There are certain events in life that we dread facing: going to the dentist for a root canal, asking our boss for a raise or going to the bank for a loan. But none top the list quite like buying a car.
Of course there are people who love buying a car; they enjoy the thrill of the hunt and the act of negotiation. These are the same people who like jumping out of planes and running with the bulls in Pamplona. The rest of us would like to just buy a car and avoid getting screwed.
1-Sticker Price
The goal of negotiating for a new car is to try to get the largest possible discount off the sticker price. The sticker price is what a manufacturer, such as Ford and Honda, suggests dealers post as the selling price. You'll see the manufacturer's suggested retail price (MSRP) hanging on the window of all new cars.
This is a price that is rarely paid for by consumers, except at high-end dealerships (either you can afford a $60,000 Mercedes-Benz or you can't) and at Saturn dealerships that refuse to budge on the price because it's company policy.
2-Where do you begin?
You have to get creative to get a good discount. The worst thing you can do is walk into a dealership uninformed. If you are reading this, you obviously have access to the Internet. Take advantage of that and inform yourself by surfing the Web. Figure out which type of car you want and what options it has. In fact, memorize the entire model line.
For example, a Honda Civic has DX, HX, LX, Si, and SiR trims available in two-door and four-door models. Each has its own options. Knowing them will prevent any salesperson from offering you a model and then tacking on an option, when it would be cheaper to get a better model that already provides the option.
3-Online services
When the Web began to weave itself, it held the promise of revolutionizing the way we shopped. For the most part, the revolution stopped before it started, except where car buying is concerned. If you have never delved into the world of e-commerce, this would be a good place to start.There are services that will go out and locate the best possible price on the car you are interested in by submitting bids to multiple local dealers and getting them to duke it out -- all to win your business.
Use these services, even if they contact the same dealers. The more quotes you have, the better your odds of getting a sweet deal. Each car-buying Web site has its own list of dealers it works with, so you will get a better cross section of choices by using all of them.
4-The Dreaded Negotiating
By now you have several price quotes from dealers, often with a contact person for each. What you have to do now is call them up and turn on the pressure to further outbid other dealers.
Don't be afraid to mention what other dealers are offering, even use the name of a salesperson. It shows that you are serious about buying, and that if the dealer you have on the phone doesn't entice you, you have a concrete offer you can easily take.
Usually, "Internet leads" from car buying services land on the desk of a fleet manager, Internet manager or (at a smaller dealer) a sales manager. The manager isn't concerned with making a commission. He just wants a sale because the dealer will make money on the holdback (the amount a dealer gets back from a manufacturer) and on selling large volumes of cars. Even if he passes it to a salesperson, it is usually to close the deal rather than generate commission.
5-More dealers are better:
The more dealers you have in your area, the higher your odds of getting a good deal. Supply does affect prices. If your local choice is limited, manage your expectations. If there are many GM, Chrysler and Toyota dealers in your area, for example, then take advantage and play dealers against each other.
6-Know the dealer invoice price:
This is the price manufacturers charge dealerships for cars (what Volkswagen charges Dealer X for a Jetta).
To be clear, the actual dealer cost is lower than the dealer invoice price because they get money back on the holdback charge, often 2 percent to 3 percent of the MSRP. Because a car dealership is a business, it has the right to make a profit, so aim to negotiate a price 2 percent to 4 percent above the dealer invoice to give you a good deal, and the dealer enough profit to cover his costs.
