How To Negotiate To Buy A New Car In 2009

by drjim on January 20, 2009

When Buying A New Car, You've Got To Understand How Much Negotiaitng Room You Have

When Buying A New Car, You've Got To Understand How Much Negotiaitng Room You Have

Ok, so let’s be straight about this – buying a new car is one of the biggest negotiations that most of us do on an annual basis. Any time that we have a chance to find out how to do a better job at negotiating this transaction, it’s almost like putting more money into our pockets. Interested now?

Philip Reed, a Senior Consumer Advice Editor over at Edmonds has spent some time thinking about this topic and so it would probably be a good idea to see what he has to say on the topic.

When you get ready to negotiate to buy a car, the first and most important question that you need to have the answer to is just how much room does the dealer have to give? I mean if the car has a list price of $20,000 just how far could you expect to negotiate him down to if you were the best negotiator in the world?

Reed points out that In a $20,000 car, the difference between the sticker and the invoice (dealer cost) is between $1,500 and $3,000. This is the negotiating territory that you are dealing with. I’m very sorry, but no matter how good you are your chances of negotiating the dealer down to $5,000 for the car are basically nil.

That being said, just a bit of negotiating on your side should result in a savings of $1,500 on most cars. Reed’s opinion is that if you negotiate actively you might save $3,000 (dealer holdbacks and rebates mean that you can sometimes buy a car for invoice or below).

A quick aside here: who does the best / worst job of negotiating? Studies by lawyers who have been investigating civil rights claims have revealed some interesting things.

The tests that they conducted reveled that white males receive significantly better prices than blacks and women. White women had to pay forty percent higher markups than white men; black men had to pay more than twice the markup, and black women had to pay more than three times the markup of white male testers.

It sure looks like we all need to be on our toes when we negotiate for a new car – and knowing how low the dealer can go is just the start.

Reed’s next point has to do with just how you go about talking about the 900 lb gorrilla that’s in the room when you are negotiating for a new car – the starting price.

One of the biggest issues here revolves around who brings up price first. The thinking is that whoever mentions it first will set the starting point for the discussions. Since you really don’t know how low the car dealer is willing to go, you are at somewhat of a disadvantage here.

The suggestion is that you hold off and bite your tongue. If the car dealer asks you (and they will) how much you are willing to pay, don’t answer them. Be vague, ask them how much they are REALLY willing to sell it for.

Remember that the sales person that you are dealing with may know about dealer discounts that they will receive that you don’t know about. They may start out at a lower price than you had even dreamed about and this could  help you save a lot of money!

How did your last negotiation for a car go – did you feel like you got a good deal? Have you ever been the first one to put a price on the table? How did that turn out? Did you ever let the other party bring up price first? How did that turn out? Leave me a comment and let me know what you are thinking.

Be Sociable, Share!

{ 7 comments… read them below or add one }

Kevin January 20, 2009 at 2:15 pm

We negotiated for a Toyota Yaris this past year. We ended up with a car that was already on the lot (not the color or package we really wanted). But we set the price first. We had researched on Edmonds and knew a lot of the information you describe above. So when the dealer asked us what price we wanted, we had a plan. We basically asked for ~$1500 lower than invoice. We knew about the statement “the first one to name a price is the eventual loser”. So we decided to low ball as much as possible. After 3 or 4 rounds of negotiation, with the dealer giving every excuse listed in the Edmonds article(s), we held firm and ended up getting the car for about $300-500 below invoice.

We fell we got a great deal on the car. If the dealer had other coupons that they made, that’s fine as well. Edmonds is a great resource and can help you understand the process and ensure you get a good deal. But they are also understanding that the dealer has to make money as well.

Reply

Dr. Jim Anderson January 20, 2009 at 3:03 pm

Kevin: sounds like you did an excellent job of getting a great deal. I like how you started from the price that you willing to pay and worked backwards. Enjoy your Yaris and remember that you are now getting ready for the next time you negotiate to buy a car…!

Reply

Jordan June 16, 2009 at 9:41 am

You simply have to be able say ‘no, thanks at that price’ at least once to the dealer. This gives them a strong message that you are serious about your research.

My dad swears by this process, http://tinyurl.com/knflt6

Reply

Dr. Jim Anderson June 16, 2009 at 9:22 pm

Jordan: you are absolutely correct. But man, sometimes when you REALLY want what the other side has, it can be almost impossible to do what you know that you should be doing…!

Reply

peliportti.com August 31, 2009 at 4:45 am

Make sure the negotiations aren’t personal by making an agreeable price for both parties for selling your car.

Reply

Zachary Williamson May 12, 2010 at 10:22 am

Nice post! Here’s one for ya… In a hierarchical organization, the higher the level, the greater the confusion.

Reply

nik February 7, 2011 at 12:19 am

Also don’t forget a great time to get a good deal on a car is at the end of the month. A lot of car salesman have to make quotas and such before the end of each month. This works in the buyers favor cause you can stroll in mid month and entice the dealership only to get what you want just beore the end of the month

Reply

Leave a Comment

{ 2 trackbacks }

Previous post:

Next post: