6 Things to Remember When Negotiating a Car Purchase

[nextpage title=”Intro & Tip 1: Find the Right Car”]
Unless you’re buying a car from your dad or sister-in-law, you will need to do a bit of negotiating to get the best price. Don’t worry though – this can (and should) be a friendly, pain-free process. Negotiating a car price can even be quite fun, especially when you think back on the great deal you got on your new ride!

Whether you’re a seasoned haggler or a negotiating novice, just remember these six points to guarantee that you’ll get a good car at a good price.

• Tip 1: Find the Right Car — Head to the Dealership
• Tip 2: Determine the ‘True’ Value of the Vehicle
• Tip 3: Get a Sense of the Seller
• Tip 4: Check the History and Condition of the Car
• Tip 5: Close the Deal
• Tip 6: Financing and Trade-ins

Tip 1: Find the Right Car — Head to the Dealership

This may seem obvious. Of course you need to find a car before you can negotiate for it! But there are two mistakes that most car shoppers make at this point: saying too much, and buying too soon.

We certainly encourage having a thorough look around dealerships before you decide what car you want (even if you’re planning on buying privately). You can get some idea of what to look for from our guide, What Car Should I Buy, but nothing helps narrow things down like seeing a bunch of cars in person. But it’s important not to say too much. It’s perfectly acceptable to tell the dealer that at this point you don’t even know what kind of car you want – you’re just looking around to get an idea of what you might want for your next car.

That way they know you’re not going to be buying a car today, so you’re not wasting their time and distracting them from a potential sale. It should also keep any pressure to a minimum, allowing you to browse and narrow down your options at your leisure.

Of course, it is okay to get the assistance of the salesperson; just keep things general.

You might say…

• “What do you have as far as compact, four-door sedans?”

or

• “I like the Toyota Rav4 and would like to consider similar alternatives. Do you have anything like that?” (Hint: the answer will always be “yes”. :) )

Questions to avoid would be things like…

• I don’t want to spend more than $10,000. What do you have in that range?
• I’m planning on trading in my 2016 F-150. How much could I get for it?
• What are the monthly payments on this 3-Series?

These questions will come up later in the process. For now, you don’t want to ask (or say) anything that gives away your intentions, including your budget, whether (and what) you plan to trade in, whether you will be leasing, financing, or buying outright, and exactly when you plan to buy (it’s fine to just say ‘not immediately’, or ‘within a few months’). You want to honestly show that you do plan to buy a car and aren’t wasting their time, but you won’t be buying immediately.

And you don’t want to buy immediately! If these steps guarantee you get a good deal, a sure way to guarantee you get a bad deal is to go to a dealership and buy a car (or even put down a refundable deposit) without knowing in advance exactly what car you will buy and for how much.

Finally, remember to be friendly at this stage. If you end up buying from a dealership, you will likely be interacting with the future seller of your car now. Be polite. Don’t monopolize their time if they have other customers, and get the card of the salesperson you talk to so that you can ask for them in the future (and so they can get your eventual commission if you buy there). Car dealers are generally decent people, just like you, and you’ll do far better being friendly and respectful than adversarial.

[nextpage title=”Tip 2: Determine the ‘True’ Value of the Vehicle”]

Tip 2: Determine the ‘True’ Value of the Vehicle

Once you’ve settled on a particular vehicle, you need to determine what it’s really worth. This may or may not bear resemblance to its listed price!

There are websites out there that will give you an estimate of the market value of used vehicles. The most popular of these is the Kelly Blue Book. If you’re in Canada, you can try the Canadian Black Book pricing guide. However, used cars are all unique, so this is not an exact science. It’s a decent starting point, but you need to do a bit more digging.

Fortunately, you’re likely already familiar with AutoTempest.com. Using the AutoTempest car search engine, you can cast a wide enough net to find very similar vehicles to compare to the one you’re hoping to buy.

If you can find prices that compare favorably, go ahead and print off the listings; you can use them as negotiating tools later on. Of course, pay attention to things like mileage, condition, and options installed. It’s possible for two vehicles with the same make, model, and year to be worth very different amounts. Location matters too, but there are plenty of car transportation options out there, so don’t worry about it too much – especially for negotiation purposes.

Of course, the prices you will find while doing this shopping around are all listing prices. Presumably they are all somewhat inflated, since the sellers expect people to negotiate – although not as well as you will!

With eBay Motors, you can view completed listings to see what people have actually paid for similar used cars recently – a very powerful negotiating tool. (When you search completed listings, the ones shown in green are those that actually sold, while the others expired unsold.) AutoTempest actually provides an easy shortcut for this. Just search for your car at AutoTempest.com, then on the results page, find eBay Completed Listings in the Model Info section of the sidebar.

[nextpage title=”Tip 3: Get a Sense of the Seller”]

Tip 3: Get a Sense of the Seller

Now you’re finally ready to talk to the seller!

If you’re looking at a car on a dealership lot, try to time things so this step occurs around 7-10 days from the end of the month. Salespeople generally have monthly quotas to achieve, so may be more motivated to sell near the end of the month. However, don’t leave it too late, since you want time for some back and forth, as well as the vehicle inspection and any work you want done before buying the car. (It’s always easier to get things done before buying than after!)

So, at this point you know:

• The objective value of the car you’re interested in from comparisons with other listings, KBB pricing, and eBay completed listings.
• Its value to you, based on your budget and alternative vehicles you’ve looked at. And you have some idea of its value to the seller, based on their asking price. However, the asking price just represents what the seller hopes to get for the car (plus likely some room for bargaining). That amount could be very different from the amount they are actually willing to sell the car for.

Now you want to try to get an idea of how much the seller is willing to sell the car for, so you know how much to offer. Obviously you want to offer less than the asking price, and generally less than you are ultimately willing to pay, but not so little that the seller is offended or writes you off as not being serious.

So, how do you figure out what the seller really wants for the car?

One technique is simply to ask them. This can work well with private sellers. Something like:

• “How much would it take, in cash, for you to sell today?”

Private sellers are generally selling for a reason: they’re leaving the country, or they need the money for some reason, or they’ve already bought another car and it’s just costing them to keep this one insured. Regardless, your ‘offer’ may sound quite attractive, and they might come back with a number much lower than the asking price. Even if they don’t, their answer will probably tell you something.

Back in my college days I had to sell my car to move across country for school. I was asking $6500 and eventually sold for $2200 the day before I left. The buyer was smart enough to ask a question like this, and I honestly told him to make me an offer and if I didn’t get a better one by the end of the day the car was his. You probably won’t get that lucky, but it doesn’t hurt to ask!

Here’s another question that works well for both private sellers and dealers:

• “Are you flexible at all on the price?”

Of course they are. Almost everyone selling a car is at least somewhat flexible on the price. But their answer may tell you how flexible. I was looking at a car a while back with a sticker price of $29,900. The dealer’s answer to that question was something like “Sure, I mean, nobody pays sticker price. Of course, if you offer me $25,000 I would have to say ‘Sorry.’”.

That’s a ton of valuable information! Very different than if he’d used $29,000 or $22,000 in his example. From his answer, I’m guessing he would sell the car fairly quickly for say $28,000, would likely get down to the $26,000-27,000 range, and if I were willing to wait him out long enough, might even eventually sell for close to $25,000, but probably not less. Those are all guesses of course, but they help narrow things down. (It’s also important to remember that this is just an example; certainly not every car will be priced thousands of dollars above what the seller is willing to accept! That’s why we go through this process to try and get a sense of how much room they have to negotiate.)

If you get the sense that the seller is looking for much more than you’re willing to pay, don’t give up completely. You will probably have to move on with your car search, but there’s no harm letting the seller know where you’re at.

In the example above, say my budget was $24,000. I could say something like “Sorry. $24k is the most I can afford. I totally understand you’re looking for more, so I appreciate your time. If anything changes in the future, please feel free to give me a call.” You might not hear anything. But quite possibly, especially if the seller is a car dealer, you’ll hear back in a week or so with an offer of, say, $27,500. They probably won’t get down to the price you’re looking for, but anything’s possible—if the car still hasn’t sold a couple months down the road, you might get your $24k, or close to it.

Now, if it does look like you’re close to a deal, it’s time to get the Vehicle History Report and have the car inspected. So read on…

[nextpage title=”Tip 4: Check the History and Condition of the Car”]

Tip 4: Check the History and Condition of the Car

Negotiation aside, it is absolutely critical to get a vehicle history report and to check the vehicle’s condition before buying any used car. Don’t make a mistake that could cost you thousands of dollars and spoil all the fun of your new car. Check the history and condition of the car! No exceptions! AutoCheck and CarFax vehicle history reports provide detailed information on past odometer readings, ownership history, repair and maintenance history, liens and more. CarFax has wide recognition as the benchmark for vehicle history reports. AutoCheck provides a comprehensive score (called the ‘AutoCheck Score’) that helps you determine vehicle quality and compare cars at a glance, as well as any auction history a vehicle has. Both reports are priced similarly, though if you’re looking for reports on more than a few vehicles, AutoCheck provides better value.

Be aware – many dealerships will offer to “save you money” by having their service department do a full inspection of the vehicle for free. Many of these are legitimate and will do just as good of a job as independent garages. Unfortunately some won’t, and you won’t know the difference until after the fact. So unless the car is still under the manufacturer’s warranty, I highly recommend getting an independent inspection. It’s worth it. Reputable dealers should work with you to facilitate an inspection at a nearby independent garage. If they won’t, you should find somewhere else to buy. Likewise if you’re dealing with a private seller, you can find a convenient, nearby garage to do the inspection. You will deal with the shop directly, and the seller can choose whether they would prefer to drop the car off there themselves, or if they’d like you to do it. (For more expensive cars, the seller generally will want to do it themselves, and only once it’s clear you’re serious about buying.) Even if you decide not to buy, it’s nice to give the seller a copy of the inspection report so they can use it to help sell the car.

The great thing is that not only can inspecting the vehicle and checking on its history save you from making a huge mistake, they can also save you some money by helping you negotiate a better deal. No used car is perfect. Maybe this one is from out of state, or the brake pads are nearly worn out, or there are other minor mechanical issues. While these likely won’t change your mind about purchasing the car, they can affect its value, and the seller should recognize that.

Most articles I have read suggest doing something like this – negotiate the best possible price for the car first, then do the inspection and insist that any issues be resolved or the price be lowered accordingly. This method can work, and it may be the best way to squeeze out every cent. However, the problem with the negotiate-first technique is that you’re laying your cards on the table. Say you negotiate to buy a car for $12,500, subject to a clean inspection. The inspection comes back showing the car needs about $600 in minor repairs and maintenance, which you ask the seller to cover. Well, the seller now knows you have $12,500 to spend, and that you’re willing to buy the car for that much. You will probably have to really stick to your guns and wait them out to try for that extra $600.

To avoid this, another option is to get the history report and do the inspection before making any concrete offer on a used car. You should certainly negotiate the seller down to a range you’re comfortable with, but if possible, hold out on agreeing on an exact number. Or, if you need to talk numbers to get the seller down to a range you’re comfortable with, you can offer something like, “$18,000, minus any repairs that show up on inspection.”) This is different than offering 18k “subject to inspection”, or something like that. In the latter case, when the inspection comes back with minor issues (which they always do), the seller can claim that that level of wear is anticipated. If you’ve said all along that your price includes any repairs that will be required, you’re in a stronger bargaining position. (Much like when you mention that any offer includes all applicable fees, which it always should.) That said, if you do have the vehicle inspected before arriving at a firmly agreed price, you have to be prepared to walk away (sacrificing the cost of the inspection) if you don’t feel the seller’s best offer post-inspection is fair.

[nextpage title=”Tip 5: Close the Deal”]

Tip 5: Close the Deal

Now that you’ve got a great used car in your sights, there are two methods you can use for the actual bargaining process: the “pick a price and stick to it” method, and the “haggling” method. Use whichever you feel most comfortable with.

Stick to it

With this bargaining method, you will start by offering what you believe is near the lowest amount the seller will accept for the car. (Assuming that amount fits with the value of the car to you.)

Cheat to the low side if you’re most interested in getting the best possible price, or to the higher side if you are in love with this particular car and don’t want to risk it getting away. Let the seller know that you don’t like haggling, so you’re offering the exact amount you’re willing to pay, and it’s firm. Be sure to include any repairs or maintenance items you want done as conditions of buying.

Many sellers will test you with a counter offer. Just politely respond that you’re sorry, but you can’t go any higher than your offer. If they don’t accept, leave your phone number and ask them to call you if they change their mind. (You may have to repeat this step several times, especially with dealerships.) Eventually, if your offer was reasonable and no one else buys the car first, they will likely accept it or give you a counter-offer close enough that you can go ahead and take it.

Be aware that a good salesperson will try to create the appearance of outside interest. There will be people ‘coming to look at the car later today’, or ‘interest from multiple parties’. This may be genuine interest, and it’s always possible someone else will buy the car. If that happens, there’s always another one out there. But it’s just as likely that you are the only really serious buyer, and when another one doesn’t materialize, the seller will accept your offer.

Haggle that price

With the haggling method, you will start with an offer lower than the “stick to it” method above. You want to offer as low as possible, while still being in the seller’s ballpark. From Tip 3, you should have some idea of what the seller is trying to get out of the car. It’s fine to offer less than that, but you want to be close enough to at least raise their interest. If I want $20,000 and you offer $10,000, I’m probably just going to say “Thank you, no,” and forget about you.

Even if your offer is in the right ballpark, it will still be somewhat of a lowball offer, and most sellers will probably simply tell you they can’t sell their car for that much. The smart seller is trying to get you to raise your offer without giving anything on their end. This would be a good time to ask something like “Hmm.. well, how much would you take?” If they repeat the asking price, you’ll fall back to “Well, thanks for your time. Please give me a call if something changes.” On the other hand, if they come back with a counter-offer, you’re in business.

Basically you want to try and give the impression that you’re close to your maximum, so the seller is motivated to lower the price to make a deal. One way to do that is to increase your offer by smaller amounts each time. Say the asking price is $19,900 and your initial (low) offer is $14,000. The seller counter-offers by saying $18,000 is the best they can do. You could come back with $15,000 (apologizing, and saying that 18k is just out of your price range). If they eventually counter again, next time you just increase to $15,500, then $15,700. The seller will see you coming up on a limit, and if it’s in their range they may eventually offer $16,000 or thereabouts, thinking it is the most they will get out of you. Of course, not every seller will be willing to come down that much. Sellers of highly sought after cars might not move much at all. And it’s also possible someone else will snap up the car while you’re holding out for a lower price. There are always other cars out there though, so if your top priority is getting the best possible deal, that’s the chance you take.

Specific amounts are another good tool. An offer of $12,250 suggests you’re operating in a tighter range than $12,000. The first encourages the brain to think in terms of hundreds or fifties, while the second is wide open. (Incidentally, that’s the real reason why many products have prices like $9.95 instead of $10, not because people are fooled into thinking the former actually costs less.)

Finally, make sure you mention with any offer that it is for the “out-the-door” price, after any fees or service charges, except for government sales taxes. That way if they try to hit you with a $225 documentation fee at signing or anything like that, you can politely refer to your previous discussion and ask (or insist if necessary) that it be removed.

Also, make sure you get any extras in writing. If the car comes with two keys, make sure that’s mentioned, unless you have them in your hands at signing. If any work is to be done on the car, get it in writing. Even when dealing with honest, reputable sellers, things can get forgotten – it is totally reasonable and smart to request everything in writing. Or even better, have the work done before signing anything.

My last car had a couple of windshield chips that were to be fixed before I came to pick it up. I got it in writing, but when I went to get the car the chips were still there. It turned out that they had already been filled; they were perfectly safe, but looked terrible. Had I dealt with them before signing instead, I could have asked for a replacement windshield or a lower price.

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Tip 6: Financing and Trade-ins

Notice that this entire time we’ve been talking in terms of the price of the car only. What if you’re planning on financing? What about the value of your trade-in? There’s a good reason for that. If you bring up either of these too early – ie. before you’ve settled on a sale price – they will just get rolled into that price by the seller.

For example, say you’re looking at a car listed at $11,995 at a local dealership. Right off the bat, you ask for an appraisal of your trade-in. “Good news,” he tells you, “we can give you $2500 for your old car!” You know the car’s only worth $1500 or so in a private sale, so you think, “Great! This guy’s so eager to sell me this car, he’s giving me an awesome deal on my trade-in.” You then apply all the strategies you learned above, and manage to eventually get the price down to $11,000 – so along with your trade you pay $8,500.

Sounds alright. But what really happened? The dealer knows your trade isn’t worth much to him, but he wants to give you a good deal to get you interested. Fortunately (for him), he can just mentally raise the price of the car you’re buying! Without the trade he might have been willing to go lower, but now the money he’s losing on your trade has to be factored in.

If you wait until after a price is settled to talk about the trade, you have a better chance of finding their true best price for the car they’re selling, and then you can find out what the trade is really worth to them. If it’s too low for you, you can always sell privately. (Do remember that there is usually some savings of sales tax when you trade in though, plus obviously selling the car separately will take time and effort, so factor this into your decision.)

If asked about your trade before you’re ready, you can always just say you’re thinking you’ll probably sell privately. If they offer an appraisal “just in case”, politely let them know you’re not really interested until you’re sure what car you’re buying.

Read more tips for getting the best price for your old car.

Financing is similar. Most dealerships make some money when you take their financing, so if they think you might finance, they may be willing to give you a better price. However, if they know for sure that you’ll finance, they will want to discuss in terms of monthly payments, and it will be more difficult to feel out the lowest price they will accept for the car.

That’s why it’s better to wait until the price for the car is settled before discussing financing. Don’t lie, but you can just say you haven’t decided yet. And if you are considering financing, don’t just settle for whatever the dealership offers. We recommend also getting quotes from banks and other vehicle financing companies such as AutoCreditExpress, up2drive, CarsDirect and MyAutoLoan.com.

When you’re ready to talk financing with a dealership (ie, after all other negotiating is done!), it’s best to come pre-armed with competing quotes. First ask the dealer’s rate, then if one of yours is better, you can see if they will beat it.
[nextpage title=”Car Negotiation Recap”]

Car Negotiation Recap

So, now you have all the tools you need to get a fantastic deal on your next car!

1. Find the right car, without discussing budget, trade-in, or financing.
2. Determine the true value of the vehicle, using the AutoTempest car search engine and the tools it links to.
3. Get a sense of the value of the car to the seller. Try to determine how much they really want.
4. Buy a Vehicle History Report and get the car inspected by an independent mechanic.
5. Come to an agreement, either by haggling or picking a price and sticking to it.
6. Now, and only now, talk financing and trade-ins. If you’re financing, be sure to get competing quotes first.

If you’re interested in other ways to get great deals, check out our article on car auctions too. And, be sure to get competing quotes on your car insurance as well. No sense getting a great deal on your car then paying too much every month for your car insurance. Then, head to AutoTempest.com to start the search for your next car!

Header image courtesy of TexasEagle on Flickr.