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How to Negotiate When Buying a Car

By: , dated January 25th, 2013

If you decided to utilize a car-buying service, or buy through an online network or no-haggle dealer, skip the next two paragraphs. If you’re planning to buy from a dealer, read this whole section.

When you’re ready to buy, let the dealer know you’ve done your homework. Tell them exactly what you want and tell them you’re planning to shop around for the best price. They’ll be more inclined to spend time on you if they know you’re ready to buy rather than just window shopping. Talk about the invoice price the dealer paid, rather than the manufacturer’s suggested retail price (MSRP), which includes a significant markup. If the dealer claims to not know the invoice price, show him a printout from one of the many sites on the internet that provide this information. Offer about $300 above the price the dealer paid (invoice price minus holdbacks and rebates). If the salesperson says he needs to “talk to his boss”, there’s a good chance he has no intention of doing so. Tell him you only have a few minutes now, and give him a phone number where he can reach you if you’re not here when he gets back from “talking to his boss”. That should accelerate the negotiations. Get the best offer you can from the dealer, and then take it to a second dealer (and a third, if you have time). You’re purchasing a commodity product, so don’t be afraid to look around for the best price.

While most car buyers will perform the steps in the preceding paragraph at the dealership, you might want to consider doing it by phone or fax. Dealers would much rather have you in the showroom where they can sell harder to you, and so many will resist negotiating by phone or fax, but if you can find a few who are willing to do so, it could save you some time. To maximize your chances of success, we recommend a fax rather than a phone call. The fax should explain exactly what car you’re looking for, and should indicate that you’re planning to make a decision right away, and that they should send you their best offer within three days. Fax it to as many dealers as possible within 50-100 miles who might have the car you want (you should be able to generate a list using the Yellow Pages). Ignore the responses that say “come on down and we’ll make you a great deal”. If any of the genuine offers are acceptable, take the best one.

We recommended that you do some test drives in an earlier step, to help you determine exactly what make and model you want. But now that you’re ready to buy a car, you’ll want to test drive that exact car, to make sure it’s exactly what you’re looking for. If you’re buying a used car, it’s a good idea to have a professional mechanic examine the car in detail. Your local mechanic can do this for you, and there are also a small number of companies that specialize in detailed auto inspections.

Once you have a solid, acceptable offer, then it’s time to discuss a trade-in, if you have one. Don’t let the dealer bundle the two transactions together, because it’ll make you seem like you’re paying less, and because he’ll be able to offer an apparently great deal on the one side, only to make up for it with a worse deal on the other side. If the dealer you’re buying your car from can’t give you an acceptable price on the trade-in, you can always take it to another dealer or sell it yourself. In order to know what a reasonable price is, use the same sites you would if you were buying a used car (but of course, understand that the dealer needs to make a profit and will pay you less than you would have to pay him for the same car).

Before the trip to the dealer, clean the trade-in thoroughly and have it detailed, to improve its resale value. Also determine the value of the car, just as you determined the value of the cars you considered buying. During the appraisal, point out any recently added equipment, such as exhaust systems, brakes, tires, and anything else that wears out over time. If you’ve done anything else with the car that increases its value, point that out as well.

Once you have a deal and you begin the paperwork, the dealer will try to persuade you to spend some more money. They’ll give you a sales pitch for an extended warranty. They’re offering it because it’s profitable for them, but it might make sense if you feel you need it to achieve peace of mind. Some dealers also pitch security etching, in which your vehicle identification number is etched onto your windows. The dealer will claim that it reduces the risk of theft, and it may, but the cost is usually exorbitant. If you followed our suggestion and got financing taken care of already, you’ll be able to skip that step.

That’s all there is to it. Congratulations on your purchase, and happy motoring!

This article was brought to you by the InvestorGuide Staff Writers and Editors.

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