Beware of the Add-on
The dealer will probably offer all kinds of add-ons after you've negotiated
the price. The dealer makes extra money on almost every single one of them. You
may find add-ons are included as if you have no other choice. You do. Feel free
to refuse them. It will help if you know what these add-ons really are:
- Destination Charges Some manufacturers charge
separately for shipping the vehicle to the dealer. You can't get around
this. But check the sticker to make sure it wasn't already included in
- Licensing and Registration Fees These are
necessary, but call your state's Department of Motor Vehicles to make
sure the dealer hasn't padded this price.
- Extended Warranties These are also called service
contracts. Just buy a car with a good service history and an extended
warranty should be unnecessary.
- Dealer Prep Part of a dealer's job is to get the
car ready for you and it's one of the things the dealer gets paid for.
Don't pay this twice.
- Credit Insurance This insurance will pay off your
car loan should you die while leasing it. As long as you have life
insurance, this also is unnecessary.
There are many other fees that may be added. Ask directly what each one is
for. If it seems unnecessary, it probably is and you should refuse to pay it.
Getting a Good Deal
If you think of the negotiating process of buying a car as a dance, you'll
find it a lot more tolerable and you might possibly enjoy it. It's just two
people suggesting and redirecting. And remember - you have the advantage. You
have a long line of salespeople who would like to dance with you. If one isn't a
good dance partner and isn't working with you to nail down a price, feel free to
say, "Good night," and find yourself another dance partner.
Another good attitude adjustment before you start: dealerships try to average
a specific amount of profit on each car they sell. People who pay too much allow
there to be people who pay too little. With some preparation and education, you
can be one of the latter.
Dealers will pressure you to make all your decisions in a single day. They've
been doing this for a long time. They have all the scenarios mapped out. So when
they react, they're acting with experience. For you, it's probably unfamiliar
territory so that when you react, you may be acting with emotion. Dealers and
salespeople know how to use that to their advantage. So slow the process down,
sleep on decisions overnight and it could save you quite a bit of money.
Also, the more proactive you are and the more you take control, the better
the result. Educate yourself. Understand how the car business works. Know what
price the dealer paid for the car and have some alternate financing options.
Some strong negotiation moves and redirects can help you come out ahead:
- Keep a neutral outward attitude. Don't sell yourself. If you give
the impression that you could take it or leave it, a salesperson will
work harder and be willing to give more to sell you.
- Avoid financing questions. Even if you don't have the money, tell
them you're paying cash. They won't hold you to it. But it will force
them to concentrate on the current price negotiation and not see a
long-term strategy to inch up their profits.
- Be prepared to haggle back and forth for a while. The salesperson
might try to tire you out with a prolonged negotiation session. Don't
give in. Stay strong and save money. Keep in mind an extra hour of
persistence could save you a few hundred dollars.
- Watch for the good cop, bad cop move. The salesperson will tell you
that he or she really wants to give you the price you're asking for, but
he or she will have to ask the manager. You may feel like the
salesperson is on your team at that point. Just remember who signs their
checks. It's you versus them.
- Ask to see the invoice. If they are dead-set against showing you the
invoice, there's a reason why. They're probably offering you a bad deal.
- Shop for a car later in the month. There are a lot of bonus and
rebate programs that are based on monthly sales quotas. If a salesperson
or dealership is short of meeting goals at the end of the month, you
might find more willingness to sell the car cheaper in order to get the
There are some no-haggle dealerships. If you are really opposed to the
negotiation dance, head there. The dealership is still making the same average
profit on each car but there's no way for them (or you) to use bad negotiators
to an advantage.
Let's Talk Price
Before you talk price, there are some terms you should know:
- Invoice Price This is the wholesale price the dealer paid the
manufacturer before any rebates or incentives. Do some research on this
number. If you can find out what the dealer paid for the car, you'll
know what the profit is on each car. Then you're ready to strike a
compromise between letting the dealer make a living and getting a good
deal for yourself. The Internet is a great source for this information.
Use it to decide on a number you're willing to pay. Print out the
invoice price when you find it and bring it with you to the dealership
- MSRP - Manufacturer's Suggested Retail Price Also called the
"sticker price," this is the number on the car window. Don't pay this!
It's just a starting point for negotiations. If the model you're
interested in is in high demand, you probably won't get much lower than
- Dealer Incentives Manufacturers sometimes give dealers extra money,
bonuses and rebates for selling overstocked and undersold cars. Find out
if the car you're interested in buying has any dealer incentives
attached to it. Then subtract that amount from the price you're willing
- Holdback The manufacturer often gives money to the dealership to
help reduce operating overhead expenses - the cost of running the
dealership. It's often 2% to 3% of the sticker price. This information
may not be very helpful in the negotiations, but if it comes up, you'll
know what it is.
- Sales Tax The sales tax is the same tax that's charged on everything
from candy bars to umbrellas. However, don't try to go to a different
county to avoid a higher sales tax. They charge it based on the county
you live in, not where you buy the car. This cost, of course, is