Negotiating the price of a new car can be overwhelming, but with the right approach, you can snag a deal that fits your budget. Whether you’re buying your first car or have already purchased a vehicle in the past, understanding certain negotiating tactics can make a difference in what you eventually pay. Let’s take a closer look at ways to effectively negotiate a new car price to keep more money in your pocket.
Key Points
- Negotiating a new car price can keep more money in your pocket.
- Not only can you negotiate the ticket price of the car, but also any add-ons and fees, like extended warranties and paint or fabric protection.
- Look at the all-inclusive price, and not just the car cost when negotiating, including sales tax and registration fees to understand the full cost of the car.
- Make sure to do some comparison shopping on different dealerships so you know roughly how much you should be spending before entering a negotiation process.
Why Negotiate The Price Of A New Car?
Here’s what a potential car-buying experience can look like. You’ve done your research and have a few vehicles in mind. You visit the dealership and a salesperson tracks you down as you’re checking out vehicles. The two of you discuss the vehicle you want, your needs, and your budget.
The first trick is right around the corner. The salesperson will ask you what your monthly payment budget is. Unfortunately, this is a common pitfall for car buyers since it doesn’t accurately represent the price of the vehicle.
Monthly payments rarely reflect the price of the car itself. For example, the monthly car payment for a $20,000 versus a $30,000 car can be the same, only you’ll end up paying more in the long run with a more expensive car and a longer loan term. Car loans are about more than periodic payments. Though it can be tempting to look only at the value of a low monthly cost, it could result in you paying far more than your ultimate budget for the car.
Making monthly payments attractive is a sneaky way to make a car outside of your budget seem affordable. The salesperson is trained in getting buyers to pay the highest price possible, meaning they will always give you a higher quote than what you want to pay for your car. So long as you keep your wits about you, this is the beginning of your negotiation.
How To Negotiate A New Car Price
To help you wheel and deal your way to a better price for a car, consider the following tips and steps:
Step 1: Research
The first is researching the specific car, in detail. Learn how much it’s worth, factoring in the cost of any add-on features. Ensure that you have this information in print and on hand.
These real numbers give you a better leg to stand on in terms of negotiation. It shows the salesperson that you are an informed consumer and that you know the value of the vehicle.
Step 2: Be Aware Of The MSRP Trap
Whether as a comeback to your printed price or as a go-to tactic, salespeople will typically offer you the Manufacturer’s Suggested Retail Price (MSRP). This is the retail cost for the vehicle suggested by the producer. When you negotiate, it’s essential to work up from your lowest price as opposed to negotiating down from the MSRP. It will result in a better price just about every time.
If you approach the negotiation from a higher starting price, chances are you are already quite far from your ideal budget. Conversely, if you work your way upwards from the lower end of your budgetary parameters, there is more room to negotiate. You can stay within your budget and still navigate better terms.
Step 3: Compare Prices From Multiple Dealerships
Get quotes from a few different dealerships to see if there are any price discrepancies between them. You can quickly obtain quotes using online platforms and compare offers before visiting a showroom. If there are any differences in prices, you can use this as leverage to negotiate a lower price with the dealership you’re hammering out a potential deal with.
Step 4: Get Preapproved
Another step to take that can facilitate your negotiation is to get preapproved for a loan. This offers a quick glance at your financial situation and shows that you are serious about making a purchase. Sellers are far more likely to negotiate when they understand that you actually plan to buy a car. Time is money, and when you make it clear that you’re able to cover the cost of the car and are serious about buying, the dealership may be more likely to negotiate.
The other side to this is the opportunity that financing poses for the dealership to profit from your purchase. You can emphasize to the salesperson that you may be willing to finance the vehicle through the dealership, which can work as an incentive.
When you finance through the dealership directly, the business makes more profit over the long term. When the salesperson can see the long-term profit, you have a better chance of receiving a lower price on the car.
Step 5: Time Your Purchase Wisely
The timing of your vehicle purchase can significantly affect your ability to negotiate. The best times to shop for a car include the following:
- End Of The Month. Sales representatives work based on quotas. Make your calls before a cutoff date, like at the end of the month. Agents might be more amenable to lowering their prices if there is pressure to make the sale before the end of the month.
- End Of The Quarter. Car dealerships also have quarterly quotas to meet, much like monthly targets. More specifically, consider shopping towards the end of March, June, September, and December. These times of the year can provide you with more negotiating power.
- End Of The Year. The last few weeks of the year presents another great opportunity to find deals and strengthen your negotiating position. Dealerships typically try to get rid of that year’s models to make room for new models. So, they may be looking to make as many sales as possible, which is a prime opportunity for you to negotiate.
Learn more: Best Time To Buy A Car In Canada
Step 6: Diversify Your Approach
Work with more than just one dealer. By staying consistent in your approach and using the same terms each time, you improve your odds. In sales, this is often referred to as the law of averages. When you persevere and approach multiple retailers, you are very likely to have someone accept your terms.
Step 7: Start Low
Your initial offer should ideally be slightly under the ticket price. This gives you a little more wiggle room to negotiate upward while still getting a fair deal.
Step 8: Understand The Full Price
Many dealerships add other fees once a final price has been negotiated. Make sure you ask for the out-the-door price, which can include the following additional fees:
- Sales tax (rates different from province to province)
- Registration fees
- Title fees
- Documentation fees
Step 9: Decline Dealership Add-Ons
Car dealerships may try to tack on other services and products that will cost you more. They make higher profits on add-ons such as the following:
- Extended warranties
- Fabric protection
- Paint protection
- VIN etching
If you want any of these types of services or products, you’ll likely pay much less elsewhere. Consider declining these add-ons if the dealer tries to add them to your final price.
Step 10: Be Prepared To Walk Away
Always enter a negotiation with a firm price point in your mind that you won’t exceed. Not only will this ensure you get a better price on a car, but it will prevent you from spending more than you can comfortably afford.
Don’t be afraid to leave the negotiating table if the dealership won’t meet your price. They may be willing to reconsider. And if they don’t, there are other dealerships and cars to consider.
Final Thoughts
The most successful negotiating approaches involve some level of confidence backed by information. So long as you do your research ahead of time and come prepared when you approach salespeople, you put yourself in a better position. Gather all the information possible about the car you want. From there, as long as you ensure that you stick to the budgetary parameters you have set, you can get a great price.
