety, and price are easily available online. Know the approximate mark-up of the car’s sticker price, what the dealer expects as a profit margin, and what their competitors are selling their vehicles for. We have picked some of the most useful links to help on the Buying a Car page of our website.
Dealers count on the emotional appeal of a new car to push you into buying. Desire can be a powerful motivator, and it’s harder to walk away from a gleaming car with “new car smell” than it is to hang up the phone on a car dealer. This can work to your advantage if you call the dealer before you ever go in. Ask for their best price on the phone, but realize you probably won’t get it. The dealer wants to bring you in to the showroom to put you on their turf. However, if you are lucky (or smooth) enough to get a phone quote it will almost always be lower than a quote at the showroom.
Negotiate the Price, never the Payment
Many dealers negotiate cars in terms of the monthly payment, not the final purchase price. They can lower the monthly payment by extending the loan term instead of cutting the purchase price, but you’ll end up paying thousands more in interest.
Hide Your Trade
If you are going to trade in your existing vehicle, don’t let the dealership know until you’ve agreed on the price of the new car. Tell them you don’t have a trade-in, or that you’ll be selling your old ride yourself. The reason for this is that dealers make very little profit from the sale of the vehicle itself, so they have very little room to negotiate. If they know you have a trade in, they can make it look like they’re giving you a great price on your junker without actually dropping the price of the new vehicle. Once you’ve agreed on the new vehicle sale price, you can “remember” that you have the trade, or your “buyer” for it could fall through. Beware, though, that a dealer won’t lose money on his deal. If he already cut it close to the bone with the negotiated price, he may walk away when the trade in is added. You may really find yourself selling your old vehicle, but that’s what Craigslist is for.
No one spends just a few minutes at a dealership. Car dealers are famous for making people wait (“let me go talk with my manager”). This isn’t bad service, it’s a sales tactic. The longer you wait, the more likely you are to just give up and sign something to get out. Knowing this, though, you can flip it around and make it work for you. Leave without buying, and you can be sure the salesman will call you to follow up. The longer you can string THEM along, the more they’ll wonder if you’re still going to buy, and the more likely they’ll offer an even better deal. Of course, if they don’t, you always know how to find them again.
Go Rate Shopping
You may buy the vehicle from the dealer, but that doesn’t mean you need to buy your loan from them too. Get your credit report before buying a car, and consider applying for an auto loan online or from your local bank or credit union. Take the approval letter with you and see if the dealer can get you a better rate. Just like “Hide Your Trade”, though, this may mean you won’t be saving much money on the vehicle itself. With the tight margins, loan interest is one of the major ways the dealers have left to make money.
Skip the Dealer Altogether?
There are options that can keep you from ever stepping into a dealer’s showroom at all. Costco sells cars now, and you don’t even have to buy the bulk package. Also, you can contact the manufacturer of many vehicles directly and arrange for pickup at a dealer near you. Some of these options are a little more difficult than the dealer experience, so make sure you do your research first if you want to take these routes.
In the end, buying a new vehicle is a complex balance of your needs, the dealer’s needs, availability, financing, negotiating skills, and more. If you’re like most people you don’t buy new vehicles very often, but the dealer is a pro who sells them every day. He’ll have the homefield advantage and you can be sure he WILL make a profit on the sale. However, knowing your strengths and his weaknesses can ensure that you’ll have the best buying experience possible.