Monday, June 04, 2007

TIPS ON NEGOTIATING TO BUY A CAR

Buying a new or used car is one of the last bastions of the negotiated price. In some countries, negotiation is fairly common in stores, but in America most products are sold at a fixed price. Some of us are simply not comfortable negotiating and most of us are not very good at it.

As I have said in previous columns, the best way to buy a new or used car is on the Internet. You can do your research on which car is the best to suit your needs, get guidance on what kind of price you can expect to pay, and finally get quotes from several dealerships on that specific car. However, everybody is not “Internet savvy” and if you are not, you may find it necessary to walk into a car dealership and negotiate for the lowest price.

If you are not comfortable with negotiation, the best advice I can give you is to bring someone along with you who is. Car sales people and sales managers are trained experts in negotiation. This is how they make their living. Here are some tips for you if you decide that you want to negotiate the best price on a car.

(1) If you have a trade-in, keep that separate from the negotiation. Negotiate the best price on the car you are buying and then negotiate the best price you can get for your trade-in. Don’t fall for the old “over allowance” on your trade-in ruse. This is where the dealer makes up the price of car you are buying higher so that he can make you think you are getting more for your trade-in.
(2) Never buy a car on payments alone. Always negotiate the best price you can for the car you are buying and then calculate your best payment after you have negotiated for the best interest rate.
(3) Be sure you understand how the dealer arrived at his retail price. Federal law dictates that a Monroney label be affixed to every vehicle with a manufacturer’s suggested retail price. Many dealers mark that up with another label, often referred to as a “Market Adjustment Addendum”. This markup can be several thousands of dollars.
(4) Expect the first price you are given to be substantially higher than what you can buy the car for. Sales people and sales managers are trained to “start high because you can always come down”. Don’t be afraid to offer substantially less than the initial asking price. You should do what the car salesman does, but in reverse…”start low because you can always go higher”. If the salesman accepts your first offer, you probably offered too much. In fact, shrewd car sales people are trained to always ask for more money, even if the offer is good one. This is because they don’t want to “scare off the customer” by telegraphing to the customer that his offer was high.
(5) If the sales person asks you for a deposit before he will begin negotiating, determine whether the deposit is refundable. Florida law requires a nonrefundable deposit be disclosed in writing on the receipt. If this is printed on your receipt, insist that this be waived in writing on your buyer’s order. If the dealer will not agree to this, be warned that he may be able to keep your deposit if you change your mind about buying the car.
(6) Be prepared for a lot of “back and forth” when the salesman takes your first offer back to the manager. When you get close to finding a mutually acceptable price, the manager himself will often come to talk to you. Don’t be intimidated and stick to your guns even when they tell you this is “positively, absolutely the lowest price”. Even if you think you do have the lowest price, a great strategy is to get up, walk out of the showroom, and get into your car to drive away. This will often precipitate an even better price. When you try this, the worst case scenario is that you really do drive home, but you can always return and buy the car the next day for the last price they quoted you. They may tell you that you have to buy today, but nine times out of ten that is a bluff. The only exception is when there are factory rebates and incentive expiring.
(7) The last day of the month really is a good time to buy a car. The salesman’s bonus money is maximized, the factory incentives are in effect, the managers are desperate to make their quotas, and it is the one time of the month when the buyer has the best edge in the negotiation.

Caveat emptor “let the buyer beware” could have been written specifically for what you can expect when you walk into a car dealership to negotiate the best price. You are up against some of the shrewdest, experienced negotiators anywhere. But, if you will follow my advice above, you should be able to hold your own and maybe even get a great deal.

4 comments:

  1. If you bought a high demand, low supply vehicle like a Prius, Solara convertible or FJ Cruiser we sold it to you at a fixed price, at or below MSRP. We never charge over MSRP and do not add a supplemental sticker next to the Monroney label on the window with an addition to the sticker price. Many other dealers do this and call it a "market adjustment addenddum". We do negotiate the price on other vehicles that are readily availabe. We negotiate in good faith, when necessary, in an attempt to meet or beat the price of our competition.

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  2. Excellent article. I'm seeding it to my car-buying-tips.newsvine.com account.

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  3. Still riding the bus with my sonJuly 10, 2007 12:27 PM

    I put a deposit on a car at Orlando Auto Mall on Orange Blossom Trail and was turned down by the finance company they use. They will not return my deposit because they say they offered me a different car which was 6 years older to purchase and of course I did not want this car that has so many problems.

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  4. It's a good idea for people to do a proper research before buying a car. There are only a few people who know that they have the advantage when buying a car on the end of the month. I agree with the #4 tip, most people are afraid to talk back to salesmen and sales managers, thinking that they won't be able to buy the car that they want.

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