We arrived at the dealership on Dec. 28. Our goal? Find out as much as possible about the new sports car I had been eyeing. Two hours later, goal accomplished, we walked out.
But I was hooked. The car cornered like a dream. And I needed safe, reliable and fun transportation.
So began my recent car purchase. It’s a negotiation many dread. But you shouldn’t. Why? Because a new car purchase shares many characteristics with negotiations everyone regularly faces, at work and at home.
1. Get information.
The first step in all negotiations, including buying a new car, involves obtaining critical information. Regular readers of this column will recognize my first Golden Rule: Information is Power – So Get It.
In the car context, look inward and figure out what you want and need. Prioritize your following interests: safety, reliability, appearance and styling, price and affordability, energy efficiency, comfort, practicality, and, of course, enjoyment value.
Then find a vehicle that satisfies your interests. These days, hit the Internet first. Hundreds of Web sites are devoted to model-by-model comparisons, safety, features, financing, and more. A good place to start is www.consumerreports.org or www.Edmunds.com.
And after you’ve narrowed your choice, get some firsthand information from friends with these vehicles.
Now go for a test drive. Kick the tires. See how it feels. If you like it, express some interest. But don’t ooh and aah. If you show too much interest, you lose leverage.
Don’t get sucked into a price discussion, either. The salesperson will push you to start bargaining, saying “Tell me what we need to do so you can drive out of here today.”
Resist the urge. Use this trip simply to gather information. Wait until you’re fully armed to talk price.
2. Find the dealer’s cost.
A key to getting the lowest possible price revolves around the dealer’s vehicle cost. Find it. How? Consumer Reports will provide you with a detailed statement of the dealer’s vehicle cost, including current rebates, unadvertised incentives and holdbacks. Order this on its website.
You now can figure out dealers’ anticipated profits since you will know the vehicle’s invoice price (manufacturer’s price to the dealer), sticker price (what the dealer wants you to pay), and the invoice and sticker prices for that vehicle’s options and packages.
Now you’re ready to bargain.
3. Exercise your leverage by working dealers off against each other.
Once you’ve decided on a vehicle, contact some dealers and find out how many have “your” vehicle on their lot. You’ll get a better deal if the vehicle is physically on their lot, and they want to move it. You’ll get an even better deal if it’s year-end and they need space for their new models. It’s no coincidence I made my first trip to the dealer on Dec. 28.
Once you’ve found “your” vehicle at two or more dealers, comparison shop by calling and telling each dealer:
• You’re a serious buyer and will likely buy “your” vehicle in the next few days.
• You’re a very price-sensitive consumer.
• You’ve done your homework and know the dealer’s costs.
• You’re getting price quotes from a number of dealers for that vehicle.
• You want a breakdown of the charges in their quote.
• You want the absolute best price, and you will not consider the dealership unless the price is practically the lowest.
Do this by phone, too, if you can. It puts you in control, not the dealer, and is the most efficient use of your time. And if a dealer resists giving you a phone quote, push them. If they want your business, they’ll talk. Of course, if this doesn’t work, you may have to visit them.
You can also obtain price quotes online from CarsDirect, CarOrder and InvoiceDealers. Or you might solicit online bids from dealers from car referral services such as Autobytel.
Work these dealers off against each other. They’re competitive and usually don’t want to lose your business. So don’t just accept their first offer as their last. Take the low dealer’s price to the second lowest and get him to beat it. Then go back to the original low dealer and get him to beat your new lowest price. Don’t stop until the dealer does.
Overall, experts suggest, you should be able to negotiate a price of 4 to 8 percent over the dealer’s cost. If vehicle demand is unusually high, however, you may have to pay more. Vice versa, too.
Finally, use these additional tactics to get what you want:
Negotiate up from the dealer’s cost, not down from the sticker price. Frame your discussion around the dealer’s profit, not the discount off the sticker price.
Don’t discuss leasing, financing options, or your possible trade-in until after you’ve agreed to a purchase price. Negotiate these separately.
Beware of prices “good only today.” Legitimate quotes today should be equally good tomorrow – unless rebates or special promotions have specific cut-off dates.
Leave if you get a firm price that the manager subsequently rejects.
I just bought a new car using these strategies. It now has 250 miles on it. My old car has 108,000. Time to sell it. But that’s a negotiation for another day.
Published February 1, 2002 The Business Journal