Archive for the ‘car buying’ Category

How To Negotiate To Buy A Car in 2010

Friday, February 26th, 2010
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The Global Recession May Make Buying A Car Easier This Year

The Global Recession May Make Buying A Car Easier This Year

Despite the fact that the world is emerging from a global recession, sometimes the need to buy a car shows up just when you least expect it. If that time has arrived for you, then maybe we should spend some time talking about what you need to do in order to successfully negotiate the purchase of your next car in 2010…

Three Phrases You Need To Know

Michael Royce has spent a lot of time researching how best to buy a car and he believes that you need to understand the difference between three different car buying terms before you first step foot inside of a car dealership:

  1. Sticker Price: this is a fake value – if the car dealership could sell the car to you for this price, then they’d be happy because this value represents a nice big profit margin for them. For you, all this value means is that you should be able to buy the car for much less than this value.
  2. Invoice Price: this is how much the car dealer paid the car manufacture for the new car. In theory, this value does not include any car dealership profit in it and so the car dealer will need to sell the car to you for more than this value. However, if the car manufacturer is offering rebates and other special offers, the car dealer may actually be buying the car for less than the invoice price.
  3. Wholesale price: for a used car, this is the price that the car dealer paid for it. If you look in used car pricing books, they will list both the wholesale price (what the dealer pays for the used car) and the retail price (what the dealer will try to sell the used car for).

Remember: It’s A Game

In order to get yourself into a proper mental state to negotiate to buy a car, you need to sit yourself down and remind yourself that you are getting ready to play a game – it’s a game with very high stakes, but it’s a game none the less.

The biggest challenge that you will face is the simple fact that in this game the other side of the table may be much better at it than you are. The car salesperson does this several times a day, every day. You might think that this gives them an insurmountable advantage over you; however, it doesn’t – most car salespersons are not that good at what they do.

Since many of them only know how to sell a car by following a script that the car dealership has provided them with, you have a fighting chance – if you change the way that the game is played, then you will have gained the upper hand in the negotiations.

Your Strongest Tactic: I Don’t Need This Deal

In sales negotiating one of the most powerful tools that we have is the ability to walk away from the deal. All too often when we are negotiating to buy a car, we forget that we have this option. We’ve spent a couple of hours at the car dealership, we’ve gotten to know the salesperson and maybe even their manager, we’ve filled out some paperwork, its really started to feel like we’re committed to doing a deal with these guys. However, that’s not the case.

The great thing about being a car buyer is that there are a lot of different places that you can buy your car from. You don’t need to complete the deal that you are working on – you can walk away at any time. The other side of the table knows this too and they will do almost anything to prevent you from leaving.

You need to clearly state that you don’t want to talk about monthly payments (that’s like dealing in “funny money”), instead you want to talk about the selling price of the car. Don’t be in a hurry or give the appearance of being desperate (even if you are!).

Make sure that you’ve done your research and know what a fair selling price for the car that you want is. For new cars it’s probably a couple of hundred dollars over the invoice price and for used cars it’s probably $400-$500 dollars over the wholesale price. Start your negotiations there and be prepared to leave if things don’t go the way you want them to.

What All Of This Means For You

Royce makes the good point that even if you do walk out of a negotiating session, leave on good terms. There’s no need to burn bridges – this is just a business deal after all, not a personal attack.

The next day call the dealership back up and see if they still want to deal. It can be amazing how seeing you walk out the door can motivate them to find ways to get closer to the price that you want to pay.

Always remember that buying a car is very much a game that you play every few years. You’ll never do it as many times as the other side of the table has done it, but if you use these suggestions, then you can make the deal work out in your favor…

What’s the one thing that you think that you must do before walking into a car dealership to negotiate to buy a car?

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What We’ll Be Talking About Next Time

Remember when every business used to view themselves as an island? This made life pretty simple for anyone doing sales negotiations – it was always us vs. them. Well, it sure looks like someone farther up the corporate ladder has been reading those business self-help books and they’ve decided that there is a better way to go about doing things: partnering…

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How To Negotiate To Buy A New Car In 2009

Tuesday, January 20th, 2009
When Buying A New Car, You've Got To Understand How Much Negotiaitng Room You Have

When Buying A New Car, You've Got To Understand How Much Negotiaitng Room You Have

Ok, so let’s be straight about this – buying a new car is one of the biggest negotiations that most of us do on an annual basis. Any time that we have a chance to find out how to do a better job at negotiating this transaction, it’s almost like putting more money into our pockets. Interested now?

Philip Reed, a Senior Consumer Advice Editor over at Edmonds has spent some time thinking about this topic and so it would probably be a good idea to see what he has to say on the topic.

When you get ready to negotiate to buy a car, the first and most important question that you need to have the answer to is just how much room does the dealer have to give? I mean if the car has a list price of $20,000 just how far could you expect to negotiate him down to if you were the best negotiator in the world?

Reed points out that In a $20,000 car, the difference between the sticker and the invoice (dealer cost) is between $1,500 and $3,000. This is the negotiating territory that you are dealing with. I’m very sorry, but no matter how good you are your chances of negotiating the dealer down to $5,000 for the car are basically nil.

That being said, just a bit of negotiating on your side should result in a savings of $1,500 on most cars. Reed’s opinion is that if you negotiate actively you might save $3,000 (dealer holdbacks and rebates mean that you can sometimes buy a car for invoice or below).

A quick aside here: who does the best / worst job of negotiating? Studies by lawyers who have been investigating civil rights claims have revealed some interesting things.

The tests that they conducted reveled that white males receive significantly better prices than blacks and women. White women had to pay forty percent higher markups than white men; black men had to pay more than twice the markup, and black women had to pay more than three times the markup of white male testers.

It sure looks like we all need to be on our toes when we negotiate for a new car – and knowing how low the dealer can go is just the start.

Reed’s next point has to do with just how you go about talking about the 900 lb gorrilla that’s in the room when you are negotiating for a new car – the starting price.

One of the biggest issues here revolves around who brings up price first. The thinking is that whoever mentions it first will set the starting point for the discussions. Since you really don’t know how low the car dealer is willing to go, you are at somewhat of a disadvantage here.

The suggestion is that you hold off and bite your tongue. If the car dealer asks you (and they will) how much you are willing to pay, don’t answer them. Be vague, ask them how much they are REALLY willing to sell it for.

Remember that the sales person that you are dealing with may know about dealer discounts that they will receive that you don’t know about. They may start out at a lower price than you had even dreamed about and this could  help you save a lot of money!

How did your last negotiation for a car go – did you feel like you got a good deal? Have you ever been the first one to put a price on the table? How did that turn out? Did you ever let the other party bring up price first? How did that turn out? Leave me a comment and let me know what you are thinking.

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How To Make “Total Cost” Work For You When Negotiating A Sale

Thursday, September 18th, 2008
How To Negotiate For The Car That You Want!

How To Negotiate For The Car That You Want!

I suspect that I’m just about every car salesperson’s nightmare. I’m the guy who decides what model car he wants by either personal experience (“I want another one just like that one”) or by reading every car review that I can get my hands on. I then go ahead and spend countless hours online and reading the paper comparing prices and availability. More often than not I’m looking for a used car so issues like mileage, year made, and how many previous owners come into play. Would you want to see me coming in the door of your dealership with my overstuffed folder of backup material?

When I arrive, the single issue that we have to talk about is price. Talk about your win-lose negotiations! Now in all fairness to the car salespeople, they do a good job of trying to expand the discussion from being just about price to a whole host of other items: extended warranty, quality of the repair shop, free oil changes, etc. However, I’m really just interested in talking about the price and I will keep pulling the conversation back to this one basic point over and over again.

Now you might think that this is a fairly poor topic for a blog that purports to be all about “good” negotiating. However, there you would be wrong. For you see my last car purchase went just a bit differently and in that there might be something for all of us to learn.

I had wrecked my previous car and so, unknown to the dealer, I had a serious need to buy. I showed up at the dealer with my paperwork in tow and sat down ready to start my typical price based negotiation. My salesman, Nick, didn’t seem to be too phased by my stack of paperwork nor my request to buy his car for $10,000 less than they had it listed for. Instead, he started off by asking if I had had a chance to shop at any of the other dealers in town. I said that I had. He then asked how that had gone. I told him truthfully that just about everyone seemed to be very nice and that they all had some play in their car prices. He then asked me if all of the cars that I had looked at had a dealer 1-year bumper-to-bumper warantee? I told him that some did and some didn’t. He nodded and said that all of his cars had this and that it was just proof that the car had been inspected and could be viewed as an insurance policy just in case something happened during the first  year. Without actually saying the words, he let me know that there was a value to this warantee.

Next he asked if I had only looked at cars that had had one owner. I said that I had looked at a mix. He said that when he bought a personal car, he always made sure that it had had a single owner before him – it just kept things simplier he said. Once again, he had implied a value to this feature of the car that I was interested in without actually saying the words.

Finally, he asked if all of the other car dealers had provided me with a CarFax report on the cars that I had looked at. I told him that some did and some didn’t. At this point in time he whipped out a CarFax report for the car that I was interested in and asked me to keep it. Once again, Nick was showing the value of how this car dealership did business.

In the end I ended up buying a car from Nick. I was able to get about $3,000 off of their listed price – not the $10,000 that I had originally asked for. However, I still felt that I was getting a good deal. Nick had done a good job of expanding my view of the deal that we were negotitating from being a “price only” deal to including the total cost efficiencies of the deal.

What were the total cost efficiencies for my deal? Well the 1-year bumper-to-bumper warantee had a value of between $1,200 – $2,000. The one owner feature is a little harder to quantify; however, I’ll put it at between $500 – $1000 (to cover hard use repairs). The CarFax report would have cost me about $35.00. Additonally, there was the cost for the time and money that I would have spent driving around to visit more dealerships. In the end, Nick’s ability to get me to see the big picture got him the sale and me a car.

How do you go about negotiating to buy a car? Are you only focused on price or do you allow other issues to be considered? The last time that you bought a car, did the sales person just talk price with you or did they try to expand the scope of the deal? Leave a comment and let me know what you are thinking.

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How To Buy A Car

Tuesday, June 10th, 2008

Used Car Salesman
So let’s spend some time talking about something that we can all relate to: buying a car. It’s all good and fine to talk about negotiating concepts, but buying a car is when the (pardon the pun) rubber really hits the road. Nobody that I know ever looks forward to the whole process of buying a car. Although they want a car, they don’t want the hassle that they have to go through to get one. For the purposes of this discussion, we won’t care if you are looking for a new or a used car — the process is basically the same. Let’s see if we can make things just a bit easier for you the next time you need to go car shopping:

  1. Determine Your Schedule: This will set the tone for the whole car buying process: how much time do you have before you need to have a car? The more time that you have before you need to make a decision, the more power you have. If you currently have a car to drive or if you walk/bike/run everywhere and can keep doing so, then you are (another pun) in the driver’s seat. You can take your time in selecting the brand, model, and sales location that you want to buy from. If things aren’t going your way at any time, you can just stop the process and restart it whenever it suits you. On the other hand, if your clunker just gave up the ghost and you really need a new set of wheels, like yesterday, then you have less negotiating power, but you can maximize what power you do have. You do this by spending more time on the car search right now and doing your research throughly and moving quickly. If you spend more time now, then you’ll have all of the information that you need and you can lead the negotiations.

  2. Find Out What You Want: Negotiations can’t start until you decide exactly what you want. If you already know, then great move on to the next step. If you don’t know, then this is the time to do some off-line research and then go do some test driving. No matter what the “helpful” salesperson says, keep in mind that you are not a car buyer right now — you are a car researcher and so your one and only job is to decide what make and model you want. Don’t sweat options and maintenance packages right now — just pick a car!
  3. Research How Much This Car Should Cost: Ah, isn’t living in the 21st Century grand? Thanks to the power of the Internet you can go online and quickly find out how much your dealer paid for. A great place to start is Edmunds.com. If you need to understand the difference between Manufacturer’s Suggested Retail Price, Dealer Invoice price, etc., then checkout an excellent overview at WikiAnswers. Once you know what a reasonable price is, then you are ready to negotiate.
  4. Own The Stage: When you go to a car dealer to start negotiating, it is as though you are walking onto a stage. This is one of the reasons that so many people fear buying a car — they’ve got stage fright. Ideally you want the salesperson to be eager to talk to you so you should do you best to set things up in your favor. We all know that car dealers want to move as much inventory as possible before the end of the month/year. If you can wait until that time is drawing close, then you’ll improve your position. No matter what, make sure that you have all the time in the world to talk to the car dealer because that will put you in control of the discussion. The salesperson won’t have the same amount of time and so you’ll be in control.
  5. The Last Word Said Is The Most Important: Realize that even after you’ve reached a fair price for your car, the salesperson is still participating in the negotiating game — it’s not over yet. You need to stay awake and engaged because this is where the money can slip out of your wallet / purse. Taxes, documentation, dealer prep are all negotiable items and the salesperson is going to want to present them to you as fixed items. Don’t give up now!

No matter what information I can pass on to you, buying a car will always be an experience that causes emotions to run high simply due to the amount of money that is involved. If you follow these simple steps, you can at least be more calm and focus on achieving the outcome that will make you a happy driver for years to come.

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