Negotiating Car Price

Many people claim that they are not good at negotiating, and in fact most people hate it. However, if you really want to save money, this is the way to go - negotiating the price of the car you want to buy.

To illustrate even better how negotiating can save you money, consider this:

Auto manufacturers determine the retail price that will be set on each new car model, each variation of that model, and each option. These prices form the Manufacturer's Suggested Retail Price (MSRP), or also called the sticker price.

Dealers buy wholesale, so they buy cars from manufacturers at a dealer invoice price.

The difference between the dealer invoice price and the sticker price is the dealer's profit margin and it is different for the different car models. This profit margin is your negotiating territory. Basically, on a $20,000 car you should expect to negotiate somewhere between $1,500 and $3,000. Just think about saving $3,000 out of your new car's price and the amount of money with which you will cut your monthly car payments.

How to Negotiate a New Car Price

So now that you know that negotiating car prices is important, how do you do it?

The first thing you should do is learn as much as possible about dealer's cost (invoice price). And always tailor your opening offer based on the invoice price; don't negotiate down from the sticker price.

If you follow this advice the negotiations should take too long. Offer higher bids only when the dealer reciprocates with lower prices and keep your increments to under $100 a shot.

You should know your target price and be prepared to walk out of the dealer's office if you meet a negotiating wall. Leave politely your phone number and go to the next dealer.

Successful negotiating requires you to know the true market value of the car you want to buy. This is the price at which the dealer will probably sell you the car that gives profit for him and represents a fair dealer for you.

How to Negotiate a Used Car Price

If you are negotiating the price of a used car, be prepared and go to the dealer equipped with your mechanic's report.

Generally, you should offer about 85% of the fair market value, and stop at about 90%. But you could also subtract the repair cost estimate from the asking price and subtract the repair cost estimate from the fair market value and negotiate the difference.

Here is an example: You are planning to buy a car with an asking price of $10,000. The fair market value of the car is about $6,600. Your repair cost estimate is for $1,400. This means that you should probably start negotiating with an opening offer of $6,600 and haggle up to about 50% of the difference. If you reach that limit, cease negotiating politely and go to another dealer.

The information and interactive car payment calculators that are provided on this site are made available as general assistant guidance in regards to car loans and payments. We do not guarantee that any information or calculations will be accurate or applicable to your personal financial situation, circumstances, or objectives. Accordingly, before making any final decisions we encourage you to consult a qualified professional and get personalized advice.

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