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Car Buying

Buying a New Car: Tips for Negotiating a Good Price

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author photo by Doug DeMuro

Negotiating can be one of the most intimidating things about buying a new car. How do you do it? What do you say? Where do you start? Fortunately, we've got you covered with a few negotiating tips that will help you get the best price.

Don't Talk Payment

This is one of the most important parts of negotiating a car's price, and also one of the most overlooked. It's important not to negotiate based on a car's monthly payment but on the purchase price instead. The reason for this is that it can be hard to figure out the purchase price if you're negotiating based on payment. And that means you might end up overspending for the car if you negotiate based on payment alone.

Here's what we mean: Say you're looking at a $30,000 car and you want to get your payments under $300 per month. If you tell that to the dealers, they may need to stretch your loan term out to 72 months or more -- but they can probably get your payment under $300 per month. In doing so, however, they may have charged you $31,000 or $32,000 for the car. You'll never know, because you were focused on the payment rather than the purchase price.

Don't Be Afraid to Walk Away

It's important that you don't settle on a car that you can't live without. That puts you in a bad position, because then you're at the mercy of the dealership's pricing. Instead, be ready to walk out at any time. That gives you the upper hand -- because a salesperson can't walk away like you can. He or she needs to sell the car, while you could always find another one. While you don't want to become combative and threaten to walk out of a dealership, remember: You don't need to buy this car.

Ask the Salesperson for His Price

The last time I bought a car from a dealership, I paid $1,000 less than I was expecting to. The reason: When the salesperson asked me for my offer, I asked him for his. Speaking first in any negotiation is a bad idea, because your number might be higher than the other party's best offer.

That was the case in my transaction. The salesperson's offer was the same as my ideal price. Knowing this, I realized he had some negotiating room in the price of the car. So I asked him if he could come off another $1,000. He did, and I paid less than I expected -- all because he gave his number first.

In case you're confused on how to do this, you might want to ask the salesperson for his "best price." If he or she insists that number is the sticker price and asks for your best price, just remember our advice above. You can always walk away.

Make a Counter-Offer

If the salesperson's "best price" happens to match yours, our suggestion is simple: Make a counter-offer anyway. The dealer might have more negotiating room in the car's price than you realize, which means you might be able to get the car for a better deal than you think. As a result, we strongly suggest making a counter-offer when the salesperson comes back with a price. And we suggest that the offer be considerably different than the salesperson's.

For instance, if a car is advertised at $31,000 and the salesperson offers $30,500, we wouldn't suggest counter-offering with $30,000. Instead, try $28,500. That gives you a lot of room in between to make a good deal.

Don't Sweat the Small Stuff

Once you've heard the dealer's best price and you've made a good counter-offer, we advise that you don't sweat the small stuff. It may be infuriating, but don't walk away from a good deal over a small amount like $300 or $400. With the average car loan term well over 60 months, these numbers equate to $5 or $6 per month -- not enough to lose a deal over. On the other hand, a $1,000 difference is certainly enough to walk away from when buying a new car -- a point you should make clear to your salesperson.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
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Buying a New Car: Tips for Negotiating a Good Price