How to Negotiate a Car Price When Paying Cash
Anyone who needs to buy a new or used car dreads the process and negotiations. It seems the moment a customer pulls into the car lot, throngs of salespeople descend on them, hardly letting them get out of their vehicle. Car buying at a dealership makes for an often confusing and frustrating transaction. Usually, car buyers leave the dealership without a new car or drive away in a new vehicle they know they paid too much. However, if you pay cash upfront for your purchase, you have more bargaining power from the get-go.
Do Your Homework Before You Go
Before heading out to shop for a car, do some homework first. Decide what whether you want a used vehicle or new, what options are essential, color choices, gas economy, two or four-wheel-drive or all-wheel-drive, and do online searches so you know what kind of details you should jot down. Knowing what type of vehicle you need to buy and what options you need prepares you to start searching dealership lots.
Get Your Negotiator Hat On
How you present yourself at the car dealership makes a difference. First, call and schedule an actual appointment to meet with car salespeople. Too many times, a car buyer gets caught up in the sales hype, as well as add-ons dealers stick on such as paint protectors or even exterior wraps. Making an appointment gives you time to arrive at the showroom with your information and negotiator hat on, leading to an air of confidence. And that makes a car salesman nervous.
Part of your homework needs to research price ranges and markups for the type of car you want to buy. Used or new isn't as important as having a printout with you of the current market value from an auto website like Edmunds, Kelley Blue Book, or NADA. Run some prices on a vehicle with different options, mileage, and engine size and print out the average retail price, average trade-in price, and high retail price. When it comes to the back and forth price game, you already know what you'll settle for. And remember, keep all your information under your hat. Don't let on that you did your homework. That only makes the negotiations tougher.
Load Your Trojan Horse and Save the Good Stuff for the Battle
Once you have stacks of paper with all your notes and numbers, place them in a folder, separated in categories. If you can, keep this folder off the desk. Don't open it until you're ready to let the most aggressive negotiation begin. If you give the salesman too much information at first, they will move quickly to hardcore sales tactics. Your goal is to be cool, calm, and collected.
If you plan to use your current car as a trade-in, do not reveal this to the salesman until the right timing. Let them roll out the asking price and potential discounts or incentives that apply to customers like you. Dealers will finagle the profit margin on the sales price to appear they're giving you a lot of money for your trade-in. When the price is right and time is right, and you decided you want the car, let them know you changed your mind and will trade-in your vehicle.
The final tip here is don't let the sales associates know you'll be paying cash until right before you accept their offer. Let them know that you'd like to find a car and agree on a price first. Then maybe you will talk about financing with them later. Typically, the salesperson will think you didn't get funding before coming into the dealership, and the sales staff will assume they can sell you on in-house financing. Car buyers who must use financing to buy a car should always get approved by a third-party bank or credit union before they head to the dealership, especially one where you already have a long-standing relationship.
Play Your Cards Right
If you get to the place where you decided on a car, and you find yourself face-to-face with the king or queen of price haggling, be sure you're ready to play your cards right. Think of your negotiations as your cards; you have the car you want with the options and color, you know you won't need financing or an auto loan, so that card is a keeper, but you're not sure of the last few cards.
Dealerships typically present cars by offering a monthly payment price—not the actual purchase price. If you ask for a lower payment, they will provide a lower price, but the real cost of the car just went up. A lower monthly payment doesn't mean a lower price. Make them reveal the actual list price of the vehicle.
Then, have them print an estimate sheet with the actual car price and have them include all sales tax, fees, registration costs, and any other amounts to give you the final price with everything included. With that card in hand, you are well prepared to negotiate a lower price. The salesman should be a bit worn at this point from all the ways you've dodged their haggling. But they will come back with a second wind.
Come Up from the Rear for the Win
Begin your offers with a price you already planned as the lowest. Somehow, use your phone, tablet, or pen and paper, take the MSRP, deduct the incentives, and that will give you a starting price. Always begin with the lowest.
With all your information and numbers in front of you, plan answers to the next decision: the financing options. It is the best time to come up from the rear and start going back and forth on price. The salesman thinks he has you convinced and you want the car. They already know they can make more money on the sale by offering you their in-house financing. They see the finish line in sight and feel confident the deal is a good as done.
Let them ask you about financing and then drop the 'cash card' on them. Once you let the sales staff know you will be buying the car outright for cash, you can offer reasons why the car price can be lower. Are there any rebates? Will they throw in an extended warranty? After all, you're paying cash, which is a fast deal for the salesman and less paperwork and preparation. Salespeople make a profit off selling you a car in three ways; selling the vehicle, setting up financing with their banks, and making money on your trade-in when they resell it. So a cash transaction cuts down their profit.
Now you're in the prime position to take control of the negotiations. Here, you can push to ask for other niceties such as free maintenance, floor mats and other minor accessories that could've added hundreds of dollars to the purchase price. The salesperson will likely shy away from giving in to perks that may cost him more in the end. That puts you in a better position to negotiate your very bottom price.
Dig Your Heels in for Final Lap
Even racecar drivers know they have to conserve fuel to get to the finish line, checkered flag waving them into victory. The final terms of the deal are being settled, but it's still important to remain calm and steady. Don't get emotional, stand firm, and never let on that you know you're winning. The price tags on the cars in the lot are seldom the actual price. Buying a brand new microwave in a department store is typically non-negotiable, but you're talking about spending thousands of dollars on a car you want to last you a long time. So negotiate as long as you can. The dealer doesn't want to lose your sale, and the salesperson knows that.
That person isn't merely trying to get the best price for the dealership. They want to make the highest profit for the dealership, which in turn affects their commission. Once they turn down the extras you asked for free, and now that you're trying to lower the price of the car, they will resurrect the 'sell-ups' like roadside assistance plans, additional and extended warranties, and other enhancements like seat covers and new mats. Don't do it. Keep your heels dug in.
So the price negotiations continue. The salesperson now points out the deal he's offering is so much lower than the sticker price that the dealer will lose money. That, of course, is not true. They just threw a curveball hoping you'd have no idea what the actual sticker price is, and you now feel bad that you keep trying to get the cost of the car even lower. Know your terminology. MSRP stands for Manufacturer's Suggested Retail Price, a number decided by the actual manufacturer that has nothing to do with the current value of the car on the lot or how much your car purchase will ultimately cost.
Bring It All In for a Landing
The negotiation process when buying a car can be daunting. First, there's the test drive. You've talked additional options and sticker price, financing and watched the salesperson run back and forth to the dealer's office to present your offers. It's the dealer who ultimately has the power to accept or reject your offer. But they aren't just talking about numbers in the office. The conversation is likely about how the salesman can use intimidating tactics to get you to agree to the price they want. Typically, the dealer has a large glass window so you can see the back and forth pleading between the salesperson and sales manager.
There are a few little tips to keep the landing smooth. Mention you have bids from competing dealers even if you don't just to perk the salesperson's curiosity. When they ask you to show the bids to them, you can simply say you didn't bring them but have the numbers in mind. Or, if you did obtain any quotes before going to this dealership, asked the salesperson to beat the price. It will only help if the previous dealer offered a bid on a similar car with comparable options and mileage.
Be patient and polite. An excellent ending to negotiations when buying a car, especially for cash, consists of purchasing the vehicle for at or only a small amount above your bottom figure. Remember, the salesperson does this back and forth price game all day and likely has been for years. It's expected, but you were ready.
Keep your expectations real as the price you want to pay for the car may be too far out of the dealership's bottom line or lowest price. If you can successfully negotiate a price you have enough cash for plus or minus a small amount you know you can afford, take it. Being too uncompromising could ruin the deal, and you'll have to find another car you like, at another dealership, with another salesman, an exhausting process.
Buying a car for cash and being able to haggle with the invoice price and complete the deal is not for the faint of heart. Think of it as a challenge and practice before you go. It might consist of either play-acting in the mirror or with a friend. If you're anxious about the prospect of a battle of the wits, enlist the help of a friend or family member to accompany you. Be sure they are informed about all your research and you can trust them to handle the haggling the way you would. And don't overlook private seller deals. Going with a private party sale can mean getting a better price.
Bottom line: money talks, and it always will. When you have all the cash you need to pay for your vehicle purchase, you can negotiate for better deals. Have a strategy worked out going into the sale, and you can get the best price possible on your next new or used car.