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Many people view that car-buying process as painful, and that is largely because it involves negotiating. Nowadays, it is rare to negotiate the price of something you buy. Typically, the price you see is the price you pay. But that is not the case when buying a car, truck, van, or SUV. A new vehicle costs a substantial amount of money — the average new-vehicle transaction price is well over $40,000 these days — but the posted “sticker” price on the vehicle should just get the price conversation going. It should not be the final price you pay. Of course, car dealers and their salespeople negotiate prices all day long, and that can be intimidating. But what you as a car buyer have going for you is the simple fact that you don’t have to buy a car and more important, that you don’t have to buy a car from any single dealer. There are thousands of car dealers who would love to sell you a vehicle at a fair price you and they agree upon. When it comes to negotiating the price of a car, you are in the driver’s seat.
They say that if you don’t know where you want to go, any road will get you there. That is certainly true of the car-buying process. If you don’t know what you want to buy and what you are willing to pay for it, you will be trying to negotiate a deal without knowing what you want the result to be. That is not a formula for success. Instead of shooting in the dark, set up some simple goals for your car-purchase negotiation. Here are some logical goals: 1. Purchasing a new vehicle that meets my needs 2. Purchasing a new vehicle for a price I can afford 3. Purchasing a new vehicle for a price that is in line with market value 4. Making a car-purchase deal that I fully understand and feel confident about
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Before you even think about negotiating for a car, you should know exactly what you want. Through online research on autobytel.com, you can assemble a very short shopping list of vehicles that can meet your needs and wants. With that list in hand, visits to an auto show or some dealerships can confirm your decision. You need to determine the year, make, model, and trim level of the vehicle you want to buy. Many online tools can help you “build your vehicle,” giving you a very firm idea of the suggested pricing. Further, those tools can help guide you to dealers who have vehicles that match your specifications. Center your search on dealers who have the vehicle you want in stock because that will take several areas of confusion out of the negotiation. Plus, dealers are eager to sell vehicles they have on their lots because they are typically paying for them.
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The more specific you can get on the vehicle you want to buy, the better. Don’t just settle on a make and model; be even more specific. You want to decide on make, model, trim, and options. If you have strong feelings about color, you need to decide on that too. Then, via online shopping, hunt down vehicles at dealerships nearby that match what you're looking for. In this search, you might discover that a vehicle equipped exactly the way you want doesn’t exist at any local dealership. But more often than not, you will find very close approximations of the vehicle you want. Variances might be exterior color, interior trim, or optional packages. You should be able to find several potential vehicles in stock that you would find very appropriate. These then become the targets of your negotiations.
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Having sighted in on vehicles that are in your target zone, you should be able to get precise asking prices for those vehicles. This will help with a step that needs to be taken early on — deciding how you will pay for the vehicle. Of course, the cleanest and cheapest way to pay for a vehicle is paying cash. But most car buyers don’t pay cash. Instead, they get a car loan to finance the bulk of the transaction. If this is you, it implies another area that will be open for negotiation during the vehicle purchase process — obtaining an appropriate vehicle loan at a good interest rate and over an appropriate loan term. As we said, buying with cash is much simpler because it doesn’t open up this can of worms that can confuse the negotiations. The good news is you don’t have to become confused.
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If you are buying a new car, it is pretty likely you already have a car. So the purchase of a new vehicle begs the question, "What are you going to do with the car you have?" For the sake of a simple new-car negotiation, the best thing you can do is to sell that car independently of the new-car purchase. But again, most car buyers don’t take the simple route. Instead, they “trade in their old car” to go toward the purchase of the new car. What that means is they sell their old car to the dealer in the same series of transactions in which they buy the new car. And since the transactions are inherently linked, it is easy for you as the car buyer to be confused by the multiple deals. Again, you can keep all this straight, but if you are going to trade your car in, doing that will take extra effort.
If you decide to get a car loan to finance the purchase of your new car, you are very wise to shop for financing before you go to the dealer to negotiate the purchase of the car. Sources of auto financing are everywhere these days. Banks and credit unions offer car loans, and so do many online financial institutions. Some operate only in certain areas of the country, while others offer car loans nationwide. The good news for you as a consumer is that they all compete against one another. So if you do some shopping you will find that some entities will offer you a better loan rate than others. Once you settle on such a deal, you can prequalify for a loan with that institution. This means that when you make your deal with the dealer you will already have financing in place. Importantly, you will know everything you should know about that loan including its interest rate, your monthly payment, and the duration of the loan. This will prove very helpful when you negotiate.
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Once you have identified where the vehicles that match your specifications are, it is time to put on your negotiation hat and get busy. These negotiations don’t need to be painful, and if you approach them properly, they can even be fun. Just remember: You are in control. You are the customer with the wherewithal to buy a new vehicle. You don’t need to buy a car today, but to stay in business, the dealership needs to sell cars today. It is to your advantage to set up an appointment with a salesperson rather than just walking in the door and getting the next salesperson up. When you visit the dealership, ask to see the vehicle and get to know the salesperson. Make it clear you are there to buy, not just to shop, and that you will buy the vehicle today — if the right deal can be made. Knowing the “street value” of the car in advance via online research is key to making this negotiation short and sweet.
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One typical negotiating tactic is to confuse the buyer, and that is easily accomplished if the buyer is not only negotiating on the cash purchase price of the vehicle but also negotiating on auto financing and the trade-in value of their current car. You know the actual vehicle you want to buy, so determine in your mind the price you are willing to pay for that vehicle. Online tools can help you figure that out by giving you the “market price” or “transaction value” of that individual car. As a negotiating tactic, you want the dealership to give you its “best price” for the vehicle. Often that price will be higher than market value. You should counter with a price that is somewhat below market value. After a little give and take, the dealer might make you an offer that is at or near the price you had in your head. This is where you say, ”If you will sell it to me for [that value], I will buy it from you today. Otherwise, I will keep shopping.” Often the dealer will accept your price. If they don’t, get up and walk away. There are plenty more cars just like that one.
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Once you have arrived at a cash price for the vehicle you are purchasing, it is time to talk about financing. Tell the dealer you have a car loan in place and reveal the terms of that loan. It is possible that the dealer can offer you a better car loan than the one for which you are pre-approved. There is no penalty for not acting on the pre-approved auto loan, so don’t be deterred from considering the dealer’s financing offer. If the dealer’s offer for financing is not as favorable to you as the pre-approved loan, put that loan in place. That will enable you to pay the dealer in cash for your new vehicle.
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While you might be better off selling your current car to a private party or to another car dealer, there is no reason you can’t ask the dealer from whom you are buying the new car to make you an offer to buy your current car. Just don’t let the two transactions become intertwined. If the dealer wants to renegotiate the cash price you offered to pay for the car in a transaction that also includes your current car as a trade-in, decline that. It could lead to a new combined deal that will leave you in a poorer position than if you had kept those transactions totally separate.
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