New Car Negotiation Tips that Work in 2020
Last Updated: May 13,2020
After you have made all the calculations and prepared for the process of buying a new car, you need to understand how to negotiate correctly before actually going to the dealership. Follow these new car negotiation tips to buy a car cheaper.
Psychological Car Negotiation Tips
- Remember that salespeople are regular humans. They are just doing their job using negotiation techniques to get the best deal for them. You can use your negotiation tactics to get the best deal for you. While negotiating, there’s no point in being rude or getting emotionally involved because you can simply walk away if the deal doesn’t suit you.
- The dealership is not a prison. This tip continues the previous one. You can walk away and go home at any time. Some people would recommend you to put the responsibility on someone else (saying something like “I’m not the one to decide. My wife makes the decision.” or “My partner will kill me if I buy this car.”) when you refuse to accept the deal. However, we don’t recommend to follow this advice. The best way is to show salespeople that the decision-maker is you and if the price suits you, you will buy that car.
Practical advice: If you’re trading in your car, a dealership salesperson will probably take your keys and registration. Before you start negotiating, ask for them back, so you can leave whenever you want and look for a better offer.
- Take a notebook with you. You’ll need a notebook to remember what your price range for buying the car and selling your own is and what kind of financing your bank gives you. One more reason is to write down the offers, as you won’t be given anything in writing by the dealers.
- Have a lot of time and be well-fed. One of the dealer’s negotiation tricks is to tire people out by prolonging the time of negotiating. Some dealers are paid more for making you wait for every step of the process. So you get what’s called the escalation to commitment. The more time you invest in the deal, the more likely you are to finish this deal. Psychologically you feel that you’ve spent so much time negotiating and that’s why you are likely to make the deal and don’t want to go through this process again.
To counteract this, you should have a lot of time and be well-fed. You also need to understand that the escalation to commitment goes both ways: the more time they spend with you, the more eager they are to make some concessions to let the deal happen.
- Stay level-headed. Buying a car can be an emotional decision, especially if you love cars. Don’t get too excited when you see the vehicle of your dreams or when the seller says that this is the best deal ever. The dealer might show you the MSRP, the Invoice Price and other things to demonstrate what kind of discount you’ll get. These numbers shouldn’t mean anything to you. Don’t pay attention to them, because you’ve done your research beforehand, you know the numbers and should stick with them. Even if everything they say is right, be level-headed and trust yourself.
Before Going to the Dealer
- Do your homework. You have to do your homework and understand in a calm non-emotional environment what your buy-in price and walk away range are. If the amount you’re getting is not within the range, walk away! You’ve prepared beforehand in the right environment, so trust yourself. You also need to research all the incentives going from the manufacturer because your dealer may tell you that they are giving you a considerable discount. In reality, if this is a manufacturer’s discount, you can get it anywhere (for example, loyalty bonuses or employee pricing, etc.).
- Know the advertising laws. Understand what the advertised price includes. For example, in Ontario, all car prices need to be announced with all-in fees and a sales tax. If the dealer is pretending to give you a discount by not adding the delivery charge or the bogus admin fee to the advertised price, remind them that the advertised price already includes those.
- Understand seasonality. You should know what the best time to go to the dealer is. New-model-year cars start to come out in August and September, and you can already buy a 2020 car. This means that now it’s possible to buy a last year’s car at a good discount. At the same time, you’re unlikely to get a great deal on 2020 vehicles now. The end of the month and the end of the year are possibly good periods for buying a car because dealers are trying to make their quota to receive bonuses from manufacturers. Sometimes it works, and sometimes it doesn’t. In any case, you should be aware of this.
- Understand three transactions: sell, buy, finance. If you are trading in your car and getting financing from the dealer, you are doing three transactions: you are selling the car, buying a new one and obtaining financing.
Financing. One of the easiest things to do is to separate financing from purchasing. You do this by going to your bank or credit union where you are likely to have better rates. Sometimes dealers do have a back door to the bank and can get you a better rate than you’ll get yourself. This means that you still have to do your homework and know what the banks offer you and what the dealers offer you.
Buying and selling the car. There are two options:
Option 1: You negotiate both separately, so you know what goes into your transaction.
Option 2: You say to the dealer: here’s my car and here’s [x] amount of money (either cash or financed) and it’s up to you to decide if you want to reduce the new car’s price or give me more for the trade-in.
Both ways are valid.
Essential advice: If you trade-in your car, you get the sales tax benefit because you subtract the value of your old vehicle from the new one and pay less tax. You need to understand if the price of the dealer includes the benefit of the sales tax or not.
- Research the dealership. Remember: The dealer that moves a lot of cars gets extra bonuses from the manufacturer and can reduce the price more substantially than other dealers.
Look at their online reviews. Pay more attention to the negative ones, as some positive reviews are fake, especially if the dealer has 1,200 5-star reviews. That is not realistic. Look at the red flags in the negative reviews. For example, one of the dealers in Toronto is advertising super low prices, but when you go there you understand that the price is valid only if you get financing through them. That is very expensive.
You need to make sure that they have the car you want to buy. Sometimes dealers advertise a super low deal on the website to get you to the door and start persuading you to buy another vehicle. However, you may come there, but they don’t have that car. To avoid this, call beforehand or email them.
- Key rule: DON’T negotiate the monthly payment. There is absolutely no point in negotiating your payment, as there are so many things that can be hidden behind it and it doesn’t reflect the actual cost of owning the car. For example, your monthly lease payment may be far less than your payment with an auto loan. However, you may overpay in the end. What you need is to negotiate the price of the vehicle.
- Show them that you are serious. A salesperson will try to figure out what kind of prospect you are, how much money you have. They want to make sure they are not wasting time. They will ask you such questions as What kind of car do you want? Are you ready to make the decision today? If your payment is [x], will you buy the car today? They want to hear “Yes.” You need to show that you’re serious and ready to buy the car IF THE PRICE IS RIGHT FOR YOU.
- The first offer. A dealer will then ask you about the price you want. However, they will never accept your offer. You’ll have to agree to a lower price than your desired amount. Once you name the price, you don’t have to justify it; the best way is to be quiet and wait for the counteroffer.
- Counteroffer. They will leave for 15 minutes to “talk” to their manager. In most cases, they will bring you a monthly or bi-weekly payment. Your job here is to remind them that you’re not interested in payments and you want to look at the final price. You will need to state your total price again and stay quiet.
- Talk to the manager. The manager is likely to come out and tell you that your price is not realistic. They will use various tricks to persuade you in that. For example, they may show you the invoice price and say that they don’t make money on this car at all; if you leave, the deal will disappear, and so on. You should remember that you don’t care about any of those things. You know your numbers; you need to stick with them. The manager is likely to give you a discount right away. You are to make the decision.
- Agree or walk away. At this point, if the price is within your range of buy-in, you can agree to the deal, or you can still walk away. Dealers are likely to call you back with a better deal, but it could be marginal. So it is up to you decide how far you want to squeeze it and how much you have. If you are leaning towards acceptance, you can make the last-minute demand like free oil changes or merchandise to sweeten the deal.
- Review the offer. Whether you accept it on the same day or come back later, they will put a bill of sale in front of you. The bill will say something like “no verbal promises” and “all sales are final.” This means that your all previous negotiations don’t matter if they are not written down.
You need to look at: 1) The final price and make sure that it matches what you have agreed on, as some dealerships will add freight and admin fees afterward. 2)Read the whole thing. For example, if the dealer agrees on three free oil changes, but they are not in a contract, ask them to put it in.
Make sure you get everything in writing!!!
After the Agreement
- Confirm the numbers. Your transaction is not complete yet. If you are getting financing, your job here is to confirm the interest rate and total costs, to make sure they match up with your numbers and to say “no” to anything else.
- Don’t accept extras. A business manager is going to try to sell you a few extras. For example, an extended warranty. This can be good depending on the manufacturer. However, you need to make your decision and research beforehand. If this costs an extra $7 a month, you can agree. Thought, you can always get an extended warranty afterward as long as your car is under the original warranty, so you can check out how the service works before you commit.
Rustproof. There’s no point in this service. All new cars usually have at least a 5-year rust warranty. The warranty that a dealer sells you doesn’t cover anything as the maximum payout is often around $2500.
Paint protection and add ons. You can get all of this if you want aftermarket for way less than the dealer will charge you.
Know your numbers and do your homework. Keep level headed and make sure you stick to your guns. You can’t get a car for free, but you can always try and get the best deal possible with these car negotiation tips.