How to Negotiate a Car Price
  • Buying Guides

How to Negotiate a Car Price

By Autolist Editorial | June 16, 2021

The prospect of buying a new or used car is exciting, but the process itself can be daunting. Some people report that they'd rather have a tooth pulled than haggle with a car salesperson.

If you're among them, then it's good to know that there are some tips you can use to negotiate the best price for your next new car or used vehicle. Here's what to expect and how to react can help you prepare for this all-too-dreaded exercise when you're ready to put your haggling hat on.

Do Your Homework First

Before you even attempt entering into negotiations, you must show up armed with plenty of information. Learn the vehicle's average selling price in question and the main differences between makes, models, and trim levels. This is different than the sticker price and reflects the vehicle's popularity in your area. Also, be aware of any potential rebates from the manufacturer. The anxiety that you may feel with the car-buying process can be avoided or reduced by properly preparing yourself.

Negotiating on price is one of the last things you need to contemplate. Knowing what vehicle you want, down to the color and trim, is the first step in the process. Learn more about your options by reading up on car reviews and rankings.

To get a reasonable price, you need to be able to prove why you want to pay less, and naturally, that means you need to be prepared with facts and figures to back up your claims. Fortunately, the internet makes it easy to find valuable information that helps you approach the negotiation with confidence.

Arrange Financing or an Auto Loan Before Car Shopping

If possible, arrange financing for your vehicle purchase before shopping for a car. That gives you quite a bit of leverage with your car dealership of choice, and it can help you score the best possible interest rate.

In addition, being preapproved for a car loan can help you to do the following:

  • Set a realistic budget. Know how much car you can afford in advance and how much you will pay for borrowing the money.

  • Protect yourself from dealership markups. Most dealers offer financing through a preferred lender, such as an automaker's credit subsidiary. It can be convenient, but many take advantage of buyers with markups of interest that help their bottom lines. Even a bump of 2 percentage points in interest can add thousands of dollars to your loan over time.

  • Negotiate more effectively. If you already have a pre-approved car loan when you're car shopping, you're suddenly a cash buyer with a bigger chance of making a great car deal. That means the salesperson must focus more on the car's actual price than how much you can pay each month.

  • Avoid costly upsells. That extended warranty or other add-ons the car dealer pushes during the finalization of your car sale are easier to avoid if you already know you can't fit them in your budget. Finally, be sure to leave a gap in the purchase price of around 10% to account for sales tax and transfer fees.

Keep in mind that if you don't want the hard credit pull required to get pre-approved for a car loan, you can always go for pre-qualification instead. This financing option lets you have confidence that you will likely receive the loan at the rate quoted, and it only involves a (less-harmful) soft credit inquiry.

Have a Price Range In Mind

If you want to know how to negotiate the price of the car, you need to know how to recognize a good deal. First, your research should have already revealed what people are paying for the vehicle in question. Next, make sure you're finding pricing details for the specific make, model, trim, and year you want to buy, so it's an apples-to-apples comparison. For example, a Ford Explorer with the standard turbocharged four-cylinder engine will cost thousands less than one with a turbo 3.5-liter V6.

As a general rule, aim for $500 to $1,000 off the asking price, but that figure can vary widely depending on the vehicle's base price. Either way, go in with a realistic price goal as well as a firm idea of the most you'd be willing to pay.

Shop Multiple Dealerships

Beyond just ensuring that you find the best deal, shopping multiple dealerships lets you pit them against each other. If one dealer is offering a bargain, you can use that as leverage to convince another dealership to lower their price. Even if you don't get an offer, simply informing each dealership of your progress car hunting shows that you're not an easy target and that you're willing to move along if necessary.

Remember, you're the one spending money. That means you have power, and it makes visiting multiple showrooms a smart move. Make sure you're asking dealers to compete with and provide a price quote on the same specific make, model, trim, and year. A dealer may offer to beat a rival's lowest price but with a lower-grade trim level than what you're asking.

Be Firm with Your Target Number

You can approach this step in two different ways. One way is to tell car salespeople what you're willing to pay right off the bat. Then, let them know politely but firmly that if they aren't ready to play ball, you're going to walk.

The other option is to tell them that you have a figure in mind that you're unwilling to reveal. That forces them to make an offer that you can either accept or decline or even make a counteroffer. As you leave the dealership, you may be surprised by how much lower they're willing to drop the price below MSRP once they seem that you're serious.

Follow Up at a Later Date

If the dealer accepts your offer, that's great. You've done your job. If not, you may need to play the waiting game. A huge part of understanding how to negotiate a car price is accepting that patience is a virtue. The longer you wait, the more power you have (as long as your target number is reasonable).

Contact the salesperson you dealt with on a weekend evening, an hour or two before the dealership closes for business. They might be more willing to work with you at the end of the day if they didn't sell anything. You can apply this same principle to the end of the month, often with good results. If the salesperson hasn't hit their goals for the month, finalizing the sale may be worthwhile, even if they're not getting the largest commission (they get compensated in other ways too).

Ignore the Monthly Payment

A salesperson may try to entice you by offering a lower monthly payment, even though you're paying more in the long run. When you're considering an offer, always multiply the monthly payment by the total amount of months you'll be paying. Don't forget to also factor in any fees, taxes, and interest associated with the loan. Get the out-the-door price for the car before discussing finance options.

While part of learning how to negotiate price is certainly nailing down an ideal monthly payment, your primary goal should be keeping the overall cost down. Try not to miss the forest for the trees.

Boost Your Credit Score

That is a long-term step, but it can be a massive help if you can spare some time. If you have solid credit, you're much more likely to get a better financing plan and a lower price from the dealership. A high credit score also lets you get a pre-approved financing offer from a banking institution, credit union, or another lender of your choice. Then, with that pre-approved offer in hand, you can negotiate a better financing plan with the dealership.

Of course, sometimes boosting your credit is easier said than done, but even just paying down your existing bills can make a big difference.

Be Cold and Calculated (and Polite)

As you learn how to negotiate car prices, you're going to have to figure out your approach. In general, you're going to catch more flies with honey, so be friendly and polite. That said, if you let your emotions get the best of you, you may lose out on the deal.

Remember that this is a business transaction first and foremost. Your money is on the line, and often the negotiation process comes down to who's most stubborn. Offer a warm smile and a handshake, but don't be afraid to be firm and say no at the same time. Don't hesitate to speak to a sales manager at some point.

Skip the Extras

After you've arrived at a price, the salesperson may try to tack on some extra features you don't need. There's nothing wrong with springing for those amenities if you genuinely want them, but don't feel obligated to accept just because you won the negotiation. Make sure you go through the contract with a fine-tooth comb to know precisely what you're paying for, nothing more and nothing less.

Get the Most for Your Trade-In

If you have a car, truck, SUV, or van to trade in, getting the maximum trade-in value can make a big difference in your new vehicle purchase price and even affect other loan terms, such as how much your monthly payments will be.

For this reason, it makes a lot of sense to give your old car a boost in trade-in value when possible.

That may include:

  • Knowing your car's value. Check out Edmunds and Kelley Blue Book to find out how much your old car is worth and to get a fair price for it. Be upfront with yourself about your car's condition and any repairs needed so that you can get an accurate idea of how much you might get as a trade-in. Dealers rarely pay top dollar.

  • Fixing any known mechanical issues. The value of your car depends largely on its condition. If there are fixable things, it can pay to repair them, especially if they're minor. For instance, if it's possible to fix a check engine light, do it. It's also a good time to look for car recalls where you might get some mechanical problems fixed for free.

  • Making trade-in negotiations separate from negotiations to buy a car. A well-known tactic a car salesperson often uses is to inflate the new car's price to make it look like they're giving you top dollar for your trade-in. If you negotiate separately, you come closer to getting your vehicle's actual true trade-in value.

  • Giving your car some TLC and a bath. First impressions matter. Make your car look its best when you attempt to trade it in. A clean, well-maintained car will garner a greater trade-in value than one that needs some attention.

  • Providing repair and maintenance receipts and records if possible. Having this information on hand helps the dealership to understand the level of care your car has had.

  • Trading your car in when the season is right, if applicable. If you have a seasonal-type vehicle, such as a four-wheel-drive (4WD) in a snowy state or a convertible in a sunny locale, trading it in when the season is suitable for the vehicle will help you get the most for your trade. That's because the dealership knows that it won't have to wait long to resell your trade-in, so it is sometimes willing to negotiate with you for more value.

  • Getting more than one quote for your trade-in. Shop around with more than one dealership to figure out which is willing to give you the biggest bang for your trade-in buck.

Trade or Sell?

Remember, although using your car as a trade-in can be an easy and cost-efficient way to get rid of it, make a more significant down payment on a vehicle you want, and avoid the hassle of dealing with buyers, it's not the only route you have.

Sometimes it makes more sense to sell it yourself, even though it may take more time. You will almost always get the most out of your vehicle by selling it in a private-party sale because dealerships only make money on your trade-in if they can resell it for a profit. With a private-party buyer, the person is just looking for a car to buy and not necessarily looking to profit from it.

While trading in your car is relatively simple, it also usually means you get the car's wholesale value at best. Selling it yourself can require a considerable amount of elbow grease, from dealing with lookers and riding on test drives to placing ads and taking calls about the car. Still, you'll come closer to the car's KBB.com or even retail market value when you sell it yourself.

Diversify Your Car Purchase Search

While learning how to negotiate the best car price is a worthwhile endeavor, so is learning how to shop classified ads, online ads, and other private sales. Dealerships have a goal, and that's to make money. Plenty of private sellers are willing to offer a more significant bargain.

As a car buyer, the most critical step is doing your due diligence to find the best deal. Use all the tools that are available to you when you're ready to make a car purchase, and you should have no problem finding the perfect car at a price that fits comfortably within your budget.