For many people a new car is the second most expensive purchase they will ever make. With new car prices in the tens of thousands of dollars, that expense is second only to the cost of buying a home. Car prices are negotiable, however, and strong negotiating skills can save you thousands of dollars on the car you need. Learning as much as you can before you walk into the dealership, and driving a hard bargain once you're there, is a smart strategy.
Research each car you are considering thoroughly. Compare standard features, options and reliability projections. Publications such as Consumer Reports provide reliability ratings for virtually every model of car. Similar publications also provide reliability ratings and resale projections.
Use the resources available at your local library, bookstore and the Internet--including Consumer Reports, Kelley Blue Book and Edmunds.com--to find the dealer's invoice price of the cars you're considering. Knowing what the dealer paid will make the negotiating process a lot easier. Instead of negotiating down from the sticker price, start by negotiating up from the dealer's cost.
Familiarize yourself with the terms used by car dealers. The Federal Trade Commission (see Resources) provides an excellent resource that lists the terms dealers use when referring to the base price and sticker price of the vehicle.
Check the window of the car for the Monroney Sticker Price (MSRP). This sticker is required by Federal law, and it can only be removed by the vehicle's purchaser. This sticker lists the base price of the vehicle, the retail price of any options and the transportation charges. The sticker also lists the vehicle's fuel economy. Compare that price to the invoice price you found in Step 2 and start your negotiations from there.
Negotiate the price of the car based on the actual purchase price, not your monthly payments. Some dealers will try to determine up front how much you want to pay each month, then build the price around that figure. Falling for that trap could leave you with a higher total price, since the dealer might stretch out the terms of the loan to accommodate the lower monthly payment. It's much better to negotiate based on the purchase price of the vehicle and work out the financing details after the price has been negotiated.
Wait until you've negotiated a firm purchase price on the car before you broach the subject of a trade-in. If you start talking about your trade-in too soon, the dealer might offer you a generous price for your old car, while inflating the purchase price of the new car. Handling the trade-in and price negotiation as two separate transactions eliminates this possibility. You might be able to get a better price for your trade-in if you sell it yourself.
Ask the dealer for a written offer on the car you have in mind, then take that offer to your bank to arrange financing. Compare the financing offer you receive from your bank to that offered at the dealership. While the dealer can often provide a good financing package, you might be able to arrange more favorable terms and a lower interest rate by working with your own bank.
Based in Pennsylvania, Bonnie Conrad has been working as a professional freelance writer since 2003. Her work can be seen on Credit Factor, Constant Content and a number of other websites. Conrad also works full-time as a computer technician and loves to write about a number of technician topics. She studied computer technology and business administration at Harrisburg Area Community College.