In the current automotive market, prices are starting to come down. However, many dealerships are still being greedy and holding onto their old COVID times where prices were outrageous and dealer lot inventories were at all-time lows. To navigate the higher interest rates and stockpiled dealer inventories that we’re now seeing, we have provided our top comprehensive tips on how to properly negotiate buying a new car that will help to save you time and money. Whether you’re a seasoned buyer or a first-timer, our tips will empower you to make informed decisions and drive off with confidence in your new ride.
- Begin your car-buying journey by conducting thorough online research to compare prices from different dealerships, ensuring they match the specific specifications you desire. Typically, internet prices tend to be highly competitive, serving as a reliable starting point for negotiations.
- Refine your search further by examining pricing information available on reputable websites such as Edmunds, Truecar, and even Consumer Reports. Aim to reach a price as close to the dealer’s invoice price as possible, as dealers often operate on slim profit margins, with only a few hundred dollars per car constituting their profit.
- Avoid engaging in time-consuming negotiations that involve unnecessary back-and-forth with sales representatives using phrases like “I have to go talk to my manager.” Instead, approach the negotiation process directly, seeking to establish the final, bottom-line price for the vehicle. If needed, request to speak with the manager directly to expedite the negotiation process.
- Dealerships typically generate their profits not from car sales but rather from the finance and insurance (F&I) office, commonly known as the “box.” To optimize your purchase, resist purchasing unnecessary add-ons or extended warranties, as modern vehicles are mechanically superior and less prone to issues than ever before. These extra offerings often incur significant markups, such as extended warranties, which can carry an 80% profit margin for dealers.
- Be proactive in addressing any additional fees, especially “doc fees” that dealers may automatically include in every sale. Such fees are often purely profit-driven and lack a clear purpose. Politely negotiate with the dealer to waive or reduce these charges, focusing on reaching the total amount you are willing to pay for the vehicle.
- Avoid negotiating solely based on monthly payment costs, as this tactic allows dealers to manipulate various factors to meet your desired monthly payment amount. Instead, concentrate on negotiating the final overall dollar figure you are willing to pay for the car. By prioritizing the bottom-line price, you can then make informed decisions about monthly payments.
- If you plan to finance your purchase, it is advisable to secure your own financing through a credit union, your bank, or financial institutions with low fees, like Capital One or Ally. Dealers often profit from financing arrangements, and current interest rates might not be as competitive as those offered elsewhere. Inform the dealer that you have already secured financing to ensure transparency in the negotiation process.
- If possible, consider paying for the car in cash, but if financing is necessary, opt for a loan term not exceeding five years. Shorter loan terms can save you money on interest and help you pay off the vehicle sooner.
- Avoid giving the dealership your financial plans or financial position during initial negotiations. By avoiding an explanation on how you plan to purchase the vehicle you gain an upper hand in negotiations. When the time comes to provide payment, you may then reveal how you wish to pay ie: Financing/Leasing or Cash.
- Be prepared to walk away from the negotiation table if the dealer is unwilling to meet your price expectations. Maintaining a firm stance and being ready to explore other options can provide you with the leverage needed to secure a favorable deal elsewhere.
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