Negotiating the Right Way
Your Second Visit to the Dealership—the Buying Visit!
You are way ahead of the game right now. You’ve been patient, and all that homework is getting ready to pay off.
- You know how much money you can spend (your “Available Cash” figure.)
- You know what the one vehicle you like cost the dealer.
- You know what your old car is worth.
- The dealer—not you—is under the gun: They can lose a sale if they don’t do it your way.
The secret to winning (saving lots of money) is to stay in control, keep things simple, and never be pushed. The following steps will help you:
- Make an appointment with your salesperson.
These men and women work hard and work on commission. If you liked the person who waited on you during your first visit, go back.
- Put these numbers on a summary sheet or take your Buyer’s Fact Sheet with you.
- The wholesale value of your trade-in, if you’re trading.
- Your available cash figure.
- Your maximum offer on the one car you like.
- Your maximum difference figure, if you’re trading.
- When you arrive at the dealership, ask to go to the salesperson's office.
You take the initiative; you take control of the situation. Tell the salesperson you are definitely going to buy a car, but not necessarily from that dealership. Say there are other cars you like as well as this one. Why say this? To increase your bargaining power.
- If you have a trade, ask to have it appraised.
Do this before you discuss the new car at all. Keep the transactions separate. But beware: many dealerships will at first refuse to give you the true wholesale value of your car at any time. They'll want to talk about "allowance," a meaningless figure, or worse, may refuse to have your car appraised at all right then. If you run into a dealership that refuses to deal straight with you, find another dealership.
- Agree on the amount the dealer will give you for your trade.
- Make an offer, and be prepared to negotiate on the new car.
You've finished talking about trades. You've agreed what they will pay to buy your car. Now it's time to see what you must pay to buy their car. Two separate transactions. Your goal now, using the cost of the car you like, is to set the scale of bargaining in your favor. How do you do that? Whatever your first offer, expect the dealership to counter offer. And don't be afraid to counter offer yourself—just offer a very small amount of money.
The conversation might go like this:
Salesperson: "What if I could give you a ten percent discount?"
You, the smart shopper: "No, let's do it my way. I'll offer you $15,000. Invoice cost on that car."
The flustered salesperson: "But, my boss will never accept that!"
You: "Well, why don't we offer it and see? I'll even sign a buyer's order saying I'll buy at that figure."
A now calmer salesperson: "Okay. Let me fill out this sheet. And I'll need a deposit before I can take this offer to my boss. To show him you're serious, you understand."
You, very firmly: "I'm sorry, I won't give you any deposit until my offer is approved in writing."
Salesperson: "But we're not allowed to do it like that."
You: "If you can't, I've got an appointment at a dealership that will."
The salesperson leaves, then returns and agrees to do it your way. You've offered $15,000. They now ask $20,000.
You: "I'm sorry, no. How about $15,025?"
Startled salesperson: "What?"
You: "Okay, make that $15,030."
Do you get the idea? Set the scale of bargaining in your favor. Raise your offer a time or two, that's part of the game. But don't raise it much. And don't give a deposit until your offer is approved in writing. Dealerships use deposits simply to make it harder for you to escape. Warning! Some dealerships, rather than taking money, will ask for your driver's license or credit cards as a deposit. Don't give those to them.
- When you reach an agreement and you are looking at a completely filled out "buyer's order," compare the "amount due" line to your "difference" figure from the Information Edge Vehicle Buyer’s Fact Sheet.
Quick Information Edge tip: Beware of hidden fees in the price that are not itemized on the purchase order, such as extended warranty and rust-proofing fees.
If you don't see the difference figure, ask the salesperson. Make sure it includes tax, tag, title, and any other dealer charges. Are you on budget? If this figure is below your difference figure, you're home free. If it's above it, stop the transaction. You've just gone over budget.
- If the difference figure is okay, give a small deposit.
Dealers will ask for hundreds or thousands, but, unless you're asking them to order a Cadillac without air conditioning or to paint your car pink and purple, don't do it. Any amount of money makes a contract legally binding. $50 should be enough.
- Now be prepared to deal with one or two or even three other "salespeople."
You're not free yet. Even if you're paying cash; even if you have a creditunion check in your pocket, many dealerships will virtually force you to talk with finance managers (also known as "financial counselors" or "business managers"). They'll also insist that you talk with their "after-the-sale" manager. This might be a separate person or the finance manager. Whatever, as we noted earlier, this person will try to sell you warranties, "protection" packages such as rust proofing and undercoating, and add-ons such as alarm systems.
- Be prepared for the leasing switch.
And don't forget, this is the time a dealership may try to switch you to leasing. Don't automatically fall for it. Remember that the dealership wants to convert you to leasing because the dealership generally makes a lot more money leasing you a car than they would selling you the very same car.
- If you're buying, Information Edge recommends a simple approach for evaluating the value of dealership financing, insurance, protection packages, warranties, and other add-ons.
After the sales pitch, which invariably presents dealership products and services as the cheapest and best, simply say something like this.
"That sounds fine. And if your loan and products are cheaper, I'll certainly finance with you. Now, would you mind giving me a copy, completely filled out, of the contract you want me to sign so that I can compare it to other sources?"
Banks will be happy to give you exact figures. Your credit union will be glad to do that, too—to tell you exactly what we will charge for the loan itself, life insurance, disability insurance, and warranties. If the dealership is cheaper, shouldn't they be willing to give you these figures, too? To the penny?
If the dealership does that, your credit union will be happy to help you compare costs, and will send you to another source if they're cheaper. But if a dealership won't give you the details, what does that say?
What about their insurance, protection packages, warranties, and the like? At times, it might be sensible to buy extra rust proofing and undercoating protection—though many consumer groups doubt the need for extra protection. And at times an extended warranty might make sense—though manufacturers’ warranties are good these days. But it never makes sense to spend hundreds and thousands more than you need to for these products. Unfortunately, some dealerships are now trying to charge $1,200 and more for rust protection they used to sell for $200; they're trying to sell $300 warranties for $1,900 or more. We don't think you should spend that type of money without very carefully comparing products. Who wants to throw away an extra $2,000 without thinking?
- After you’re finished with the finance salesperson, don't celebrate quite yet.
If you're financing at the dealership, many will insist that you take the car home that minute. It's called "spot delivery," remember. But don't do it. Go home and diffuse a little. Check the dealer's figures again. And give the dealership time to fix the little things wrong with any new car. You did check it over carefully, didn't you? Make a list of the squeaks, rattles, sticking knobs, and scratches, and have them fixed before you agree to take the car.
If you're financing at a bank, make sure you have all your paperwork necessary for their loan. If you're financing with the credit union, just stop by or call, and we'll have you ready to roll in an instant.
- When you finally pick up your new wheels, check it over carefully.
Don't look at it in the rain when it’s hard to see flaws in the finish. If everything's okay, smile. You did it the right way and saved a lot more than change!