I wouldn’t say I’m skilled at negotiating, so I’m not going to tell you that you that by reading this, you will get the best possible deal on a car purchase. What I will tell you is that if you go in armed with the information below, you can avoid getting screwed by the dealership selling the vehicle. Just remember these three important things and you can buy a new car with confidence.
1. Do your homework.
Self-explanatory right? You might be surprised. You need to be armed with more than the knowledge of the type of vehicle you’re interested in before you buy. Here are a few things you MUST research thoroughly before even stepping foot into a dealership.
- Know the model and features of the car you want. Manufacturers usually release multiple versions of the same model of vehicle. Each model will contain different features and will vary in cost. You’ll want to thoroughly research which features you want and factor those features into the cost of the vehicle.
- Know the invoice price (the price the dealership payed) and manufacturers suggested retail price (MSRP, the suggested selling price of the vehicle (ie. the sticker price)) of the vehicle you want. Knowing these two amounts will give you a negotiation point. For example, if a car’s MSRP is $25,000 but the invoice is only $22,000, you will want to negotiate a price closer to that $22,000. You can find the invoice price for just about any vehicle, as well as lots of other important information at Edmunds.com.
- Are you trading in a vehicle? Find out the trade-in value of your vehicle at KBB.com to ensure you get the most from your trade.
2. NEVER negotiate based on monthly payment.
Dealerships will often attempt to begin the negotiation process by offering you a certain monthly payment. DO NOT ACCEPT THIS OFFER! I was once offered a payment of roughly $350 a month for 60 months on a car with an MSRP of $11,000. Do the math you’ll find out that I would have paid about $21,000 over the course of 5 years for an $11,000 car. All other closing fees aside, I would have walked out with an interest rate of roughly 29% had I accepted that deal!
The best way to get the best deal is to negotiate on selling price and interest rate and start low. If the invoice is $22,000 on the vehicle you want, you may want to make your first offer at $22,500 with a 2.5% interest rate. Chances are they won’t accept your first offer, but it’s a good starting point.
Also, always get a breakdown of the numbers before any negotiations are finalized. You may agree on a selling price and interest rate, but it’s still a good idea to review an itemized list of fees before signing any paperwork. The last thing you want is to agree to pay a charge you didn’t know about until after you signed the paperwork.
3. Stay strong.
Newsflash: car salespeople work on commission. They will do an awful lot to get your business because they get a chunk of the sale. Take advantage of this by setting a limit for yourself and sticking to it. If you let yourself get sweet-talked, you’re liable to walk out of the dealership paying much more than you originally intended. If the seller doesn’t give in to your offers initially, either it’s not meant to be or they will meet your demands in order to have your business. Don’t be afraid to walk out.