Successfully Negotiate a New Vehicle Purchase

By DriverSide
So you've settled on a car, found a dealer you like, and are finally ready to sit down and start with the paperwork that will land you your new set of wheels. It's all very exciting! You just have one hurdle left, and it's the one that makes most people break out into a cold sweat: negotiations. Fret not! The process doesn't have to be stressful or complicated. We talk you through what to expect during the table talk and which information to have up your sleeve in order to get the best deal on your new vehicle.
 
Negotiating the Deal 
Before you arrive at this point you should know everything there is to know about the car of your choice, including the dealer invoice price, which is what the dealer paid to the manufacturer for the car. If not, we recommend doing some more research so you can successfully reach the purchase price you want. That invoice price is key to your negotiations, since you'll want to keep the purchase price as close to it as possible. Note that this applies whether you're paying cash, financing, or leasing your car. Everything is on the table and negotiable. For that reason, keep your target monthly payment price a closely guarded secret, so get as close as you can with the vehicle purchase price, then work on financing details to get the best terms possible.  
 
The reality is that you won't buy your car from just one person. It's an orchestrated dance between several people, starting the moment you walk through the door. There's also a lot of [LINK: dealership lingo], and it's a good idea to get a handle on it before you start. For example, as a customer on the lot, you're an "up," and may be initially seen by a "greeter," whose job is to make you feel welcome, find out what you're doing at the dealership, and direct you to a salesperson if you're a hot prospect. The sales rep is with whom you will spend most of your time, from the walkaround to the test drive to the initial stages of negotiating a price. Are you a "grinder," who will drag out negotiations for hours to get the price you want, or are you just going to "lie down" and take what they give you? Once you've finalized the price, the "closer" (usually the sales manager) will come in to try to squeeze the last dime out of you. 
 
At some point you may meet the service advisor, whose job is to sell you whatever service you need on your car after you've bought it. Make sure you are aware of the warranty coverage for your car and have the service manager explain what is and is not covered. The general sales manager, who basically runs the sales operation, might be involved as well. If you have any complaints (or praise) about the process, this is the person that can make things happen for you.
 
After you've settled on a price, you'll go to the finance and insurance manager, or F&I, who will set up the paperwork for you to sign, and probably try to upsell you on items such as an extended warranty, accessories or things like paint protectors, undercarriage treatments or other sources of "EDP," extra dealer profit. It is important to know before agreeing to such items what they do, how effective they'll be and even if you need them at all. If you only plan on keeping the car for three years, an extended warranty is not necessary. Be sure you don't agree to buy anything you won’t need. 
 
It's possible that one of the reasons you've chosen a particular manufacturer is because of the promise of a factory or dealer rebate. These incentives can come in a few different forms, be it cash directly to the customer, cut-rate financing or a dealer spiff that gets passed on to you. To find out what's out there, head online find out what's available in your area, since incentives can vary from place to place. Remember that the factory pays these incentives to you or the dealer, so you still have negotiating room when determining the price of the car later. In other words, these rebates apply after you've settled on the price of the car, not before. 
 
Once you're seated in the dealer's office, out comes the "four square." This is a simple worksheet with four boxes, one each for your trade-in value, vehicle purchase price, down payment, and your monthly payment. The interconnected nature of the boxes is geared to the dealer's advantage, but you don't need to be afraid of the four square if you come prepared.
 
If you've already secured financing or are paying cash, then you can just draw a big "X" through the monthly payment and down payment portions. The same is true if you don't have a trade-in. Regardless of how you're handling it, the most important box to you is the vehicle purchase price, because it will ultimately determine if you're getting the best deal or not.
 
If you have a choice between financing and cash back, think carefully about which way to go. A low interest rate may sound tempting, but if it comes with a shorter financing term, the monthly payment may price it out of your range anyhow. For example, let's say you're buying a $20,000 car and plan on financing $15,000 of it. The dealer is offering you $1,000 cash back or zero percent interest for 36 months. The zero percent sounds tempting and will give you a payment of $415. However, if you take the extra $1,000, apply it to the price of the car and finance for 48 months at a five percent interest rate, the monthly payment is $322, almost a hundred dollars a month cheaper. On the other hand, if that interest rate were for a 60-month loan, then you'd be looking at a payment of only $250 a month.
 
If you're going the dealer route for your financing and trade-in, then the sales rep will try to get you to focus on those two boxes, while not changing the actual vehicle price. You know how much your trade-in is worth, so stick to it, and don't let them lowball you. The same is true for your monthly payment. Yes, we know we said to figure out what you can afford each month earlier, but if the dealer is focusing on a monthly payment, it's because he's trying to avoid reducing the overall price of the car. The monthly payment can be adjusted by lengthening the term of the loan, changing the interest rate or other tricks, but what you want is a reduction in the vehicle purchase price to get the monthly payment you can afford. 
 
What to Do if You Feel Pressured
As you go through negotiations, keep one important detail in mind: you can leave. The dealership will try to use numerous tactics to get you to pay more, mostly by adding pressure through the use of multiple sales people, making you wait (the good ol' "let me talk to my manager" trick is a classic example), or simply leaning on you hard. If you don't like the way the sales rep is treating you, or if you don't think you're getting the deal you should, summon the courage to get up and walk out. If the dealer is trying to negotiate an unfair price for your trade-in, leave. The same holds true if the sales rep is emphasizing something you don't want, such as monthly payments instead of the sale price of the car. 
 
Don't let yourself fall in love with a particular car, since the manufacturer has undoubtedly made more just like it. Don't let the dealer play on your emotions by making you feel guilty for the time put in so far. Also, if the dealer insists on doing an appraisal of your trade-in, make sure you get your keys back before you start negotiations. That way if things go south you can leave when you want, not when they return your keys.
 
A vehicle purchase is something you’ll live with for years, so you shouldn’t feel pressured into buying one that isn’t exactly what you want. If the car on the lot is close, but not close enough to what you wanted, you have every right to ask the dealer to check inventory across the state or region to get something transferred in. There are a dozen exterior colors, a handful of interior colors, and a hundred and one other options, and it’s not always the case that the dealer whose lot you’ve stepped onto has your dream car. But it’s out there somewhere, and he can certainly get it for you. The dealership might pressure you to buy something from their available inventory because they’ve already invested in those vehicles. The longer a vehicle sits on the lot, the more it has cost the dealership, and in many cases, the less they can make off of it. Don’t pay any attention to it. It’s your money – get the car you want.
 
Inking the Deal
As the deal comes to a close, you'll be transferred to the finance manager to sign the actual paperwork. Here, you'll often undergo one last barrage of salesmanship, known as upsells. As we mentioned, most of this is EDP, but an exception is GAP insurance. Quite simply, GAP insurance covers the difference between the replacement cost of the car on your insurance policy - usually based on the used price - and the retail price that you paid for your car. That means you’ll be insured when you drive off the lot. Before you agree to it, check to see if your current insurer offers it. If not, it is a small expense and a prudent move.
 
When you're presented with the contract, review it carefully before signing it. Make sure that all the numbers correspond to what you negotiated earlier. If you have any questions or see something that doesn't make sense, call it out. They are there to work with you, don't be afraid to stand up for yourself and your money because once you've signed the contract it's binding; there's little chance of you going back since there's no "cooling off" period in most states. Once you're satisfied that the contract is the way it should be, sign it, and congratulate yourself. Hopefully, you've gotten the best deal possible and are behind the wheel of a car that you'll enjoy for years to come.
 

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