Negotiating Car Deals – Explained

negotiating a car dealMost of the kinds of car deals that we discuss on this web site don’t require negotiation because they are pre-packaged deals offered by car manufacturers, not dealers. They are usually genuinely good deals and better than any deal customers could negotiate on their own with a dealer.

However, these promotional incentive offers are limited to specific makes, models, and styles and are only good for a specific period of time, usually a month. Some manufacturers regularly offer such incentive deals; others do not.

So, what is the best way to negotiate great new-car deals when there are no incentives being offered?

1. Know your car and know your prices – do your homework first

Before you ever contact a car dealer, you should have already done your homework. Use the Internet to research the car you want, its options, color choices, features, and prices. Go to a dealer and test drive the car you like, but leave your checkbook at home. Use web sites such as and to find invoice prices and “market” prices (prices other people are paying). If you will be trading a car, use Edmunds or Kelley Blue Book web sites to get trade-in values. In order to intelligently negotiate prices, you have to know what you’re negotiating for. You have to know what are reasonable negotiation targets, not blindly “shooting in the dark.”

2. Contact dealers first on the telephone or email

Once you know the car you want and prices, contact your local dealer(s) by telephone or email. Get price quotes and determine if they have the exact car you want. If they insist on your coming down to the dealer’s store, tell them you don’t have time and would rather they work with you on the phone or email. By coming to the dealer’s store, you are just where they want you and they will control the negotiation process. Most dealers have an “Internet” sales department that is accustomed to working with potential customers by email or telephone. When you’ve gotten what you feel is a good deal, you can then go visit the dealer with your checkbook.

3. Now visit your dealer to arrange the purchase

Obviously, you’ll have to visit your dealer to finalize the deal. However, you’ll now be in the dealer’s house where he is more in control. It’s possible that the deal offered on the phone might change, or that the car you wanted is no longer available, or that you have a trade vehicle that affects the deal, or that you have credit problems. Any of these factors gives the dealer the chance to reset the deal and start all over with you in terms of negotiations. It might catch you unprepared and off-balance.  You can either leave to take a couple of days to better prepare yourself, or continue if you feel you can adjust to the new situation.

4. Start and end the negotiations

If you’ve adequately prepared yourself with prices and trade-in values, you’ll have a good idea of your target price. It’s likely that the dealer salesperson will offer his price first, which may be considerably higher than your target price. To save time and reduce stress, tell the salesperson that you don’t like the price and that you want his best offer — and that he has only one chance.  If he comes back with a better deal (and he will), you can decide if it’s close enough to your target to accept. If not, simply get up and walk out the door. If the dealer has not offered you his best deal, he’ll come after you as you exit the building. If he does not come after you, you can assume that his offer really is his best deal — and you’ll have to decide to keep walking or come back in to accept it. NOTE: Always negotiate a vehicle’s price, not monthly payments.  If you’ve done your homework, you’ll already know what vehicle price will give you the payments you want.

5. Don’t throw away your negotiated deal

At this point, you’ve gotten the deal you want, or a deal you are willing to accept. But the dealer is not finished with you. He still has a chance to improve his profit position with you. When you go into the F&I manager’s office to sign papers, you’ll get hammered with offers for expensive extended maintenance, security systems, paint sealant, fabric protection, rust proofing, credit insurance, and GAP insurance.  These are all high-profit items for the dealer and are largely unnecessary.  Buy the GAP insurance if you know you’ll be “upside down” on your loan — because you made little or no down payment or your loan term is for more than 48 months. It protects you if your car is stolen or totaled in an accident, and your insurance only pays what the car is worth, not what you still owe on your loan.

6. Your deal might change later after you’ve driven away

If you applied for a loan at the time of your purchase, the dealer assumed your credit score was good enough to be approved by his bank or finance company. He even lets you drive the car home, even though you haven’t been approved yet. However, if your credit is not-so-great, you may get a call from the dealer days, or even a few week’s later, asking you come sign new papers with a larger down payment and/or higher interest rate. This happens all the time, and it’s perfectly legitimate.

To prevent this kind of surprise, you should always know your credit score. If you don’t know your current FICO credit score and rating, you should find out before you visit a car dealer. What’s your FICO score? Find out now when you check your credit report for $1 at!

If you know your score is not so great, do not take delivery of the car until your credit and loan application have been approved.


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