When I was Internet Manager for a major car dealer, one of the biggest mistakes I saw my customers make was not allowing enough time to find the vehicle they wanted or negotiate its price. If you expect to walk into a dealership, pick out a car, and then negotiate the best price—all in the same afternoon—you are probably going to pay hundreds, if not thousands of dollars more than necessary.
Savvy car shoppers don’t even walk into the dealership where they want to buy their car until they have pre-negotiated all aspects of the deal by email or phone. Then, if the dealer changes any part of the agreement, they simply stand up and walk out. It’s the only real power you have in the situation, and it’s the only way to know if you are getting the best deal.
Yesterday we looked at new cars and how easy it is to determine the dealer’s invoice cost and what other customers in your area are paying for the exact car (use KBB.com or Edmunds.com). This gives you a target to shoot at when negotiating the selling price. However, it’s more complicated to negotiate the selling price of a used car with a dealer.
Car dealers in your area pay the same invoice price for new cars. And it’s the manufacturer who determines the MSRP or sticker price. However, used cars are a totally different ball game. Dealers take vehicles in on trade, they buy them at wholesale auctions, or they buy them outright from customers who are moving out of the area or need to get out from under a big monthly payment. In all these cases, there is no way for customers to know what the dealer paid for a used car, the acquisition cost (auction and transportation fees, for example), or the cost to inspect and repair a used car to get it ready for sale.
Using the Internet, you can discover the general value of a car and what it should sell for—either privately or from a dealer (use KBB.com or Edmunds.com). But when buying from a dealer, there are variables at work that don’t let you know how low the dealer is willing to go in price no matter where they started from.
For example, on slow days most dealers want to put at least one sale up on the board. If they have a used car they either got for a very low price as a trade-in or made a smokin’ deal on at the auction, they may be willing to sell it for much less than fair market value because they’ll still make a profit AND they put a deal up on the sales board. Everyone wins.
Assume You’ll Walk Away
What if you don’t pre-negotiate the deal in advance? What if you find yourself at a dealership negotiating the price with your salesperson right there on the showroom floor? As an industry insider, I can tell you with total assurance that you should not trust ANY rationale a dealer gives for how they price their used vehicles. Sure, they may be telling the truth as far as it goes (their mechanic really DID check it out thoroughly and fix some things), but they may not be telling you the whole truth as to why, for example, a pre-owned Honda Civic EX needs to be priced at $16,500. It doesn’t matter that you like your salesperson and have established a very nice rapport with them. It doesn’t matter what your research told you prior to arriving at the dealership. With a used car, the only way to know if you are getting the best deal possible is to stand up and walk out at least once.
Walking out is not easy. First, your research needs to be accurate, which allows you to make an offer well below fair market value and provide a rationale for it. It’s usually safe to blame your budget for the low offer. Then, it takes resolve and a backbone to stand up and walk away. Many of us are uncomfortable doing something like this. It flies in the face of the usual ideas about politeness and civilized behavior. Your feelings may shift, though, once you realize that this nice salesperson has spent many hours being trained how to build rapport with you and appear trustworthy, in order to hide the game the dealership is playing. However, once you have a clear game plan and carry it out, you’ll see how fast your salesperson and their manager rework their figures and give up their game plan for yours.
Be forewarned, there are no stock rules for this gutsy move. You are winging it, playing it by ear, and going with the flow, as it were. Should you actually drive away? That’s what’s needed in some cases. Let the salesperson call you at home with their best offer. Each situation is different. But to do any less is to not really know if you got the best deal possible. Good luck.