Car Negotiation: The 10 Step Guide
April 9, 2009 by Grant
For most people, buying a car is the second biggest investment of their lives, right behind purchasing a home or condo. Yet, as a whole, even street savvy consumers can be confused and taken advantage of when it comes to purchasing a car. That’s why we’ve put together this summarized, ten-step guide to turn you from a negotiating novice to a confident buyer.
Step 1: Come Emotionally Prepared
The statement above should really end with the line “for battle”, because you should come prepared and determined. Buying a car can be a great mental toll, with lots of pressure, so be sure to negotiate on a day when you feel ready, rather than immediately after a long day at work. It will help your decision making skills greatly.
Also, have a confident mindset when you arrive on the lot. It’s easy to forget that as the party with the purchasing power, you are the one that is in control. Having emotional control is important, because salesmen are trained to push your emotional buttons to buy, even though the terms may not be favorable to you. You should be very comfortable saying “no“.
If you know you are timid or uncomfortable at the idea of negotiating, either bring along a friend for moral support or consider buying your car through an intermediary such as a car broker (we are happy to refer a local auto broker if you email us).
Step 2: Know How Much the Vehicle is Worth
It’s impossible to negotiate properly unless you actually know how much your prospective car is worth. Thanks to sources on the internet like Kelly Blue Book or Edmunds.com, you can easily find the invoice pricing of any new vehicle on the market. Print or write the numbers and figures down on a sheet of paper and bring it with you to the dealership. Be sure to get the invoice price of your car with all the right packages and add-ons, as you don’t want to arrive at the dealership only to realize you only know the price of a base price, bare bones car.
When you arrive at the dealership, don’t hide or flaunt the fact that you know their invoice pricing. If you do, the salesmen will probably give you the spiel that not all dealerships pay the same price and that the internet figures are totally wrong. They may even show you an invoice that is far above the figures you found. The truth is that while dealerships don’t always pay the same per vehicle, the difference is within the hundreds, rather than thousands. When in doubt, trust the invoice you printed out.
Step 3: Arrange Financing Beforehand
Before stepping into any dealership, you should also have a firm idea of how to finance your vehicle. If you are taking out a loan, you need to get a credit check to know what your credit score is. Your credit score determines your ability to get a loan and the interest rate of the loan. If possible, you should try to get a pre-approved loan from the bank beforehand, so you have an idea of what APR you qualify for (and if you quality for a loan, period).
With the internet, you can also find many auto loan payment calculators that will tell you how much your monthly payments will be depending on your initial down, APR and loan term (normally 36 months). Because of the complexity of finances, it’s important to figure this all out before negotiating. If you attempt to walk in without any idea of your financing, you might as well have a giant bulls-eye on your forehead when you step into the doors of the dealership.
Step 4: Know What to Expect
Ok, you’ve done your homework and you’re now sitting down with salesman, with your special other or friend looking on. From here on out, it’s what we refer to as the dog and pony show- the big razzle dazzle. Your salesman will most likely bring out a form and start asking how much you’re looking to pay per month, asking about your trade-in, down payment and price you want to pay. This form is often called the “four squares” and this and other similar forms are employed by dealerships to divert your attention and distract you.
The salesmen will usually ask if you have a trade-in at this point. If you do, go ahead and say so, but don’t reveal any more than that. More than likely, another salesman is already out looking at your car figuring out the black book value anyways, but it’s in your best interest to negotiate the trade-in later. At no point, should you ever, ever, give up the keys to your car, license or insurance during negotiations (you do need to provide a photocopy of your license for the test drive, however). If the salesman asks for them, it should be a huge red flag, as shady dealerships will withhold these items from you to prolong negotiations.
Step 5: Negotiate Only on Price, Not Payments or Extras
Now that the negotiation form is out, your salesman is going to try and toss a flurry of figures at you. Politely – but firmly – tell him you want to negotiate only on the price of a car and nothing else. Your salesman knows that most people are emotionally attached to their monthly payments and how much they need to put down, so he’s going to try and push your buttons to play his game. Don’t fall for it. Negotiating only on price makes things easier for you to understand – which is good for you, but bad for the dealership.
Next: Part 2 – Car Negotiation: The 10 Step Guide
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