New Car Negotiating Tips

Knowledge is your best advantage in the negotiating process.
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While it would be nice to have a new ride for that commute to work, the thought of sitting down to negotiate with a car salesman may be keeping you away from your dream car. Previous experiences may have left you feeling a bit ripped off, but knowing a few negotiating tips of your own will put you in the driver’s seat of your new car, as well as the negotiation process.

Do Your Homework

Don’t set foot onto a dealership lot until you’ve done your homework about what kind of car you can afford. Banks and credit unions usually offer lower interest rates on car loans ,so research all your financing options ahead of time. Use the calculator at to calculate what price range you can afford. When budgeting for your new car payment, don’t forget to factor in insurance, as well as fuel and maintenance costs. Once you have a monthly payment in mind, write it down and stick with it during the negotiation process.

Understand Prices

Knowing the types of prices you will see at a dealership will be your best weapon in the negotiation process. Usually, dealerships only reveal a sticker price, known as the manufacturer’s suggested retail price, or MSRP. The invoice price is what the dealership actually paid for the car, and the difference between those two figures is where you’ll find your negotiating room. Research invoice prices online beforehand. With most vehicles there is also something called a dealer “holdback,” which you should learn ahead of time as well, because no one is going to let you in on that. A holdback is a percentage of the MSRP or invoice price of a new vehicle that is paid to the dealer by the manufacturer. If the MSRP of a car you want is $21,000, and the manufacturer gives the dealership a 3 percent holdback, then you have another $700 worth of negotiating room. A list of holdback fees is available at If you’re trading in your car, use the Kelly Blue Book to learn both the trade-in and the retail value of your old car. This will help you get a better trade-in price. If the trade-in value of your car is $8,000, but the retail value is $12,000, you should be able to negotiate a higher trade-in price.

Waiting Game

Be prepared to wait. If you’re short on time or hungry, don’t go car shopping. You might get suckered into a bad deal just because you’re in a hurry. Don’t, however, let on that you’ve got all day. Once you make your initial offer, the salesperson will probably say she needs to go discuss it with her manager. Don’t let her talk you into upping your initial offer before she even leaves to present it to anyone else. Insist that she go, and let her know there are other dealerships you plan to visit before the day is over.

Buddy System

Going over budget will have long-term effects. Most vehicle loans are for five years. If you budget a $300 monthly payment and then agree to a $360 payment, you will have spent an extra $3,600 that could be sitting in your savings instead. Remember that cars are not an investment and that they don’t appreciate in value. If you don’t trust yourself to stick to your budget, take a friend with you. Instruct your friend to reel you in when it looks like you’re about to agree to something you might later regret.

Walk Away

Stubbornness is essential during the negotiation process. If you’re trading in a car, the salesperson may insist on taking your keys, explaining that the car needs to be inspected to get a value on it. Keep your keys until you’re ready to start dealing, and be prepared to walk away if they aren’t willing to consider your offer.

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