You’re preparing to go into a car dealership and buy a new car. You know once you arrive, you’ll be dealing with an experienced salesperson – someone who knows every trick in the book when it comes to negotiating a price. It can be an intimidating process.
At Addition Financial, we work closely with our members to ensure they go into a dealership from a position of strength. Negotiating requires skill, but it’s nothing you can’t master. Here are six strategies to help you negotiate car prices for your next car.
#1: Get Pre-Approved for an Auto Loan
Your first step takes place before you ever set foot in a dealership. When you get pre-approved for an auto loan, you go into the negotiation from a position of strength. You’ll know how big a loan you can get and what interest rate you can qualify for. It's almost like paying cash for the vehicle. That gives you a leg up on any salesperson who approaches you.
The pre-approval process is a simple one. Once you have your approval, you can negotiate as if you were a cash buyer. Any salesperson you deal with will know you can walk into any other dealership and buy a car. They’ll be less likely to play games with you if they know you’re not relying on them for a loan.
#2: Know What You Can Afford to Spend
The price of buying a new car goes beyond the amount of your loan. You’ll also need to consider:
- Insurance premiums
- Registration and inspection fees
- Gasoline
- Maintenance and repairs
You should aim to spend no more than 20% of your monthly take-home pay on automobile expenses. Your loan payment should be no more than 60% of that amount. That will leave you enough left over to pay for your other expenses.
The reason you need to have these numbers at your fingertips is because a salesperson may try to distract you by focusing on your monthly loan payment. You need to keep the big picture in mind.
#3: Do Some Research
The final thing you need to do before you set foot in a dealership is to do your homework about the cars you’re interested in – and about your current car’s trade-in value. Any salesperson you deal with is going to know the cars on the lot inside and out. The more information you have, the more likely it is you’ll be on a level playing field.
Make sure to consider more than the sticker price. You should also look at fuel efficiency, resale value and insurance prices. The salesperson is only worried about making a sale. You need to worry about living with the consequences of the sale.
#4: Let the Salesperson Know You Can Walk Away
As much as you can, try to play it cool once you’re looking at cars. You might fall in love with a car but don’t let the salesperson see your enthusiasm. You always want the salesperson to believe you’re ready to walk away at a moment’s notice.
This tactic might seem manipulative, but it’s not. You’re simply looking out for your best interests. If you seem too invested in a particular car, the salesperson will sense it and try to take advantage of it.
#5: Know the Salesperson’s Tactics
There are a lot of clichés about car salespeople and that’s for a good reason. A successful salesperson will use psychological profiling and other tricks to get you to buy a car. Here are some to be aware of:
- They may try to wear you down by playing out the clock until you’re tired and hungry. You can override this tactic by announcing you’re only there for a test drive and you’ll be back to talk prices at some other time – unless you get a better deal elsewhere.
- They’ll ask what you want to spend each month. Play it cool and don’t give away this information. They’ll use it to try to strong-arm you.
- They might try to use an impending deadline by telling you someone else is interested. Don’t bite. Instead, look them in the eye and say, “That’s okay, another dealer will have it.”
- They may want to engage in a prolonged round of negotiations with their manager. If they do, tell them to go for it and email you with the results.
The key here is to be aware of the tactics they use and not let yourself be drawn in by them. That way, you can keep the upper hand.
#6: Know Where to Start (and End) Negotiations
The final thing you need to know is where to start negotiations. A lot of first-time buyers make the mistake of starting too high. You should begin with the manufacturer’s invoice price plus any add-ons and work from there.
The salesperson will likely come back with a much higher price. Don’t meet them halfway. Instead, offer a couple of hundred dollars more.
The other part of this is to know your “walk away” point and be prepared to leave. If they’re not willing to come down to the highest price you’re willing to pay, get up and leave. Their goal is to get you to buy a car that day. They’re not going to want to see you walk off the lot.
Negotiating a car price may take a while, but you’ll be in a position of strength if you go in armed with information about the car you want and the tactics you’ll be facing.
To learn more about Addition Financial’s flexible auto loan options and financing, please click here now.
Posted on Jul 26, 2018
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