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How do I negotiate at the dealership?

Home » Automobiles » Making an offer and negotiating the price of a car » How do I negotiate at the dealership?

The single most important rule for negotiating at a dealership is to know what you want, and what you are willing to pay for it. If the dealer is asking $16,900 for a 2003 Honda CRV, and you, through your investigation, have found that they are worth around $15,000, you are in the position to make an offer. Also, if you have found that they have had 20 of them on the lot for 2 months, you can be relatively confident that you can get a good deal. Don't expect to talk to the dealer and "talk him down" without making an offer yourself. Until you show a dealer that you are willing to make a commitment to a price, he will just be blowing smoke. As already discussed, your research is what prepares you to make a reasonable offer. If you make a ridiculously low offer, you will insult the dealer, and lose your credibility.

The key is to know what you would be willing to spend, and then offer a few hundred dollars lower than that, so that you have some room to come up, and still be around what you want to spend. For instance, if you think that $15,000 would be a good deal on the CRV, you might offer $14,700. The dealer will come back with a counter-offer, maybe $15,800. Now is the time for patience. You should say something like, "The most I'd be willing to pay is $14,900. Call me if you can do any better." This is counter-intuitive, since usually we want to buy things the same time we go to the store. Nevertheless, the best deals in car sales take place over a week or two. Typically, the dealer will call you back after about a week, and will make you a significantly better offer. Otherwise, you won't get a call, and you should just look around at another dealership. Going through the same process at another dealership on a car that is similar to but not exactly the same as the car you want can give you the ammunition to challenge a dealer to lower the price again. If you can say, "So and So down the street is offering me X--What can you do?" that will be a powerful negotiating tactic. With patience, and by referring to the knowledge you have gathered, ("Well the blue book is..." "These things are going for...") you will be able to find a price that will benefit you, and that the dealer can live with.

Finally, some tips on fees. Dealers will sometimes make you a good offer, and then charge you a $200 "document fee" that recoups some of the cost that they lost in negotiating. This is a fee where you pay them to fill out their own paperwork, and it should be no more than $50. Make sure you say that you will pay $50 for the documents. Also, call your bank yourself about financing. Often, the dealer will get a commission from the bank for setting up financing. This may be as much as 2% interest. If you finance through the bank yourself, you may get 6% instead of 8% APR. But if your dealer has a special offer on interest rates, that may be better. If you have to choose between a low APR and cash back, just call the bank and then do the math.

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