There’s little doubt the Internet has made quick work out of the new-vehicle shopping process. For example, Motor1 allows shoppers to virtually “kick the tires” and compare specs, equipment, and prices – not to mention expert reviews – for most if not all makes and models sold in the U.S. You can even “build” your dream car equipped with the options you want, and receive bona fide price quotes from local dealerships.
Unfortunately, it’s still not possible to actually bypass a dealership and purchase a new vehicle entirely via the Internet, given the limitations of state regulations and automakers’ franchise agreements. You’ll still have to show up at the showroom to finalize the deal, sign the paperwork, and such.
But keep in mind that while you may receive some attractive offers via online inquiries, chances are you probably won’t get a new-car dealership’s absolute best deal just be politely asking for it. Of course, if it seems like a fair price and you dislike haggling with salespeople as much as getting a root canal performed, the time and effort you’ll save by accepting an up-front deal could well outweigh whatever further amount you might save. Still, you can almost always do better if you roll up your sleeves and do some old-fashioned horse trading.
Your goal here is not to “beat the dealer,” but rather to determine through careful negotiations the lowest price he or she is willing to accept on that particular day. In a way, cars and trucks are a lot like airline tickets, where the person sitting next to you may have paid less for a seat on the same flight than you did simply because he or she bought a ticket on a day when the number of unsold seats triggered a price reduction.
Understand that this is a peculiarly and almost constantly moving target that’s subject to a combination of factors. Supply, demand, and sales quotas all either earn the dealer cash bonuses, or enable additional shipments of the brand’s most-profitable vehicles. Generally, unpopular and overstocked models will tend to be offered with the deepest discounts; time is money in the new-car business, and the longer a given vehicle sits on the lot, the more a dealer will pay in financing costs. To that end, it’s a good idea to search the inventories of local dealerships online to see which one has the most versions of the model you're considering in stock. On the other hand, the hottest-selling limited production rides (say, the 2018 Dodge Challenger SRT Demon with only 3,000 units designated for the U.S.) may command full sticker price or even above.
For the sake of brevity, we’ll assume you already know how much you can afford to spend on a car and which model you’re considering, that you’ve shopped around ahead of time and have already been pre-approved for financing (unless you’re paying cash or leasing), and have an idea of what your trade-in is worth if you have one. Instead, we’ll focus solely on the negotiating process.
Targeting Your Best Price
Before setting foot in a new-car showroom, you’ll need to establish a “target price” for the car or truck you wish to purchase. This would be its so-called "invoice price," available via various online sources, which is a few percent above what the dealership actually pays for the vehicle. Add the cost of any options or option packages, along with the automaker’s mandatory destination charge. If a manufacturer’s cash rebate is being advertised for the vehicle – which is usually used to bolster a buyer’s down payment - consider it separately from your target price and not part of the dealer’s discount.
When it’s time to head for the dealership, resolve to remain emotionally detached throughout the negotiating process. It’s a good idea to leave the kids at home to avoid distractions, but you may want to bring your spouse or a friend along for moral support. And be prepared to turn and walk away if at any time you feel you're not being treated with the utmost respect.
If you’ve gotten a prior offer online, you’ll probably be directed to someone who handles Internet referrals to facilitate the sale – keep in mind you can still dicker for a lower price. Otherwise a member of the dealership’s sales staff will introduce him or herself and will likely begin to “qualify” you to determine if you’re a serious buyer. Avoid answering questions like, “Are you willing to buy from us today if the price is right?” or especially, “How much are you willing to pay per month?” Never consider the price of a new car or truck based solely on a given monthly payment – focus only on the bottom-line transaction price to ensure you’re getting the best deal.
If you haven’t already done so, be sure to give the vehicle you’re considering a thorough test drive – it’s sheer folly to consider entering into a transaction that averages over $30,000 without actually spending some time behind the wheel.
Wheeling And Dealing
Whether you’ve walked in cold or have a referral in hand, once you’re seated in a closing room (or a cubicle or desk off to the side or back of the showroom) start negotiating by making the first offer, which should be your target price as outlined above. Tell the salesperson how you arrived at this price, and that if he or she can meet it, then you’ll close the deal on the spot.
Don’t discuss your trade-in at this point to prevent the salesperson from “inflating” its value to assuage your ego by manipulating the selling price of the new vehicle. And never hand over the keys to it at the start of negotiations – there’s a chance the salesperson might hold them hostage until you sign a sales contract.
Otherwise, the salesperson will typically come back with a counteroffer that will be slightly less than the vehicle’s retail price. You should now raise your initial offer by incremental amounts, say, a couple hundred dollars at a time; the salesperson will likely lower his or her price in the same manner. At some point the salesperson may leave to “present your offer to the sales manager” (though sometimes he may just be just grabbing a quick cup of coffee or a drink of water). He or she will probably return with a higher bid. If it’s close to your last offer, try standing firm; if it’s considerably higher, continue the negotiating process. If the salesperson won’t budge at that point, just stand as though you are preparing to head for the door and say, “That’s it, thanks for your time.”
This leaves the salesperson facing the prospect of losing a sale, so it’s likely he or she will make another (or a first) trip to see the sales manager. Either the salesperson or someone else, perhaps even the manager, will then come in with another offer and try to close the deal. By now you should be looking at the dealer’s lowest price, and it will be up to you whether to accept it or see if another dealer will beat it. Once you’ve reached an agreeable offer on the new vehicle, bring up the subject of your trade-in and negotiate that price as a separate transaction.
However, you won’t be handed the keys just yet. Instead, you’ll be handed off to the “F&I” (finance and insurance) manager’s office where you will be asked to sign the necessary paperwork and participate in the often costly “back end” of the deal. That’s where a dealership can make up to twice as much (perhaps even more) money than they can selling the car or truck itself by arranging financing and pushing high-profit add-ons like service contracts and rustproofing. We’ll show you how to protect yourself during that phase of the new-vehicle buying process in a future post.