We all know that uneasy feeling of going into the car dealership to purchase that brand new car. You’ve got your best game face on; you’re prepared for battle. You tell yourself you are not walking out of there unless you’ve got the best deal possible. Then BAM! You leave the dealership feeling as though you got the raw end of the deal (much like Jerry Seinfeld did here). Let’s try to never let that happen again! Take a look below at my 7 step strategy. I’m confident it’ll help.
Before we begin though, I’m going to assume you’ve narrowed down the make and model. The best way to start any negotiation is to know exactly what you want. So, do yourself the favor and do the research first. It’s a pivotal part (especially of step 1) in the strategy below.
Step 1: Research
Even if the last time you wrote a paper was on the Gettysburg address in high school, doing research shouldn’t be a foreign concept. Good ole’ fashion research on price point is a great place to start. From there, I’d research which dealerships do the most (and least) volume in your desired car. It’s best to know the optimal time of year to purchase, too. For instance, if you are looking for an Infiniti, you will get the best deals in December for yearend (or March as it is their fiscal year end).
Step 2: Strategize
The days of “mom and pop taking a Saturday drive to the dealership to browse” just won’t cut it in today’s market. You need a strategy. Assuming you are going during the “optimal” time a year for this dealership, I would plan to visit two dealers. (#1 rule of negotiating is ALWAYS have two dogs in the race.) If you listen to nothing else in this article, remember that statement.
First, I would go to the dealership which does the most volume. These guys are generally very aggressive and operate on quantity. They just want cars on the road and will likely be motivated to negotiate. Then, I would target a place you know doesn’t sell a lot of this model. When I bought my Toyota Prius (boy that seems so many moons ago) I didn’t go to the local Philadelphia Toyota dealership. Those guys sold tons of them. Instead, I went to middle of nowhere Pennsylvania where there were 1,000 pick-up trucks on the lot and one Prius squeezed between them. These guys couldn’t be more excited to sell me this car! I therefore got a great deal from their sales team.
Step 3: Know your price
Come on, this is pretty common sense stuff. But for the folks in the cheap seats, I’ll say it again – know your price. Before you go into a brick and mortar dealership, know the actual price you are willing to pay. Just like real estate: if you don’t know your “happy” price, how can you even begin to haggle?
Step 4: Be flexible
Remember when it comes to these cars, you are dealing with inventory. The more flexible you are on features (like color, interior, or that satellite radio) the more likely you are to get a great deal. That said, however, you certainly have every right to be picky. In the end, flexibility can be a great negotiating chip.
Step 5: Go visit in person and let the games begin
Now, you are armed with data and have strategically chosen your (two) dealerships. Time to tighten your boot straps and head to the dealership in person. I can’t stress how important it is to physically go visit these dealerships. As the salesman will see it: calling on the phone=not a serious buyer; going in person=a real potential sale. A car salesmen can tell the difference between an educated buyer and one who is not. Make sure you approach the sales person confidently and let them know you are there to see a specific car.
Be upfront. Leave emotions at the door. Tell them this is the car you want and that you’ve been in contact with another dealership. You are there to discuss the best deal they can offer, because you’ll be purchasing a car today from “someone.” This is the point when the sales person will play all sorts of games (like going to talk to their manager multiple times to “see what they can do”). Once this back-and-forth comes to an end, you’ll land at their best price. This is where you ask if there is anything else they can throw in to sweeten the deal (free window tint, upgraded rims, and free oil changes). Wherever they land, get their offer in writing.
At this point, stand-up and say, “Thank you very much. I’ll be in touch shortly as I promised the other dealership I’d come visit them as well.” Go visit the other dealership and get right down to business. Sit down with the sales person. Let them know you are purchasing a car today and you’ve already been to another dealership about this specific car. Explicitly state where you need to be to purchase the car from them today. Now the ball is in their court. They shouldn’t do that back-and-forth nonsense. Simply wait for them to make you an offer to beat the other dealership.
If they can’t beat the original offer, walk away. Then call the original salesman. Let them know that both dealers are offering the same great price. Ask what they can do to seal the deal right now? A little bluffing never hurt anyone. A good portion of the time they’ll give one final incentive. If good enough, let them know you’ll be in shortly to purchase the car.
If the second dealership can beat the original, then you are in the driver’s seat! (Get it…driver’s seat.) You can either accept the offer right on the spot, or step outside and leverage the original person against this one. Either way, you have now likely gotten the best price around. It always feels nice to “win.”
Step 6: Financing matters
Most likely, you’ll be financing some portion of the car purchase. Agreeing on a lower purchase price with high financing charges, may end up costing you more in the long run. Do some calculations of total cost and/or monthly costs. Make sure you are comparing apples to apples.
Great tip from my partner David is secure your own financing elsewhere either bank or credit union. Bring that in with you and since the dealership makes money on the financing they’ll most certainly do what it takes to get you to do it through them.
Step 7: Read the contract
For starters, it isn’t uncommon to see mistakes on contracts. They can certainly be honest mistakes. That said, though, you’ll want to make sure you diligently read the document in its entirety. Make sure it’s what you agreed upon. Confirm no hidden fees or superfluous services/insurances. (Do you really need/want rust proofing?) This will be the dealerships last ditch attempt to sell you on extra add-ons. Avoid the temptation!
Hopefully, you found this very helpful. I know the stress this causes, having dealt with it a few times myself. But once done, breathe that sigh of relief. Put your best shades on, dust off those fuzzy dice, and go enjoy your brand new (extremely well negotiated) car!
In his role as Financial Planner, Andrew forges lifelong relationships with clients. He coaches them through all stages of life and guides them to better achieve their life goals. For more information about Andrew or the other firm partners, Kyle Hill and David Levy, click the link below.