Buying a car is a major financial investment, and today’s auto market can be especially intimidating to buyers. Cars are in demand, prices are high, and interest rates are steep. That’s why it’s more important than ever to know how to negotiate when buying a car.
Because dealerships have plenty of strategies to maximize their profit, you should come ready with strategies of your own. Equipping yourself with knowledge, negotiation skills, and bargaining power could help you get a lower car price, a better car, and more manageable loan terms.
Whether you’re shopping new or used, and whether you’re buying from a seasoned car dealership or a stranger you met online, approach your negotiations with confidence and plenty of hard data. In this article, we’ll share some tips for getting the best deal on the car you want.
Looking for an auto lender? Easily compare lenders below.
Your one-stop shop for comparing car loans.
Enter your information to see how much you can save on auto loans.
What Can You Negotiate When Buying a Car?
You can’t negotiate every part of your car purchase, but you can negotiate a lot of things. Here are some of the factors that you can often negotiate when buying a new or used car.
The most important item you can negotiate is the purchase price. Dealers usually base their asking price on the Manufacturer’s Suggested Retail Price (MSRP), which is the price the automaker considers fair for the vehicle. But you might not always pay the MSRP.
Dealer mark-ups and demand in your local market can influence the car price you see at the dealership. However, you can always try to negotiate a lower base price, and you should.
Some dealerships won’t budge. Some even market themselves as no-haggle dealerships, meaning they don’t negotiate the sticker price at all. But it never hurts to try.
If you plan to finance your car, you can negotiate the terms of your loan, especially your interest rate. According to the Consumer Finance Protection Bureau, dealers don’t always offer their lowest rate first.
In fact, they usually do the opposite. Even if you’re getting financing from a lender outside the car dealership, get multiple quotes and use them as leverage to get the best possible interest rate from whatever lender you choose.
Dealerships usually tack on a host of fees when you buy a car. These might include document fees, freight fees, and advertising fees. Some dealers also charge fees for inspection and preparation.
Basically, you pay for the car to be in good condition. You can sometimes convince dealers to waive some of these dealer fees or lower the vehicle price to compensate for them, especially if you have a good argument.
Insurance and Warranties
Some dealers might try to sell you extra insurance policies, like gap insurance or credit insurance, by implying that they’re mandatory. In reality, these policies are usually not required unless you’re leasing. If your lending company requires additional insurance, you’ll usually get a better deal on it outside the dealership.
The dealer might also try to sway you toward purchasing an extended warranty. They might point out inadequacies in your manufacturer warranty and emphasize the importance of additional coverage that kicks in after your original warranty expires.
You can (and probably should) wait to buy any additional warranties. Research your options, learn more about the companies that offer them, and decide whether you really need one.
If you’re selling your current car too, it’s important that you get a fair offer on it. Always estimate your car’s value using a reputable site before you arrive. Be honest with yourself about the car’s condition, though. Damage, even minor cosmetic damage, can make a serious dent in your vehicle’s value. Note imperfections like:
- Scratches on wheels
- Alterations to the body
- Paint chips or dents (even if you fixed them)
- Heating or air conditioning issues
- Loss of tire tread
- Interior odors
- Stained or worn seats
- Unresponsive electronics
- Issues with the title
Tips for Getting the Best Deal on a Car
Use these tips to increase your chances of getting a great deal on a car in the current market:
Before you set foot on the dealership lot, do plenty of research beforehand. Read about different dealerships in your area and learn about your local market. Consider reading reviews of each car dealership from people who bought cars there. They might contain valuable information about their sales tactics and negotiation styles.
Buying a car is a big decision, and you will probably feel a variety of mixed emotions. Car shopping can be stressful, frustrating, exciting, and exhausting all at once. But most people make better decisions when they’re clear-headed.
Try to filter out emotions that may cloud your perception of the cars on the lot and the offers dealers make. React logically and take your time.
Work with a Variety of Dealers
Make dealerships compete for your business. Not only can competing offers give you negotiating power, but they also give you a clearer view of the market. You might expect to work with a dealer you trust only to learn there’s a better price elsewhere. Shop around and be flexible.
Shop at the End of the Month
Consider visiting the dealership at the end of the month. Car salespeople sometimes have to sell a certain number of cars by the end of the month, quarter, or year. If you show up on September 28 and catch a salesperson who’s desperate to meet their quota, they might go for a lower price than they would on October 1. This method isn’t foolproof, but it could be worth trying if you can wait.
If you’re interested in several makes and models, do some research to see if any of the manufacturers are offering incentives, like 0% APR for the first year or cash-back incentives where you can earn a rebate on your purchase.
There are also sometimes special promotions that apply to specific groups, like military members or students. Research all manufacturer or dealer incentives that you might qualify for to ensure you get the lowest price possible.
Focus on Price over Payment
The dealer may use a low monthly payment as bait for you to pay more than you really should. If you want to save money in the long term, push for a lower purchase price, not a lower monthly payment.
A low monthly payment often just means you have a long-term loan, which costs you more in interest and increases your risk of developing negative equity as your vehicle depreciates.
Get Pre-Approval for Your Financing
Work with a lender beforehand to get pre-approval for an auto loan. Talk with banks, credit unions, and online lenders to find the best interest rate available to you.
This saves you the time, energy, and money you might spend working with the dealership’s finance team. Plus, you will have a pre-allotted budget for your car. Shiny new features and optional upgrades can’t tempt you if your loan won’t cover them.
Know the Invoice Price
The invoice price is the amount the dealer paid the manufacturer for the car. It’s useful to know this figure in addition to the MSRP because it’s how the dealer calculated their sticker price.
They start at the invoice price and mark it up to earn a profit. You can usually find the approximate invoice price for the make, model, and year you’re targeting on a site like KBB.
Trade-in Your Current Vehicle
The upside of the current auto market’s dire condition is that your car might have spiked in value. If you’re selling or trading in your vehicle, you can apply its value to the price of your new car. But approach your trade-in cautiously. To take advantage of the market conditions, it’s best to separate trade-in negotiations from new car negotiations.
For example, the dealer can use your car’s trade-in value to make their deal look better than it is. They could make you a great offer on your trade-in just to inflate the price of the new car. It might even be worthwhile to sell your car on your own before you go to the dealership. That way, you can maximize your payout and focus on negotiating the actual price of the car in front of you at the dealership.
Don’t Spring for Add-ons
Dealers usually try to make extra money by pitching optional add-ons. These extras are usually unnecessary and can drive up the price of the car significantly. Say no to things like tire protection plans, anti-theft protection, infotainment upgrades, and VIN etching. Like extra insurance policies and warranties, if you really want these add-ons, you can buy them later.
When negotiating with a dealer, your first offer should be the lowest you want to go. Don’t blurt out an unreasonably low number, though. You want to show the dealer you know what you’re talking about and want a fair price.
Start with an offer that’s at the lower end of your budget, and is based on your research. The dealer usually counters your first offer at a higher price, and hopefully, you’ll be able to agree on a price somewhere in the middle.
Schedule an Inspection
You should know everything about a car before you buy it. Take the car to a mechanic for an inspection before you sign anything, especially if it’s used. Dealerships typically inspect cars themselves, but it helps to arm yourself with extra information from third-party mechanics who have no personal stake in the sale. If they find unreported issues, you might bring them back to the dealer as a reason for a lower purchase price.
Say No if You Have to
Any skilled negotiator knows when the deal is off. Know what your boundaries are before you start negotiations, and walk away if the dealer can’t meet them.
Don’t let the salesperson convince you that your boundaries are unrealistic or unimportant, either. If you did your research carefully, you probably know what’s out there and where to find it. Move on if they can’t offer you a satisfactory deal.
How to Get a Good Deal with a Private Seller
Car dealerships aren’t the only options, especially if you’re open to buying a used car. You could also buy a car from an independent third-party seller.
One of the benefits of working with a private seller is that they may want or need to sell their car quickly, and are more willing to negotiate. The downside is that they have fewer incentives to close the sale. If you can’t offer the price they’re looking for, they might be happy to let you walk away.
However, it’s still possible to negotiate with a private seller to get a great deal on a car you love. Most of the same advice applies here. Do your research, request a vehicle history report, and start with your lowest offer. If you plan on buying from an independent seller instead of a dealer, here are some things to consider:
- Make a cash offer: You typically have to pay cash when buying a car from a private seller instead of financing your purchase. While you might pay a lower price overall, you will have to pay it in a lump sum.
- Schedule an inspection: When buying from an individual, you don’t get the same quality control measures you’d get at a dealer. Have a mechanic inspect the car before buying it.
- Avoid scams: Private party vehicle sales can be scams. Be wary when working with independent sellers, and never give your financial information to a stranger.
- Check the VIN: If the car’s price is unbelievably low, there might be a reason. Check the car’s VIN with your local Department of Motor Vehicles (DMV) to make sure there are no liens on the car and that it rightfully belongs to the seller.
Finance & Insurance Editor
Elizabeth Rivelli is a freelance writer with more than three years of experience covering personal finance and insurance. She has extensive knowledge of various insurance lines, including car insurance and property insurance. Her byline has appeared in dozens of online finance publications, like The Balance, Investopedia, Reviews.com, Forbes, and Bankrate.