Cars are a necessary part of many of our lives, giving us the freedom to make grocery trips, commute to work, and visit friends and family. However, the average cost of a new car continues to climb, making it more difficult to afford something so vital for modern living. According to the National Automobile Dealers Association, the average new vehicle purchase price has risen to more than $36,000.
With this type of pricing, now’s the time to do your research and learn how to negotiate. Effective negotiation is a smart money move that can put a lot of cash back in your pocket when it comes time to buy a new car. Implementing these 12 clever negotiation tips may help ease your money anxiety when you head to the dealership for a test drive.
How to negotiate a new car price — 12 helpful tips
Understand what you want
Going into a negotiation without a clear understanding of what you want can ultimately favor the salesperson. This is because it’s harder for a salesperson to steer you in a specific direction of their choosing if you already know what you want to buy. But when you’re more open-minded, the salesperson can use that to their advantage and sell you something you may not be completely satisfied with.
Take the time to research the type of vehicle you’re looking for before heading to the car dealer. If you can narrow down the choices to a specific make, model, and trim, you’ll cut additional time spent looking at other vehicles. It can also save you from purchasing something you didn’t want in the first place.
Know the best time of year to buy
Learning how to manage your money often involves figuring out how and when to make big purchases to get the best prices. Simply making a purchase at the right time of year or during a special sales event might save you loads of money. For example, many car manufacturers and dealerships hold year-end sales events with huge discounts and financing options on new vehicles. In some cases, you could save thousands of dollars on a new or used car during these events.
The reasons behind these big sales vary, but year-end events are often a big push to hit sales quotas and get rid of unsold inventory. This doesn’t mean there’s anything wrong with the vehicles, it just means dealerships want to hit their yearly and quarterly goals and make room for newer models in the coming year. You can use this to your advantage as a way to potentially get even more savings on an already discounted vehicle.
Keep in mind that other sales events like Memorial Day, Independence Day, Labor Day, and more can also provide excellent opportunities for negotiating big savings on a new car.
Research rebates and incentives
If you want to know how to save money on a new car purchase, consider the many rebates and incentives typically offered by most major car manufacturers. These discounts are offered on a regular basis, though their value will change from time to time. To get the best deal on your new car, stay updated on the current rebates and incentives being offered.
You can find these offers on the car manufacturer’s website. Each manufacturer is a little different, but you’ll often see a full list of available offers by vehicle, including any special deals for military members, college students, and more.
Get your financing in order before you head to the dealership
Part of preparing before heading to the dealership is making sure you know how you’re going to pay for a new car. It’s easy to show up to a dealership, pick a car, and use the financing options at the dealership to pay for your new vehicle. However, the dealership’s options might not always present the best value for your money.
The cost of a simple and quick transaction at the dealership could be higher interest rates on your car payments. To avoid potentially higher interest rates and monthly payments, consider car loans from different banks and credit unions. You can get preapproved for these loans before ever setting foot in a car dealership, which makes it easier to compare options and find the best deal for you.
Know your trade-in value
If you’re planning on doing a trade-in with your current vehicle, be sure you know how much it’s worth before you go to the dealership. Dealerships are a business and businesses need to make a profit to survive. This means many dealerships will try to pay a lower price than what your vehicle’s actually worth.
If you already know the trade-in value of your vehicle, you won’t have to worry as much about haggling its price at the dealership. Instead, you can focus on negotiating a good price on the new vehicle you’re looking to purchase. In some cases, you may not want to go through with doing a trade-in because of how little the dealership is willing to pay. It may make more sense to sell the vehicle yourself to get more money out of it.
Research fair prices online
Proper research during the car-buying process involves looking up the market value of your future car and understanding your existing car’s trade-in value. These prices won’t always be exact, but you can get a good idea of fair pricing on sites like Kelley Blue Book and Edmunds.
Because you’ll already know fair prices for the vehicles you’re working with, you won’t be caught unaware by a salesperson at the dealership. This will help you negotiate better and get the manufacturer’s suggested retail price closer to what you’re looking for. In some cases, your research may save you hundreds or thousands of dollars on a new car deal.
Get price quotes from local dealerships
Comparison shopping isn’t a new concept. As a car buyer, you want the best bang for your buck, so you want to find who can offer you the lowest price. It may take some time to get quotes from all the dealerships in your area, but the time you invest now can easily pay off down the road.
As you search for quotes, don’t forget about contactless car buying. Options like Carvana and TrueCar offer legitimate car-shopping options without the need to visit a car dealership. Their home delivery services make it easy to get your new car, plus their prices can often compete with typical dealerships.
Once you have the quotes on the vehicles you’re interested in, it’s time to see which company can outperform the competition and earn your sale. Use the quotes you’ve been given to see whether dealers will match or beat each other’s sticker prices. If you don't want to haggle prices with car dealers, this strategy could help you avoid some of that.
Be prepared to walk away
If your negotiations aren’t evolving how you want them to, be prepared to walk away. This tactic can be especially useful if you have quotes from other dealerships and they’re better than what you’re currently seeing. You also aren’t required to buy anything when you’re simply talking with a salesperson. So if an initial offer or counteroffer is unacceptable, don’t hesitate to politely decline and seek other options.
This may or may not sway a dealer to give you a better offer. It’s great if you get a better offer, but if you don’t, it’s no sweat off your brow. You don’t want to be pushed into a sale you aren’t comfortable with because it’ll likely cost more money than you want to spend.
Stay focused on the price
Selling cars is literally a car salesperson’s job. And many of them are very good at what they do. Remember to stay focused on the price of the vehicle when you’re negotiating a new car. Flashy sales techniques and extra benefits shouldn’t distract you from decreasing the price of the car you want.
To help with your focus, do your research before you head to the showroom. When you know how much a vehicle is worth, what your trade-in value is worth, and the target price you’re willing to pay, it’s a lot easier to set and maintain a course of action during the negotiation process.
Don’t agree to buy every extended warranty
Extended warranties may or may not be worth it for you, but it’s likely most salespeople will still try and upsell you on extended warranty coverage for your new vehicle. Of course, you don’t want to pay for anything major when you’ve only had your car for a few years, but most manufacturer warranties should still have you covered within the first three years of car ownership.
If you want to save money, consider avoiding the extended warranty options. However, if they’ve helped you before, it may be worth it for you to get them.
Consider paying cash
While it will likely vary by dealership, paying in cash could potentially provide you with opportunities for discounts on a new vehicle since you’ll be paying for it in full. This may tempt certain dealers into giving you a deal.
If you can’t pay cash or there’s no available discount for paying cash, consider using a credit card. You may not have the option to buy a car with a credit card, but if you do, it can be very rewarding. Many dealerships offer options to use a credit card for the down payment on an auto loan or to pay a portion of the sale. If this is the case, it’s a great way to earn credit card rewards on a purchase you were going to make anyway.
Ask for extras
If you’re interested in getting add-ons with your new car purchase, whether it’s another key fob or upgraded floor mats, make sure you ask for them. Dealers will often include extras at no additional cost, but only if you bring it up. This can be in addition to getting a better price on your new car, so you might as well ask for extras while you’re already negotiating.
The bottom line
Preparation is key to learning how to negotiate a new car. The more you research and prepare, the more confident you’ll feel when discussing how much a vehicle will cost you. Smooth-talking salespeople won’t catch you off guard, and you’ll know what to look for when browsing the best sales and discounts. And at the end of the day, you’ll have a much greater chance of spending less money and achieving your overall financial goals.