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How to negotiate a new car price effectively

Do your homework before you go to the dealership

Last updated: February 2014

When bargaining a vehicle’s price, you’ve got two arrows in your quiver:

  • Your opening bid, based on what the dealer paid for the vehicle, and
  • Competing bids from other local dealerships or car-buying websites.

The price you finally end up with will likely be somewhere between the two. However, before you go to the dealership, it's important to do your homework. Purchase a New Car Price Report, to learn what the dealer paid.  If you want to save time and money, check out Consumer Reports Build & Buy Car Buying Service to get competitive prices from local dealers who are held accountable for high customer satisfaction

Once you get to the dealership ready to make the transaction, the salesperson will probably begin the discussion about price by focusing on the vehicle’s MSRP or on your monthly payment. He or she may even try to hook you on a “special” price that’s several hundred dollars below the sticker price. But don’t fall for that ploy. Once you allow the conversation to move in that direction, you start playing the dealership’s game. Don’t bite on the question of a monthly payment, either. It’s the first step down a slippery slope of being manipulated with numbers and overpaying for your vehicle. Using the monthly payment as the focus, the salesperson can lump the whole process together, including the price for the new vehicle, the trade-in, and financing, if appropriate. This gives him or her too much latitude to give you a tempting price in one area while more than making up for it in another.

Instead, insist on negotiating one thing at a time. Your first priority is to settle on the lowest price you can get on the new vehicle. Only after you’ve locked that in should you begin to discuss a trade-in or financing, if necessary.

Set the ground rules

Rather than get drawn into a discussion on the salesperson’s terms, politely explain the following:

  • You have carefully researched the vehicle you want and have already taken a test drive.
  • You know exactly which trim level and options you want, have researched the price for that configuration, and
    know what the dealership paid for it.
  • You have already calculated what you are prepared to pay. Reassure him or her that your offer will include a fair profit.
  • If he or she can meet your target price you’ll be ready to buy immediately; if not, you intend to visit other dealerships.

Start by showing the salesperson your rock-bottom offering price. But don’t disclose your competitive bids, which are the upper range of what’s acceptable. Otherwise, he or she will focus on undercutting that higher figure by a token amount instead of working off the lower figure. For example, the Consumer Reports Bottom Line Price for a 2014 Honda CR-V LX with two-wheel-drive and no options is $21,925. Add a 1- to 5-percent markup figure to that, and your target price range is between $22,143 and $23,020. Give the salesperson your figure and say you want the lowest markup over that amount.

You will want to come across as friendly and confident, well-informed but not argumentative. From the outset, you want to prevent the negotiation from veering off in directions you are not ready to discuss until the price is settled. If the salesper­son asks about a trade-in, for instance, say that you have investigated various options for selling your old car and that you might be open to a trade-in—but only after you’ve agreed on the new vehicle’s price.

When he or she asks how you’ll pay for the vehicle, explain that you are pre­-ap­proved for a loan and are prepared to pay in cash, but that you may be willing to consider financing through the dealership provided the rate is competitive and, again, you can come to terms on the purchase price of the new car. Thinking that he has a shot at profiting on the back end of the deal will pique the salesperson’s interest, but you will also be sending a clear message that you’ll have to be sold the car you want at a price you like.

Calmly explain that you don’t want to waste his time—and yours—in lengthy haggling. And reassure him or her that if you can both agree to terms you know to be fair, he or she can look forward to making a quick sale and a modest profit. If not, you will move on to another dealership.

Then say nothing and wait for the response. By now, it should be clear to the salesperson that you know what you’re doing. Indeed, he or she might even be instructed to turn over knowledgeable customers like you to a more senior colleague. If that happens, sim­ply repeat the same ground rules to the next salesperson or manager you meet. But no matter who ends up sitting across the desk from you, your clear explanation of what you’re looking for will help counteract the diversionary tactics that salespeople often count on to give them the all-important bargaining edge. You’re in command.

Hold your ground

A salesperson’s initial reaction might be dismissive, stating flatly that there is no way the sales manager will let him sell you the vehicle at your price. He may even try to tell you that your numbers are wrong.

If so, simply show him that your figures for the retail price of the car match those on the window sticker—a sure indication that the underlying invoice figures will also match.

You should mention that you have talked to other dealerships and gathered prices. But don’t disclose what they are. If you hold your cards close to the vest, you may see how low he will go. Even if he can’t find fault with your numbers, the sales manager may counter your bid with a barrage of objections, pleas, and ploys to get you to raise your offer. Stay calm and wait patiently.

You may be asked to wait while the sales­person goes off to make your case to the sales manager. Since the manager wields the real power to approve deals, you can expect this. But make it clear that you don’t have a lot of time to sit around and wait. You also have some wiggle room. After all, the target price you calculated allowed for a dealer profit of about 4 percent over what the dealer paid for the vehicle. If necessary, you can allow your target price to inch up in small increments, but don’t go over the lowest competing bid you’ve gathered.

If you do raise your bid, you don’t want to give the impression that you’re simply giving in to pressure. It helps to state a rationale for your flexibility on price by saying, for instance, that you value the fact that his dealership happens to be the one most conveniently located for you, or that you especially like the color of the car he has to sell.

Remind the salesperson that you’re ready to complete the purchase on the spot if he can meet your price. Otherwise, you’ll have to “think it over.” They’ll recognize this as a sure sign that if you leave the showroom, you will be on your way to a competitor, and they are more likely to relent.

If you see that the salesperson is try­ing to string you along without real progress, you can excuse yourself at any time and get up to leave. What happens next will give you a clue to how low he will go. Often, a salesperson will try to stop you by saying he thinks he or she can “work something out to make you happy.” If they simply let you go, then the last price offered may be close to the dealer’s limit.

If the negotiation has stalled at a higher figure than the competitive prices you’ve gathered from dealerships or on the Internet, it may be time to disclose this. Let the salesperson know he or she is not even in the ballpark. This could motivate another visit to the sales manager for a lower price. If you are offered a price that’s in your target range, you could accept it on the spot and save yourself more legwork or get it in writing and move on to another dealership in hopes of getting an even lower figure. Keep in mind that if the price is really close to your target, it’s not likely to go that much lower somewhere else.

Know when to walk

If your discussion gets stuck, remember an ancient Chinese proverb: Of all the stratagems, to know when to quit is the best. Following are occasions when your best bet may be to stage a strategic retreat:

  • Quoting a price that is still higher than what you are prepared to pay, the salesperson tells you, “This is as low as I can go.” Tell him or her that you think you have gone as far as you can in this meeting, that you will have to think about it at home, and then evaluate his or her best price in light of what other dealerships have quoted.
  • The salesperson may try to convince you that the rebate (or low-cost financing) is available only to customers who pay the sticker price. This is not true. Rebates are reimbursed directly by the manufacturer regardless of the price you agree to at the dealership. Don’t let the salesperson use rebates against you.
  • The salesperson suggests that you come back if another dealership offers you a bet­ter price, which the salesperson will them beat. Thank him or her for their time and explain that you are not interested in shuttling back and forth between dealerships. Let him or her know that you plan to com­plete the purchase soon, and that once you leave the showroom you may not be coming back.
  • If the salesperson makes what he or she tells you is a final, take-it-or-leave-it offer that is “good for today only,” you may want to accept if it satisfies two conditions:  (1) the price meets your target price; and (2) it is a special price for the only vehicle you have found that matches the model and trim level you want. Otherwise, don’t take the offer seriously. If the salesperson’s price is good today, it should be equally valid tomorrow.

If you must move on to a second or third dealership, follow the same script you used with dealer number one. And remember, do not tell a salesperson the price another dealer has quoted you.

The more you keep them guessing, the more aggressively they will compete for your business.

Know when to say "yes"

Once you’ve completed the round of dealer visits, you may find one willing to sell you your ideal car at close to your target price. If so, congratulations: It’s time to shake hands with the salesperson and close the deal.

More likely, however, the situation you face will be ambiguous. If so, you should review the offers at home in a more relaxed environment.

At this point, you could call back certain dealerships and level with them about the competing prices you’ve got­ten from others and ask if they can meet or beat them. Make it clear that you’re willing to buy immediately if they can.

If they don’t, you’ll have to decide whether you want to go with, say, a lower price at a dealership that’s farther away or didn’t treat you as well, or accept a higher price at a dealership that is more convenient or more pleasant to work with. Similarly, if you’ve been getting quotes on two or three different models, you may have to decide whether a lower price is worth giving up something special you want in another vehicle, or if you should pay more to get a vehicle you’ll be happier with over the long haul.

What is the price of convenience?

When you’re feeling confident and are swept up in the negotiation game, you may be inclined to think that getting the salesperson to agree to your rock-bottom price is the only acceptable outcome. It isn’t. Sure, you want to bargain for a good price, but don’t let the perfect be the enemy of the good. Before you chase the last penny of savings, consider your own convenience. Do you feel more comfortable working with one dealership over another? Might it be worth your while to pay a little more to end up with a car you’ll be happier driving? Provided you’re satisfied that the slightly more expensive deal is still a fair one, there’s no harm in paying a little extra if it buys you peace of mind.

New Car Buying Guide

Learn more about choosing a car, what to do at the dealership, pricing, trading in your car, financing, closing the deal and more in our new car buying guide.




   

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