Question(s) about negotiating for car at a dealership

[slugg]

Hey there. Inspired by this thread, I've got a question, which will probably lead to more questions. I didn't want to derail the other thread; this one is about negotiation strategy, rather than how to negotiate for a third party.

So my question is this: when negotiating, at what point should you tell the salesman how you're going to pay (cash versus financing)?

And some what-if's:
- What if you don't tell them, and therefore, they only give you conservative (for them) prices?
- What if they refuse to negotiate until you tell them how you're going to pay?

Let's get some more Q&A going on the topic of negotiating a car deal. It'd be fun!

 

[Bignate603]

If they're not willing to negotiate thank them for their time, give them something with your name and phone number, then tell them to call if they change their mind and walk out the door.

Your negotiating power stems from the fact that you don't have to buy the car from them. If they don't want to negotiate then just leave and go talk to someone that will.

 

[Ferzerp]

I'm not going to claim to know the best way to buy a car, but here are a few things to keep in mind.

The more items they try to negotiate at once, the more they are trying to hide from you.

If they ask how much you're willing to pay a month at any point, walk (or give them a warning if you're feeling charitable).

Know what you are willing to pay for the vehicle you are interested in.

Negotiate the price of the vehicle independent of anything else, whether that is financing, or trade-in.

If financing, come in knowing what terms a lender independent of the dealer will give you for the price you are willing to pay (don't forget tax). After the price is agreed upon, you can let the dealership try to beat the terms you already have with their lenders if you want. This will protect you from hiding additional profit in the financing terms.

Ideally, sell your car in a private sale if you have one to get rid of. If you're doing this though, make sure that the amount you can get in a private sale is more than what you can expect in trade-in + the sales tax discount you'll get due to the trade-in value. Related to this, is know what your trade in is worth, and be willing to walk away, or purchase the car and later sell your trade in privately if you are not given an acceptible offer for it.

 

[alkemyst]

I come in telling them what I will pay for the car.

Once I get that price then I discuss trade in or not and how I am paying.

9times out of 10, dealer financing is giving them additional profit. No matter what their 'guy' tells you, unless you are getting <2% APR you can get a better deal on your own.

 

[Gillbot]

If they're not willing to negotiate thank them for their time, give them something with your name and phone number, then tell them to call if they change their mind and walk out the door.

Your negotiating power stems from the fact that you don't have to buy the car from them. If they don't want to negotiate then just leave and go talk to someone that will.

I come in telling them what I will pay for the car.

Once I get that price then I discuss trade in or not and how I am paying.

9times out of 10, dealer financing is giving them additional profit. No matter what their 'guy' tells you, unless you are getting <2% APR you can get a better deal on your own.

these

I have a price in mind and let them give me their "speech", then I tell them i'll pay this and walk out.

 

[slugg]

So how do you figure out a realistic price? You know, low enough to make it a good deal, but not so low that they can't do it?

 

[Raizinman]

If you are a Sam&#8217;s Club or Costco member you might look into their special pricing. I purchased a Honda using the Costco pricing last month. This gave me the dealerships lowest price before I even entered the dealership. There was no negotiations, no haggling, no arguing. I hate that part of new car buying. The Costco price was actually about 3 to 4 thousand below what I thought I was going to pay. If you are not a Costco or Sam&#8217;s clubs member, you might thing about joining (around $45 per year) just for the new car benefit. It saved me thousands.

If you just don&#8217;t want to join Sam&#8217;s or Costco, I spent most my life working in dealerships. I can tell you that you CANNOT outsmart the salesperson. No matter what deal you make, they will always get the better end. As someone mentioned prior, the less things on the table to negotiate, the better the deal &#8211; meaning, don&#8217;t try to negotiate the price of the new car, the price of your trade, dealer options, extended warranty, etc. etc. in one lump sum. They do this every day, know all the tricks, and nothing gets by them.

One dealership I worked at use to throw the salesperson a party if they were able to get MSRP from a vehicle. We had lots of parties. The salesperson is on commission. He gets a percent of your money. The more money you spend, the more he gets. He has no reason to be your friend or to help you negotiate the price lower.

What is a good deal or good price? Remember, something is only worth what another will pay for it.

 

[Doppel]

So how do you figure out a realistic price? You know, low enough to make it a good deal, but not so low that they can't do it?

There are a few sites that do it. For example truecar.com, but it's not as effective or accurate as some others. You can also post on forums and ask people with that car what they recently paid, but incentives change quickly and from state to state as well. You can also just call three dealerships in the area and play them against one another. Commonly a salesman will say "come stop by", to which you respond you don't have time, you need a number on the phone. It costs him nothing to give you one and thus he should.

 

[alkemyst]

So how do you figure out a realistic price? You know, low enough to make it a good deal, but not so low that they can't do it?

autotrader, kbb and edmunds give you the tools you need.

Edmunds TMV pricing is often pretty good on new cars.

For used autotrader is a good indicator of what's expected, but figure those prices are a bit higher than what will be paid.

If you are looking at a brand new car, it's best to figure out your price and just call around. Expect to hear how rare and unobtainable a '2012 mass produced sedan' is from some and that you need to act right away.

When someone is serious about dealing, make sure you let them know your price was an out the door price and not pre-addons like dealer prep, scotchguard service, etc.

Some dealers add-on over $2000 in bullshit fees.

 

[slugg]

Hm. So dealer financing is another profit maker. Should should I refrain from telling them that I'd want to pay in cash?

 

[Ferzerp]

Hm. So dealer financing is another profit maker. Should should I refrain from telling them that I'd want to pay in cash?

The price you negotiate for the car is the price you feel is fair. The payment method should not play in to it. Don't discuss payment until a price for the car is agreed upon. Remember my earlier post, don't let them bundle negotiations for multiple points together. They love to do this. They *really* love it when someone comes in and lets them bundle car price, trade-in and financing together so tightly that they are able to talk with you about monthly payments and nothing else.

From the questions you're asking, it seems you're going in to these things with the wrong dynamic in mind.

A car dealer is not doing you a favor. They are never doing you a favor. You have *all* the power. You are giving them money for a product. They aren't your friend. They are a store just like Target, but with higher priced items and a willingness to negotiate on those prices.

If they don't want make a deal in the manner you want to, then just leave. There are plenty of other car dealerships around.

 

[MiataNC]

Hm. So dealer financing is another profit maker. Should should I refrain from telling them that I'd want to pay in cash?

Here is how it works...

1. The dealer runs your credit through several banks they prefer to use and have agreements with.

2. The banks come back with a rate of 3% for 60 months

3. Dealer comes to you and says: "Good news! We can get you 4% for 60 months."

4. You sign and the dealer pockets an additional 1% on the financing on the deal.

 

[SyndromeOCZ]

Paying with cash will make dealers happy now days. With many people defaulting on their loans they may not get the full amount. If you pay cash they know they will get it all and right then. You should always pay less than what they're asking for.

 

[JulesMaximus]

Funny, my friend and I were just discussing this via e-mail today. Here is a snip he sent me that definitely pertains to this topic. Jen is his wife and Tom is his brother.

Car dealers are their own worst enemy. And people like Jen are their greatest foes. Because Jen will just shop, shop, shop... and keep shopping and comparing. She doesn't understand why the dealers act the way they do... because they want you to buy on emotion. "I WANT THE RED ONE!!" They're not interested in you getting a deal. And the more emotionally involved you get (like spending two hours at the dealer) the more likely you are to just throw up your hands and go "okay, I'll take it".

And most people are bad at math.... you know, like when they ask you "what can you afford a month". Um, I can afford a whole lot, but would prefer to spend a whole lot less... "how little can you accept a month" is always my retort to this question.

Honest to god, the funniest, most ghetto buying experience was when we went with Tom to negotiate for his monster truck. Jen was completely unemotionally attached, so she wasn't giving a penny. Tom was dying, but I made him promise to just let Jen do her thing. They would do things like come back and extend the loan period to lower the monthly. Uh, dude... does that really work on anyone?? We got all the extras included, but Tom had to go back 3 times to get them to finally install them because they were so bitter.

We went to one BMW dealer and they were going to "crunch the numbers". So the guy disappears and comes back 20 minutes later. We tell him we've got stuff to do, and he's got a bunch of BS numbers. So he says, 'let me go back and see what we can do.' So we say, "okay, you have 2 minutes". So when my watch hit two minutes we got up and started walking out. We made it to the door and he's running after us. We just said, 'thanks' and kept walking. He's trying to talk to us the whole way out, but we get in the car and tell him to call us if he can meet our number. Never heard from him.

 

[JulesMaximus]

Hm. So dealer financing is another profit maker. Should should I refrain from telling them that I'd want to pay in cash?

Check and see if they are offering any low rate financing on the car you are interested in before going in to the dealership. Edmunds.com is a good place to find out what kind of incentives there are on the car you're interested in as well as true market value and what others are paying for the same car.

Dealer financing makes a lot of sense if they have rates as low as 1.9% or 0.9%.

I would still go in there with my financing arranged ahead of time or cash. It give you more options.

 

[MiataNC]

Dealer financing makes a lot of sense if they have rates as low as 1.9% or 0.9%.

Just to clarify...

Those usually are not dealer financing numbers, but rather manufacturer financing offered through the dealer.

Manufacturers offer deals setup through major banks (or through their own finance company) to discount cars and entice buyers with lower interest rates than you can get at a bank or credit union. The loan is still carried by a major bank (or manufacturer finance company), and the "profit" (interest) on the loan is paid by the manufacturer.

For example I bought my wife a Mazda3 last August for 0%. The loan is held/serviced by Chase, but the principle and payoff is based on 0% interest for the life of the loan. Mazda is paying Chase some portion of the interest I would have paid if I had gotten my loan through Chase at 3-5%.

 

[waggy]

Paying with cash will make dealers happy now days. With many people defaulting on their loans they may not get the full amount. If you pay cash they know they will get it all and right then. You should always pay less than what they're asking for.

the dealer don't give a s hit IF you default. its not on them its on the bank that loaned it.

UNLESS you are at a buy her pay her place and even then they just repo it and resell the item. then sue the deadbeat for the money.

 

[JulesMaximus]

Just to clarify...

Those usually are not dealer financing numbers, but rather manufacturer financing offered through the dealer.

Manufacturers offer deals setup through major banks (or through their own finance company) to discount cars and entice buyers with lower interest rates than you can get at a bank or credit union. The loan is still carried by a major bank (or manufacturer finance company), and the "profit" (interest) on the loan is paid by the manufacturer.

For example I bought my wife a Mazda3 last August for 0%. The loan is held/serviced by Chase, but the principle and payoff is based on 0% interest for the life of the loan. Mazda is paying Chase some portion of the interest I would have paid if I had gotten my loan through Chase at 3-5%.

Semantics. Of course the dealership isn't financing. I know that.

 

[Safeway]

This is, in my opinion, the correct order to do things:

1. If you have a trade-in, negotiate the value of that trade in and get a signed document that expressly states that the trade-in offer is valid for X days or Y miles. Do not mention the car you are looking to purchase. If they disagree, leave.

2. Without the aid of a salesman, find the car you want to buy. The color, the options, etc. If they will not leave you alone, leave.

3. Find a salesman. Tell them you will pay $X for this exact car, where $X is some percentage lower than the best price you were able to find for comparable vehicles. Be thorough. Every detail matters in your comparisons: location, color, mileage, trim, wheels, etc. If they don't agree, leave.

4. If they attempt to show you a different car, ask them if they speak English. $X. For THIS car. If they don't agree, leave.

5. They may agree under the assumption that financing will be able to make up the loss of profit from the low sales price. If they don't agree, leave.

6. Once you are with the "financing guy," tell them you are paying $X. Make sure they amount they have on their square-sheet matches. Then tell them you are paying cash, and ask who to make the check out to. If you had a trade-in, provide that documentation and do some simple match. $X minus the trade-in value equals $Y. If they spring some additional fees on you, leave. If they try to jack up the price at all, leave. If they state $X + 1, leave. If they start discussing the value of your trade-in, leave.

7. You either left or you bought a car on your terms.

 

[MiataNC]

Semantics. Of course the dealership isn't financing. I know that.

You know, but the original poster might night.

I was not questioning your knowledge on the subject.

 

[Gillbot]

So how do you figure out a realistic price? You know, low enough to make it a good deal, but not so low that they can't do it?

autotrader, kbb and edmunds give you the tools you need.

Edmunds TMV pricing is often pretty good on new cars.

For used autotrader is a good indicator of what's expected, but figure those prices are a bit higher than what will be paid.

If you are looking at a brand new car, it's best to figure out your price and just call around. Expect to hear how rare and unobtainable a '2012 mass produced sedan' is from some and that you need to act right away.

When someone is serious about dealing, make sure you let them know your price was an out the door price and not pre-addons like dealer prep, scotchguard service, etc.

Some dealers add-on over $2000 in bullshit fees.

plain hard research

look and see what others are paying and what the invoice price is. of course they wont sell at invoice, they want to make a few $ too, but it gives you an idea of what kind of profit they are shooting for

 

[Capt Caveman]

Here is how it works...

1. The dealer runs your credit through several banks they prefer to use and have agreements with.

2. The banks come back with a rate of 3% for 60 months

3. Dealer comes to you and says: "Good news! We can get you 4% for 60 months."

4. You sign and the dealer pockets an additional 1% on the financing on the deal.

My dealership gave me a lowest rates available and the best thing it was with US Bank where I already have a credit card with.

 

[Capt Caveman]

I used truecar and edmunds to get the price I was willing to pay. Told the dealership I could go to this truecar dealership and get the truecar price, even brought my laptop to show them the website prices.

The Edmunds price was something like $1k less then the truecar. I told them if they could get to the Edmunds price, I would finance thru them. They met me half-way on the price, so I asked if they would throw in running boards that go for $1k(their cost $500) and they agreed.

They ran my credit and due to it being so good, they gave me a lower rate than their special advertised rate(better than any local banks).

 

[Jeff7]

Huh....well, I'm probably getting a new Subaru tomorrow, after several visits to the dealership, and checking out different vehicles there.
Back when I was originally researching and looking around, Edmunds, Truecar, Whatever, Etc - none of them had pricing info on the car. (2012 Subaru Impreza Premium)
Now they do have pricing data.
The price the dealership offered is $21 less than the "fair price" thing that Edmunds gives.
Truecar's price is $385 less than the dealership's price. :\

I don't know if that's good, but....hm...
(The car that's coming in also isn't quite the configuration that I requested, in that it has everything I wanted plus a few extras I don't really, but they said they'd hold the original price. Ok, fine, I guess that's ok. We'll see.)

The other complicated thing: The salesman at the dealership is my supervisor's dad, doing the car selling as a way to keep busy during retirement. He [supervisor] said I wouldn't get the run-around. Hopefully that's true. Maybe.
Negotiating isn't really a skill that I, um, have.
And I suck at bluffing. The immense blushing that invariably ensues may serve as bit of a tell.

Sucks that the next-closest Subaru dealer is >40 miles away, and they have even less inventory available, and they're in another state. The next two are 50 miles away.



So let's go with that situation - a new car model, just coming in from the manufacturer in the first batches of shipments, and there are already deposits put in on most of the incoming inventory. You're probably going to end up paying a bit more, right? - like computer parts, the shiny new stuff is always expensive.
In such a situation, how much negotiating power does an individual buyer have if there's already a line of buyers backed up behind you?

 

[foghorn67]

Huh....well, I'm probably getting a new Subaru tomorrow, after several visits to the dealership, and checking out different vehicles there.
Back when I was originally researching and looking around, Edmunds, Truecar, Whatever, Etc - none of them had pricing info on the car. (2012 Subaru Impreza Premium)
Now they do have pricing data.
The price the dealership offered is $21 less than the "fair price" thing that Edmunds gives.
Truecar's price is $385 less than the dealership's price. :\

I don't know if that's good, but....hm...
(The car that's coming in also isn't quite the configuration that I requested, in that it has everything I wanted plus a few extras I don't really, but they said they'd hold the original price. Ok, fine, I guess that's ok. We'll see.)

The other complicated thing: The salesman at the dealership is my supervisor's dad, doing the car selling as a way to keep busy during retirement. He [supervisor] said I wouldn't get the run-around. Hopefully that's true. Maybe.
Negotiating isn't really a skill that I, um, have.
And I suck at bluffing. The immense blushing that invariably ensues may serve as bit of a tell.

Sucks that the next-closest Subaru dealer is >40 miles away, and they have even less inventory available, and they're in another state. The next two are 50 miles away.



So let's go with that situation - a new car model, just coming in from the manufacturer in the first batches of shipments, and there are already deposits put in on most of the incoming inventory. You're probably going to end up paying a bit more, right? - like computer parts, the shiny new stuff is always expensive.
In such a situation, how much negotiating power does an individual buyer have if there's already a line of buyers backed up behind you?

You have to always show you have the advantage.
For example, you said Subaru dealers are scarce around your neck of the woods.
Just tell them time is on your side. You can wait until another dealer gets one in stock.
Even if you can't wait...at least pretend you can.

One of your cards is already showing, so get creative for a bit.