Americans hate to haggle. Maybe that’s because, unlike in other cultures, we don’t do it very often, so we haven’t gotten very good at it. I’m here to tell you that it’s worth it to learn, given that the two things we do have to negotiate for are the most expensive things we buy: our homes and our cars. In fact, auto website Edmunds.com says skilled negotiators can save as much as 15 percent when they purchase a vehicle.
New cars sell for just over $34,000 on average, according to Kelley Blue Book, so that’s a potential savings of about $5,000. How often in life do you have an opportunity to save four figures? “You work hard for your money and therefore have a right — and a responsibility — to reduce your costs,” said Ed Brodow, negotiation expert and author of “Negotiation Boot Camp.” Here’s how to exercise that right and responsibility skillfully when you buy a new or used car.
• Get outside financing first: Car dealers don’t make money just by selling cars. They make money selling financing. It’s another moving part that complicates your negotiation. That’s why it’s essential to get preapproved for a loan at a bank or credit union before you ever talk to a dealership. After you’ve negotiated a price for the vehicle, you can see whether the dealership’s financing is any better than your own.
• Choose either in-person or online : You know what it’s like to do it the old-fashioned way and visit the dealership. But there is another way. In the 1990s, dealerships created “Internet departments” to respond to online shoppers. These departments interact with customers via phone and email and are often quicker to reveal their best price for a vehicle. Plus, they frequently strive for volume sales rather than milking each transaction. This can make for a lower-pressure experience. Choose the method that suits your personality, then proceed to the next step.
• Know what to pay: How can you set your opening offer and maximum offer and know you’re getting a fair deal? I like to use Edmunds’s “True Market Value” pricing because it’s free and based on actual prices people in your area are paying for the same car. TMV pricing is available for new and used vehicles. Let’s take a three-year-old Ford F-150 pickup as an example, because it’s the most popular vehicle in America. Edmunds gives you four TMV levels of pricing for a used vehicle. Here they are, for the Washington area, from most to least expensive:
●Certified used: $20,689
●Dealer retail: $19,785
●Private party: $18,126
First, find the level that matches the vehicle you’re looking at. Is it certified? Dealer retail? Then, if you’re negotiating for a very popular vehicle, like the Ford F-150, make your opening offer one pricing level below that. If you’re negotiating for a less popular car, you can make your opening offer two levels below.
As for your final offer, because TMV prices are averages of what other people are paying — and some of those people may have paid too much — your goal is to pay less than the price listed for the vehicle’s category. In other words, if you were buying a certified F-150, you would try to pay less than $20,689 for it. It’s fine for the dealership to make a profit. You just don’t want it to make an excessive profit.
• Talk price, not payment: Many car salespeople — and car customers — like to talk about the monthly payment instead of the vehicle price. That’s a terrible mistake because auto loans can be strung out over many years to manipulate the size of the monthly payment. In fact, nearly a third of Americans take out six- or seven-year loans to buy new cars, according to Experian. When you do that, you can end up owing more on the car than it’s worth, because vehicles depreciate fast.
• Get the salesperson to go first: Negotiating pros follow the adage that “whoever speaks first loses.” Why? Because the opening number defines the entire negotiation. Once you name a dollar figure, you can’t go any lower than that. That’s why you should try to get the salesperson to name the first price.
• Name your price and shut up: When it is time for you to name a number, state your reasons for the number, spit it out — and then shut up. You want that pregnant pause, that awkward quiet. “Odds are, they’ll fill the uncomfortable silence you’ve created with some concessions,” said Brodow, the negotiation expert.
• Express your pain: When the salesperson makes a counteroffer, visibly wince or grimace as if the amount is painful to you. Hey, if you save money thanks to your negotiating, you can consider yourself a paid actor!
• Counter with a smaller increment: To demonstrate your mental toughness to the sales staff, make the increments of your counteroffers smaller than theirs. For example, if they come down a thousand dollars, you will only go up by, say, $500.
• Leave/hang up: Whether you’re negotiating in person or with the Internet department, end the conversation at some point. Some car dealerships keep you waiting around in a cubicle on purpose to make you invest your time and be more likely to buy, according to Edmunds. Instead, leave the cubicle. Better yet, leave the dealership. Politely let your salesperson know that the numbers aren’t where you need them to be and that you’re leaving or hanging up to shop around some more. The last time I did this, I got three calls from dealer No. 1 on my way to dealer No. 2!
• Shop multiple dealerships: This brings us to a closely correlating strategy: Always shop more than one dealership and — without naming names — make sure they know about each other. “Execute the squeeze,” Brodow says. “I can get a better deal down the street. Will you beat it?”
• Ask for upgrades: If you’re close but can’t quite get the price where you want it, instead of trying to get the car for less money, you can try to get more car. Ask for extras, such as an extended warranty, better tires or a fancy stereo. Just make sure the upgrades are things you really do want.
• Mention your trade-in at the end: Yes, you heard right. Negotiate the entire deal, and only then reveal that you have a car available to trade. The reason being, if you mention the trade-in at the beginning, just like with financing, it’s one more number the dealer can use to make the transaction confusing. You can get a good idea of your old vehicle’s value using the same Edmunds TMV pricing you worked with before. Alternatively, you can sell your old vehicle privately or at a used-car superstore such as CarMax.
So do the negotiating tactics above work? A couple of years ago, I did an experiment. I sent two young women shopping for the same vehicle on the same day. One was armed with my tips. The other wasn’t. The newly educated car shopper negotiated a deal that was $7,000 lower.