Tips for negotiating on a NEW vehicle

Previously, I gave you a list of Do's and Don'ts for interacting with your salesperson. Those tips were geared towards building a positive working relationship with your consultant. What you're really looking for, I gather, are tips on how to negotiate the best deal. Negotiation is an art, and a skill. You have to practice in order to be good at it, but once you are, you will be able to create a financial masterpiece with nothing more than a few choice words and an open mind. 

Let's dive in.

1. Understand that car sales is a business. 
It's helpful to remember that dealerships are in the business of making money. They aren't in the business of giving you a car for free. In a more practical manner of thinking, if you spent hours grinding the poor schmuck you bought the car from into a fine powder, is he (a) going to want to help you again, or (b) going to have any money left over to take care of anything you might need? Don't think so.

2. Don't look at Kelly Blue Book for your trade.
Hopefully you read my 10 Do's and Don'ts list, and you told your consultant that you had a trade in the first place. Kelly Blue Book is totally inaccurate. It's at least 60 days behind the market. Most banks use NADA values, anyway.

3. If you have an employee discount, tell your consultant.
Most customers who are looking to buy an American car qualify for some sort of official employee discount. If you are one of these folks, it takes a lot of the work out of the negotiation and makes things go a lot smoother. If you don't have an employee discount, most dealerships will give you one anyway. Most of the time there are special incentives to dealers if they sell a vehicle for an official discount, so a lot of dealerships are willing to give you one.

4. New cars with special finance rates usually don't qualify for additional rebates.
Normally, you're required to waive any cash rebate if you take advantage of a special finance rate (ie, 0% financing). It's pretty rare for a manufacturer to offer cash rebates as well as a finance rate. 

5. Usually, the only tangible difference between dealers is inventory. 
All dealers have access to the same rebates and finance rates, and can make you the same deal. The only real difference is inventory and the consultant that you're dealing with. If you find a good consultant, be loyal to him or her and they will do their best to take care of you. 

6. Most of the time, your dealer is not hiding anything.
Yes, there are advertising dollars that the manufacturer can kick in to aid a dealership in their marketing efforts. You are not entitled to that as a discount. Your dealer uses that money to fix any issues that you might have with your vehicle if they don't use it for advertising. Some unscrupulous dealers will withhold your factory rebates, which is why it's important to have a dealer you can trust. (See Test-Driving Your Salesperson)

7. If you don't get an official discount, do your homework.
Get price quotes from a couple (no more than three) dealers. If you go more than three, you will have trouble keeping track of who said what. Go to Edmunds.com and check out the invoice prices. You should not expect a dealer to breach that invoice figure before any rebates are factored in, and if one does, be assured that you're getting a great deal. 

One quick word about import makes (BMW, Mercedes-Benz, and Porsche, especially). Most of their models are built in America. Don't believe any horsecrap about currency exchange rates as being a reason why they can't do better on a price. Their MSRPs already have the exchange rate figured in. You should always be able to score a deal, regardless of where a vehicle was built. Another note, most import brands don't put cash rebates out on their vehicles, so don't expect huge discounts on best-selling models. Take the invoice price, and try to get as close to that as possible. 

One way import manufacturers try to win customers without huge discounts is by offering sweetheart leasing deals. For some customers, leasing works. For most, it doesn't. I'll cover that more in depth in another article.

8. Start low, but be ready to compromise.
Making a low but reasonable offer close to the invoice price is a sign that you're serious. Being ready to compromise means you have self-respect and respect for your consultant and dealer. Giving a low but reasonable offer can cut through a lot of the back-and-forth that your consultant will have to do, because the counter-offer her or she comes back with will be very close to the absolute best price the dealer is willing to do. 

9. Don't be afraid to walk. 
Walking out is your number one weapon (I hope this doesn't come back to bite me). If you think, after doing your research, that you are making a fair offer and the dealer doesn't want to budge, walk. The chance of a customer coming back into a dealership after walking out are less than 25%. We dealers know this. If you look like you're about to walk out, most dealers will try to sweeten the pot to get you to stay. They might not lower the price, but they may throw in some accessories or a few free oil changes. Remember, dealers have to make a profit, but they don't make any profit if you don't buy.

10. Do not make an offer if you are not willing to purchase.
For the purposes of this article, I've been assuming that you want to purchase the vehicle and are ready to do so. If you aren't, let the sales consultant know as much before talking numbers. He or she will probably be bewildered (especially if you took a demo drive), but a moment of confusion is much, much better than getting down to an acceptable deal for both parties and you walking out anyway because you weren't ready to buy.

Take these tips into consideration when shopping for your next new vehicle. And please remember, dealers and sales consultants are people, just like you. We have families to feed. 

Happy hunting!

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