Is it about time for a new car?
Until I learned the following strategy for purchasing a vehicle, the very idea of car shopping caused waves of panic and dread within me.
Shopping for a car meant I had to negotiate the price of a vehicle, which meant dealing with salespeople much more experienced and determined than me. It was nothing short of pure drudgery, and without fail, I always left the lot feeling beat down and exploited.
The method outlined below takes a bit of time, but can save a bundle of money. Best of all, it leaves me feeling confident and in control.
1. Examine your budget.
Before shopping for a new car, it’s important to know what your budget can allow.
Don’t leave it up to a salesperson at a car dealership to tell you how much you can afford. Their estimate will always be the most they hope to get from you. You will need to do the work to determine this amount yourself.
Think about the following:
- Will you need to take out a loan? Or will you be able to pay cash?
- What is your credit score and will you qualify for a loan?
- Do you have a vehicle which you will be offering as a trade?
- If so, how much is the trade worth?
- Will the cost of insurance increase on a newer vehicle?
Only you know what you can afford to pay – or what you’re willing to pay. (We don’t all want a more expensive vehicle just because we can afford it.)
Use an online tool such as this car loan calculator at kbb.com to help answer some of these questions.
2. Research to determine what type vehicle you want?
Now that you know how much you can reasonable spend, it’s time to look at vehicles.
My last two vehicles have been minivans, but we no longer take long road trips, the kids are getting older, and now that I am a single parent we haven’t used more than four seats in several years. I’ve already decided when the time comes for a new vehicle, I’m downsizing.
Look at your own situation and think about your needs, now and in the future.
- Who will be the primary driver of the car?
- How many miles a day will this vehicle be driven and is gas mileage important?
- How many people does the vehicle need to seat?
- Does this vehicle need to be able to haul large items or pull anything?
- Is luxury important to you, or can you survive with a basic model?
- Do you want a new vehicle, or used?
- What is the maximum amount you can afford to pay?
If shopping for a used vehicle, it’s possible to make use of ‘Vehicle Dependability Studies’ which survey thousands of original owners after three years of ownership to ask about the problems they have experienced.
Try it and see. Go to google.com and search for ‘2010 Vehicle Dependability Study’ to find reports for vehicles built in the year 2010.
For an easier to read version, use Google to search ‘most dependable cars’ and look for sites known to have reliable information. I like ConsumerReports.com and Popular Mechanics. I usually click through and scan several of the different websites. Any vehicle which makes more than one list, makes my list.
3. Test drive every vehicle on your list.
Once you have a list of possible options, set a date and plan to drive to car lots around town to look. You will want to test drive every vehicle on your list.
You are on a fact finding mission. This day is for test driving, asking questions, and eliminating options only.
Before you start the buying process, it’s important to know exactly what you want – the make, the model, the color, if that is important, and any other options you require.
Let the salesperson know that you won’t be buying today. It is critical that you stay in control of the buying process and not let a smooth talking salesperson rush you.
4. Know the value of both vehicles involved.
By now, you should know exactly what vehicle you want and have determined that you can afford to buy it. The next important step is to determine the value of both the vehicle you plan to buy and, assuming you plan to trade it in, also your current vehicle.
If you’re buying a new car, Edmunds.com and TrueCar.com provide ‘true market’ estimates which are fairly accurate. If you’re buying a used car, Kelley Blue Book at kbb.com will tell you both retail value and wholesale (also known as trade-in) value.
If you plan to arrange financing through your bank or credit union, do that now. While there, ask if someone in their loan department can help you determine the value of the car you plan to buy. Many financial institutions offer this service. Because the car you buy is basically theirs until you pay it off, it is in their best interest that you don’t overpay.
5. It’s time to negotiate the price of a vehicle.
The best ‘negotiation’ is no negotiation at all. Say what?
That’s right. You’ve done your research. You know what you want and you know what it’s worth. You’re going to make a reasonable offer of what you’re willing to pay in exchange for the exact vehicle you want. Make sure they know this offer is your out-the-door price and that you will buy today if they can meet your price. An out-the-door price is the total amount you will pay including all dealership fees, tax, title and license.
Most likely they will attempt to lure you into the standard back and forth negotiation which is such a big part of auto sales. When this happens, I politely let them know that I don’t enjoy the typical haggling required in order to purchase a vehicle and I prefer to handle it differently. I repeat my offer and my desire to buy today if they agree.
Every request you make should be polite, pleasant and professional, but also confident and direct.
6. Recognize common negotiation tactics.
Your goal is to keep them focused on your offer, although they will want to take things in a different direction which is more beneficial for them.
When the conversation drifts off track, as it likely will, always bring the focus back to your offer. Limit or refuse to answer questions which would give away any of your bargaining power.
- “What do you want your monthly payment to be?”, they may ask.They know a large purchase feels more affordable to the customer when they can talk about it as $350.00 per month instead of $20,000. Most dealerships also make money when you finance through them. They may finance the loan at 3% but mark it up to the customer at 4-5% or more. If they can get you talking about payments instead of overall price, they know they can manipulate loan details such as interest rate and length of contract to make it appear you’re getting the deal you want without ever needing to drop the price of the car.
It is best to answer this question vaguely, leaving them to assume you’ll be financing through them whether you are or not.
My answer: I’ve already run the numbers and know I can afford what I’ve offered. I prefer to focus on only the price of the car.
- “What are you driving now?”, they may want to know.With this question they want to know if you currently have a running vehicle or if you are desperate to buy today.
My answer: “Right now, I’m sitting at your desk and not driving anything [big smile] but seriously, I would prefer to stay focused on my offer.”
- “Do you have a vehicle which you will be trading in?”, they may ask.Their objective again may be to determine if you’re desperate to buy knowing desperate people will pay more. They also may be planning how they can accept your offer, but make up the difference later by docking you on the trade.
My answer: “I don’t know yet what my plans are regarding a trade. I prefer to first focus on the purchase price of the car I am planning to buy.”
Don’t allow the balance of power to shift. Keep the ball firmly in your court.
It is reasonable to expect a junior salesperson to need to talk to their manager before accepting a deal, but be aware this is also a common delay tactic meant to drag out the purchasing decision long enough to wear you down.
Set a time limit for how long you are willing to hang out at the dealership, and stick to it. You must be prepared to walk away if they don’t agree or if they continue to attempt to negotiate a different price.
My exit conversation usually goes something like this. “Thank you. I appreciate the time you’ve given to this. I completely understand if you need time to think. Before it gets too late today, I want to check with another dealership so I’m going to get out of here. Here is my contact information. If you and your manager talk after I’m gone and change your mind, give me a call. I am ready to buy immediately.” and then I leave.
7. Walk off, wait, but don’t give up.
So, your offer was not accepted. Now what?
You can try again at a different dealership. If you’re buying a new vehicle, the same make and model is likely available elsewhere. Make the second dealership the same offer.
If you’re buying a used vehicle, you may not be able to find an identical vehicle, but have found something similar. Used vehicles can vary in condition and mileage and you will need to adjust your offer price accordingly.
You could also choose to wait. Assuming your first offer was reasonable, there is a good change you may get a call within the next day or two.
If they don’t call you, call them.
Salespeople earn their paycheck based on commission. They also are given monthly sales quotas which must be met. If it’s the end of the month and their quota has not been met, they may be more willing to work with you. Unfortunately, their sales month doesn’t always coincide with our calendar month, making it impossible to know an exact date which to work. Instead, call back to the dealership at least once a week for the next month.
If your offer continues to be rejected, you may need to adjust your offer price and try again.
What helps you negotiate the price of a vehicle? Comment below and let me know.