Yes, I’m sure I am either alone or in the minority when it comes to this, but I LOVE negotiating with dealers for new (or used) cars. Friends have often asked me to come with them to the dealer to negotiate. I just love getting a good deal, and most times you are in control of whether you get a good deal or not.
Here are my 5 tips to getting the best deal on a new (or new to you) car:
- Do not fall in love – the best deals are on leftovers (new cars from the previous model year), loaners, and other low mileage cars that can be considered new. NEVER go in thinking you want the orange one with the purple interior only. Be open to a good deal on the car you want with most of the options you want and not a specific car.
- Negotiate total price NOT monthly payments - Dealers will dazzle you with all sorts of numbers. Without a financial calculator and a thorough knowledge of time value of money calculations, you cannot keep up. Always negotiate the actual total price for the car and do not worry about the monthly payments until you have agreed, let me repeat, AGREED the total price.
- Do your homework - Get on a site that tells you what other buyers in your zip code paid for the same car with similar options. I like Truecar.com, but there are other sites as well. Do not just use Kelley Blue Book and get the dealer price. Figure out what others are actually paying. Generally, you should pay INVOICE PLUS A FEW HUNDRED DOLLARS BEFORE THE DEALER ADDS DESTINATION AND OTHER CHARGES. Reread that sentence before going to the dealer.
- Do not be in a rush – generally, you know if you need a new car soon. Give yourself 3 months to look. You will know if you have only 3 months left on your old car. You can’t do this if your car is stolen or totaled, but even then, see if you can borrow a car or use public transportation to avoid being desperate when you head into the dealer.
- Buy at the right time – if you can, buy your car in the fall, between Thanksgiving and New Year’s Eve as car dealers are caught in a bad spot between new cars coming in October and accountants forcing them to get inventory down by January 1st. Any time around Black Friday is excellent.
BONUS TIP: Be ready to walk away. If you cannot get the price you know is right for the car, walk out of the dealership. Another dealer WILL give you the price you want. I guarantee it, as long as the price is invoice plus a few hundred dollars AND you do not want a specific orange car with purple interior, but are open to a specific model with certain options.
I’ve had dealers run after me as I walked to my car after leaving their showroom. Guess what? I got the deal I wanted. Always be able t walk away. That tip goes hand in hand with tip #3. Emotions drive car sales and it’s also how people get saddled with big monthly payments.
Also remember, what your down payment may buy you, may not match what your cash flow can handle. They are different. IF you have $5k to put down and the dealer assures you that you can afford a $50k car because you are putting 10% down, do not be fooled. A $45k loan at 2% over 60 months is a $787/month payment and you may not be able to afford that on a monthly basis. Know both your down payment AND monthly payment range that's right for your specific financial situation BEFORE you head into the dealer.
Happy car hunting!