Buying a new car? How much will a car dealer come down, negotiate, or haggle on price?

In this day and age, when it comes time to buy a vehicle, we really do have a lot at our disposal, and a lot working in our favor right now. The average consumer has multiple websites they can use to browse prices, deals, factory rebates, regional discounts - the whole gamut. When buying a vehicle, most consumers are pretty well informed. But can they deal? Can you wheel and deal with a pro?

Even armed with the Kelly Blue Book values, the Edmund's True Market Value, and the fact that you've looked at a million deals online - and in the classifieds - when it comes down to it, and you're sitting face to face with a professional car salesmen - who does this every single day, multiple times a day - do you have the gall to haggle with him?

When he says "I'm sorry, but that's what the car's worth," do you have what it takes to say "You're wrong,"? I'm inclined to think that most do not.

Will a dealer come down by a few hundred? a thousand? two thousand?

You will inevitably wonder - what is a good price for this vehicle? What is a reasonable offer. If the vehicle MSRP's at $35,000 if I offer $25,000 are they going to laugh in my face, take the beverage they graciously offered me away, and have me escorted from the dealership?

You may be surprised ... but, probably not. They probably won't offer a $10,000 discount either, but they probably won't kick you off their lot.

Many people think his goal is to sell vehicles. Wrong!

Selling vehicles is a given at a car or truck dealership. The primary function of the car or truck salesmen is to make the dealership the most profit possible, while also satisfying the customer. This might seem like a subtle point, but the distinction is important.

Conversely, what is the purpose of the buyer? What is his goal? Is it to acquire a new vehicle? No. That's a given. The car buyer's goal is to negotiate the most favorable deal on the vehicle possible.

Don't be bitter. "Profit" is not a dirty word. Remember that. Don't get disenfranchised, or upset that the dealership is going to make money of your purchase, or that the salesmen is going to benefit from your sale. Be happy that you can also get a good deal, the dealership make money, and the salesmen can make a living. The balance is real, and achievable.

"Excessive Profit" is definitely a dirty word. Excessive profit translates directly into negative equity for the buyer. No matter what, you want to avoid negative equity as much as humanly possible.

I'm sure many of you have heard, or will hear from a salesmen, that your new vehicle is "an investment". They will use that word, investment, as a way to encourage you to purchase certain upsells like warranty, roadside assistance packages, leather seats, accessories, insurance, and all sorts of other stuff. And a new vehicle can absolutely be an investment, for several reasons, but NOT if you get taken on the purchase price, gutted on your trade it, and wheeled all the way into the driver's seat by paying MSRP for a new vehicle and accepting the KBB value for your trade ... read on.

Okay, well what is MSRP anyway?

MSRP is an acronym that stands for the Manufacturer's Suggested Retail Price. This number is decided by the manufacturer - NOT the dealer. This price serves as a starting price for negotiations. Sometimes the dealer's will post an "Invoice" price for the vehicle underneath the MSRP and use this as a selling point. This is common ...

"Look at the invoice price," says Frank, of Bayside Toyota. "We're only making a few hundred dollars selling you this car at this price, and plus, you're getting almost one thousand dollars off MSRP."

"Oh," says Sally, as she fondles her hair nervously. "That's not too bad. I guess you can't really do much better than that, right?"

Frank smiles, thinking to himself, Excellent. We're done negotiating. "Exactly. You know you're getting a good deal, and we've got to make a little something on the vehicle ..."

What Sally doesn't know is the Bayside Toyota gets a $2,000 rebate from the manufacturer every time they sell that vehicle, and the Southeast Division of Toyota Dealerships rewards Bayside Toyota with another $3,000 of dealer-cash/incentive each time they sell this vehicle, plus it puts them one vehicle closer to their corporate mandated quota / or dealer bonus check. Plus, they charge a $599.99 dealer fee on top of that (or something similar).

Even at invoice price the dealership might have anywhere between $2k and $4k dollars of profit to work with on a new vehicle. Imagine their margin at MSRP?!

It shouldn't. And, no, it's not.

Purchasing a new vehicle is a big expense, should be an investment, and is definitely a negotiable endeavor.

Certain purchases are non-negotiable. Like when you walk into Wal-mart; you cant walk up to the guy and say "Hey, I know that TV has a $2,000 price tag ... I'll give you $1,500 for it." They will simply say No and let you walk. Same thing at the super market, and so on. But when you're spending tens of thousands of dollars 1.) you better believe you should be negotiating, and 2.) they DO NOT want to let you walk.

Okay. Enough dancing around the question. How much will a car or truck dealer come down on his sticker price or asking price?

If you're talking about a new vehicle, and you're looking at the MSRP, the dealer can definitely move by several thousand dollars. A used vehicle is slightly different. They can DEFINITELY move on used vehicles, but there are no factory rebates, dealer incentives, and other perks that really help in the negotiating process with a new vehicle. Let's talk about a very small number of strategies ...

They have strategies to sell you. Lots of them. Some of them are highly trained salesmen, others are just naturals, others are simply feeding mouths. Regardless, they have experience, knowledge, and a LOT of tricks of the trade.

What do you have?

Well it better be more than jeans, a t-shirt, and some crumpled notes stuffed in your front pocket!

• Use the internet
  
  1. Shop your vehicle on the various consumer sites
  2. Know what vehicle you want
  3. Know the MSRP
  4. Know the various options you want, which are important, and what they cost (roughly)
  5. Find enthusiasts forums for the vehicle you're about to purchase, join the forum, tell them what you're doing and ask for tips and hints. You'd be amazed what these people in these places know about the industry!
     
• Know what you can spend
  
  1. This seems like an obvious one, but whatever you do, DO NOT show up at the dealer and leave it up to that visit to figure out "what your monthly payment could be". This is a bear-trap and you will lose your leg.
• Have your money
  
  1. Deal with your bank or credit union when it comes to financing. DO NOT go through the dealer. They use this as a bargaining trick, a price slider, and they will mark up the interest rate they get from the lender (in many cases).
     
  2. Show up to the dealership with a Pre-Authorized Draft (a blank check from your bank, basically) and know that you are in charge. Why? Because you have the money. I can just hear it now ... But they have the car I want?! No. They have a car that you want, that they really want to sell you.
• Don't show your hand
  
  1. Be cooperative. Tell them your name, and what you're looking for, and ask any general questions they might have. But, watch out for the ...
  2. He just showed you the vehicle of your dreams. It's perfect, its amazing. YOU NEED IT! What's your response / reaction? "Ok, I see it comes with leather seats .. that's pretty nice. The color is okay, not the exact color I was thinking. Not bad." Do yourself a favor and do not gush over the vehicle and beg to drive it. Wait for the salesmen to offer the test-drive. You want to appear logical, calculating, and in control the whole time. Someone who is emotional is more inclined to throw logic to the wind. And they know this, and feed off of it.
     
  3. "So what are you looking to spend?" They will definitely, for sure, 100% ask you this question. So you actually have the advantage, because you know they're going to ask, you know what you can spend, and you know what you want to spend - you know and have everything. They have nothing, that's why he's asking the question, and you're telling him the answers.
     
  4. If you can spend $25,000 - $30,000, the former being desirable, and the latter pretty much breaking the bank, tell the salesmen something like ... "Well, I really like this model, and this year, but this model has this option that I really like. And you know, I'd like to come in right around $22, $23 ... depending on options and availability."
     
• Show your hand
  
  1. They're play psychological games with you. They're sizing you up, trying to figure you out, and trying to get you emotional about your purchase. Let them know your intentions, and be honest.
     
  2. "I am going to buy a Toyota Camry today," is an honest statement, clearly shows your intentions, and answers an unspoken question the salesman has, is this person buying or shopping? Think about it. If you're trying to make profit, and you think you're getting shopped, are you going to offer your best discounts? Probably not. You offer your best deals when you know a purchase is going to happen.
  3. "I'm working with several dealers right now, and I just want to be upfront about that. And, so far, I'm enjoying working with you." The first half of this statement better be true, or I'm going to be VERY disappointed in you. If the second half of this statement is not true do not buy from this dealership!
     
• Cut the deal
  
  1. You just got back from the test drive. It was incredible. You could basically feel the engine rumbling in your belly. Even the smell of the barely worn leather is startin to intoxicate you with anticipation. The salesman looks at you, "So what do you think?"
     
     "It drives nice. I like this little feature, and this little feature, but I saw the sticker price, we're not really at my number yet."
     
     This is when the "what if's" start. The dealer looks at you, "Well, what if I can take $1,500 off that price? Would that help?"
     
     "That's a start. I brought some notes, lets take a look at some figures."
     
  2. Their first offer is just that. Their second offer is just that. It's the third, fourth, and stop you from walking out the door offer that you're trying to get to.
     
  3. Get what you want for your trade, but don't be unreasonable. Know ALL THREE Kelly Blue Book values: Private Party, Dealer Trade In, and Retail.
     
  4. Use options to your advantage.
     
     They will try and get closer to your number by offering you less of a vehicle, and as longer as your number is not ridiculous, then this is not an acceptable solution. "Well, I like this number were at, but this model doesn't have this and that, and your offer on my trade is a little low."
     
     Then he'll start throwing the what if's out there again. What if I can throw in the DVD player, and the fancy tires, what if I give you X amount more for your trade. Would we have a deal then? Don't say yes. Say, "We'd be closer."
     
  5. He's going to ask "What is it going to take to earn your business today?" and at this point, after a few offers, a few demands, a few counter offers, you probably know what it would take to get you to pull the trigger - so tell him. Make him work for it.
     
  6. "Ok. I did it," says the salesman as he comes back from his brief meeting with the Manager. "We can throw in this bell, and that whistle, get it in that color, and give you this for you trade, but only if we have a commitment from you, right now."
     
     Now you're almost at the end of the deal. You both know you're a couple turns of the screw away from a f@#$, and that's when you drop the competition bomb. "Well, I like here we're at. I like the vehicle, this is a pretty good offer, I've made my notes (and actually be doing that), but like I said before, I'm working with a couple other dealers and this was my first stop on the list. So I need to at least see what they have to offer."
     
     He knows they are going to offer the same thing, but go that tiny bit further to make their deal better. So he's going to go that one-step further and sweeten the deal to keep you from walking. He's going to get up and leave again, and come back with a slightly better deal. This is the "closer". This is as far as they will go, most likely. They will ask for a commitment. If you like it, then say "Go back to your manager. Get a commitment from him, on this number (circle the number), with this trade figure, and these options, and if he says 'yes' we have a deal." (this is insurance)
     
  7. He'll come back wit the deal you want.
     
• All the while, watch the numbers carefully.
  
  1. I would know, and write the numbers out on a piece of paper in front of your the whole time you're in that cubicle working the deal. You need to know the current figure of every number any time anything changes so they cannot inflate your trade allowance, and stuff it into the MSRP, or the Purchase Price. Here are the typical numbers you need to be tracking ...
     
  2. MSRP (generally includes options, processing, and destination fees)
     
  3. Discounts
  4. Rebates
  5. Purchase price
  6. trade allowance (their offer on your trade)
     
  7. dealer fee
  8. tax
  9. title and registration fees
  10. down payment
  11. balance
      
• Be confident. There are a lot of dealers, and that black, sleek, leather trimmed V8 new vehicle out there with the words "Limited" badged on the back in chrome ... is probably 1 out of 1,000 vehicles EXACTLY like that one, that can be bought, or sold at any other dealership besides the one that you're at.
  
  If the deal is not going well ... walk out. Period.

When I started out on my quest for a new vehicle, I not only research the vehicle, but the salesmen, the dealerships, and the negotiating process - just like you're doing now. It is worth while, and helped me seal an excellent deal.

I hope this helps! It is certainly not comprehensive, and only scratches the surface of the techniques, strategies, and scenarios that could arise ... but I know I asked myself a lot of these questions, and the big one was "How much can I really get a dealer to come off his asking price without losing credibility and sounding stupid?"

The answer? See above : )

Be peaceful on your way,

Time_Spiraling