How to Negotiate a New-Car Price Effectively

Rather than be drawn into a discussion on the salesperson’s terms, let her know:

• You have carefully researched the vehicle you want and have already taken a test drive.
• You know exactly which trim level and options you want, have researched the price for that configuration, and know approximately what the dealership paid for it.
• You have already calculated what you are prepared to pay. Reassure the salesperson that your offer includes a fair profit.
• If the salesperson can meet your target price, you’ll be ready to buy immediately; if not, you intend to visit other dealerships.

Start the negotiations with your precalculated low offer. You should base your offer on the average transaction price for the model and trim level(s) you are looking to buy. CR focuses on the actual transaction prices, rather than invoice, because we feel it is far more useful. It sets a target for what others are paying for the vehicle in your area. The invoice price has become far less meaningful, and it doesn’t reflect the impact of supply/demand—a big consideration in the current market. Aim for the low end of the transaction price spectrum, available on the model pages at cr.org/cars, knowing that you got a fair deal if you match the average transaction price.

What usually happens after you declare your starting offer is a back and forth while the salesperson submits your bids to the sales manager and returns with counteroffers. Be prepared for the offers to be far higher than your target price. And be prepared to wait several minutes at each step.

One gambit you can use is to mention that you have competitive bids in hand from other dealers, without disclosing what they are. Explain that you are looking for the lowest markup over your bottom price.

As an alternative, ask if the salesperson is willing to beat a price you got from a legitimate buying service. If so, tell him what it is, or better yet, show them a print out.

Try not to be argumentative. Keep working from your lower figure, raising it a little at a time, rather than taking the dealer’s counteroffer and hammering it down. If you use the average transaction price as a starting point you likely will have a quick negotiation process. If you start with a lower number, you’ll likely spend more time coming to an agreement.

From the outset, you want to stay on course and prevent the negotiation from veering off-track. If the salesperson asks about a trade-in, for instance, insist on locking down the new-car price first.

As for financing, explain that you are preapproved for a loan and prepared to pay in cash, but that you may be willing to consider financing through the dealership provided the offer is competitive. But make it known that coming to terms on the purchase price is the primary focus.

Reassure the salesperson that if you can both agree to terms you know to be fair, you can look forward to making a quick sale. If not, you’ll move on.

You may be shunted to a more senior sales associate or manager. If that happens, simply repeat the same ground rules to that person. But no matter who ends up sitting across the desk from you, a clear explanation of what you’re looking for will help counteract the common diversionary tactics you may come across.

A salesperson’s initial reaction might be dismissive. He may state flatly that there’s no way the sales manager will let the vehicle be sold at your price. He may even try to tell you that your numbers are wrong. If so, show a printout of your sources of information.

Even if he can’t find fault with your numbers, he may counter your bid with a barrage of objections, pleas, and ploys to get you to raise your offer. Because the manager wields the real power to approve deals, you can expect this. But make it clear that you don’t have a lot of time to sit around and wait. You also have some wiggle room. After all, the target price that you calculated allowed for a reasonable dealer profit.

While you can allow your target price to go up in small increments, don’t go above the lowest competing bid you’ve gathered. You don’t want to give the impression that you’re simply responding to pressure. It might help to state a rationale for your flexibility on price. For example, you could say that you value the fact the dealership is conveniently close or that you like the color of a particular car.

Remind the salesperson that you’re ready to complete the purchase on the spot if your price can be met. Otherwise, you’ll have to “think it over.”

If the negotiations are going nowhere, this is the time to excuse yourself and get up to leave. There’s no need for you to waste your time or the salesperson’s time any further.

Often a salesperson will try to stop you by saying she thinks “something can be worked out to make you happy.” But if you’re simply allowed to go, then the last price offered may be close to the dealer’s limit.

If the negotiation has stalled at a higher figure than the competitive prices you’ve gathered elsewhere, say so. Let the salesperson know she’s not even in the ballpark. This could motivate another visit to the sales manager for a lower price.

If your discussion gets stuck and the dealer’s offer is nowhere close to what you can accept, it might be time to throw in the towel. If you encounter these tactics, head to another dealer:

• The salesperson may try to convince you that the rebate (or low-cost financing) is available only to customers who pay the sticker price. This is not true. Rebates come directly from the manufacturer regardless of the price you agree to at a dealership. Don’t let the salesperson use rebates as a substitute for the discount you’ve haggled for. Keep in mind that some incentives do require financing the vehicle through the dealership, so paying cash or using a third-party bank or credit union may prevent you from taking advantage of the special deal.
• The salesperson suggests that you come back if another dealership offers you a better price, which he will then beat. Let him know that you plan to complete the purchase soon, you aren’t interested in shuttling back and forth between dealers, and that once you leave the showroom, you are done.
• If the salesperson makes a “final, take-it-or-leave-it offer,” accept it if it satisfies two conditions: (1) the price meets your target price; and (2) it’s a decent price for the only vehicle you have found that matches the configuration that you want. Otherwise, you needn’t panic. If the offer is good today, it should be good tomorrow.

If you’re offered a price that’s in your target range, you should probably accept it and move on to trade-in and financing arrangements.

You might consider saying thanks, taking the offer in writing, and trying to best it at another dealer. But if the price really does leave minimal profit for the dealer, it’s not likely to go that much lower somewhere else.

Before you chase the last penny of savings, consider your own preferences. Do you feel more comfortable working with one dealership over another? Is it worth it to pay a bit more to end up with a car you’ll be happier driving? Provided you’re satisfied that the more expensive deal is still a fair one, there’s no harm in paying a little extra.

Only after you agree on a price for the new car should you turn your attention to the trade-in. If you shopped it around to other dealerships, you also know what you can easily get for it. Armed with this information, there’s no reason a dealership shouldn’t give you at least its wholesale value as a trade-in allowance.

Tell the salesperson that you simply want what you know it’s worth. Provide the figures to back this up, along with printouts from several pricing sources. This defuses any attempt to pull out a used-car pricing book so the salesperson can “prove” that your figures are too high.

To lowball you on the trade-in, the salesperson may again try to stall the negotiations and wear you down with frequent visits to the sales manager. Minimize this by indicating up front that the new-car deal isn’t final unless you get a good allowance on your trade-in.

Remember, if the trade-in discussions become too burdensome but you’re not willing to pull out of the new-car deal, you can always sell the car elsewhere. But if you’re dependent on the trade-in to make the down payment, you’ll have to sell your car before you can sign a contract for the new one.