Negotiating a used car purchase from a dealer
(assuming you are paying cash)
- Arm yourself with information.
- Kelly blue book value. Helps inform what a reasonable price will be.
- Black book value. Helps define the dealer’s bottom price, what they would acquire the car for in a trade-in.
- Common car problems and their cost.
- Go at the end of the month. Commissioned sales people are more likely to make a deal if this sale helps them squeak into a higher bracket before the month is over.
- Know the car you want before going in. Prevents you from settling or overbuying.
- Know the price you want to pay before you walk in.
- Be free to walk away.
When talking price, a dealer will likely use the 4 square model, illustrated below. These are the four areas where the dealer can make money, and that you can work to get a deal.
MSRP | Trade ---------------- Down | Monthly
- Do not tell them your budget.
- Do not tell them you are paying cash. This does not mean you should lie if they press the question. But if you can avoid revealing this, keep the information to yourself. Dealerships make money on financing; if they know you will not be financing they will try to make money elsewhere.
- Try to agree on a price before revealing you are paying cash.
- After you have agreed on the price, but before you have signed, is a good time to sneak in anything else you might need from them, like a ride to return a rental car.
- Focus on reducing the sticker price, or up-selling your trade-in, or both.
- Get the car inspected by a third party mechanic.
- Never seem happy about the deal.
- Test drive the car alone. Larger dealerships will likely want to drive the car with you, in this case try to also get a test drive alone. You can use the drive to get the car inspected to also take it for a spin alone. Small dealerships don’t have the manpower to send someone with you making this a bit easier.
- Dealerships usually try to get you to drive the car before getting a chance to really look at it. Once you drive it you are more likely to buy it. Make sure you check out the entire car even if you have to stop somewhere during the test drive.
- Don’t let them distract you while inspecting the car. Try to drive it alone so you have time to be thorough.
- Dealerships will likely press you for your budget early in the process. Avoid giving them a number. If they keep pressing then give a range. You could say something like "it depends on then car", or "depending on the car my budget could change", or "for this car this is as high as I will go".
- When inspecting the vehicle, in full view of the salesperson, slowly run your hands over the seams of the car. Make a stern face, occasionally acting as if you notice something. Gives the impression you’re searching for imperfections from accidents or repairs.
- When getting serious about price the dealer will likely show you a paper with a breakdown of the price, taxes, fees, etc. Do not look happy about what you see. The entire time they explain it stare at it like it’s all gibberish. After an awkwardly long silence say something like "I guess this isn’t the car for me", or "we’re not even is the same ballpark". This opens your chance to really move the sticker price down. You could simply point to the sticker price and ask "what can we do about that?", or "what’s the best you can do?" Even when they come back with an adjustment, don’t look happy. Repeat the process.
- They will want to charge a doc fee. Something in the range of $400-$600. Ask them to break it down and then challenge parts that don’t seem necessary. Or be bold and simply state you wont pay it.
From my experience
- If you have done internet research the large dealerships like to say that the "internet pricing" is their lowest price. They tell a story that a third party comes in and establishes the internet price, making it sound like its objective and already lower than they would like to go. They will probably have something, either a web site or a paper stuck to the car, showing a retail price quite a bit higher, emphasizing the internet price reduction. Don’t give in. They all reduced the price.
- Given cars priced at about $10k, I found getting the sticker price reduced by $500 was easy with a bit of patience. Getting it reduced anywhere beyond $1,000, at least in my travels, was very difficult.
- There is an opportunity to up-sell your trade-in instead of talking down the sticker price. My read on the situation was they still felt they won because I was agreeable to the sticker price, and as long as I convinced them they were also getting value in my car then both parties win. My situation might have been unique given how old my car was and its "classic" appeal.
- They will offer an extended a warranty. It might sound great. May even be priced great. But your insurance might cover the same stuff, e.g. a new windshield.
- There is amazing confidence in knowing why you are walking away. When you know the car you want and the price you will pay walking away from a bad deal feels like winning.
- I started doing a detailed inspection of the mechanics of a car with a flashlight and the salesperson put in noticeable effort to distract me. Seriously put in effort to take the car for a test drive alone.
- If you don’t like to rush a decision then, if possible, towards the end of the weekend, agree to a price contingent on a good third-party inspection of the car. Then agree to have the car inspected on Monday. This gives you time to think about the purchase over the weekend while resting assured no one will buy the car out from under you.