There’s no question that having a new car in your driveway is a lot of fun. But for the vast majority of people, buying that car is typically a lot less enjoyable. The reason why? Simple: the pressure of negotiating a new car’s sale price.
Yet we all know we’re going to have to haggle with the car dealership. Otherwise, we risk feeling overcharged and unsatisfied with our purchase, and that shouldn’t be the case! If you shell out big money for anything, you should be happy with your decision. So, how can you enjoy a new car without dreading the process?
Investigate the Invoice Price
A successful negotiation starts long before you talk numbers with someone. Your first step is to arm yourself with research that informs your position. In this case, that’s the price you’ll feel comfortable paying for a new car, also known as your “walk-away number.”
One way to help determine this is to find out the dealer’s invoice price for the vehicle (also known as the wholesale price). This is the amount the dealership pays for a vehicle. Then, it marks this amount up to the retail price you pay, typically considered the Manufacturer’s Suggested Retail Price (MSRP). To help ensure the store makes a profit, a car dealer likely won’t dip below the invoice price for a sale.
Mark-ups vary by vehicle and manufacturer. You can identify these amounts a few different ways. Some car value guides list invoice and retail prices. (In fact, most vehicles’ Research pages have this information on CarGurus. Just look up the car you’re thinking about buying and visit our “Price” tab.) You can also attend a vehicle auction to see how much dealers spend on a car. But here’s a better option: Just ask the salesperson. Tell them you won’t pay more than 5% above the invoice amount. That price would be a fair deal for both sides, and tough to dispute.
Learn the Average Price Paid
Sometimes, however, the invoice price can be tricky to uncover (even if attending a car auction sounds fun to you). Fortunately, figuring out the market value of a vehicle is easier, and this is another piece of information to help you set your walk-away number. Market value is a function of how much dealerships sell the vehicle for, as well as how much other consumers pay for the specific car that interests you.
CarGurus lets you search new car prices of dealers in your area to identify these numbers. Just enter the make, model, and other information for your target vehicle(s) into the search engine. For each one, the results will indicate an individual dealership’s price in addition to the MSRP, as well as the average price paid for that car.
CarGurus considers the average price paid to be a “Fair Price,” but you should still look at the differences between these numbers. They can act as a huge piece of intel in your favor. For instance, if a car’s MSRP is $28,000, but it has an average sale price of $26,000, you may want to use the latter as your walk-away number. The tool also lists “Good” and “Great” prices for each vehicle. Print all this out to bring to the dealership (among other things). Those numbers can be useful to show the salesperson if he or she pushes back against your number.
Deal with the Dealership
In addition to market value, the CarGurus New Car search tool details which dealerships have the car you want as well as how many are on each lot. This information can help you negotiate in a couple of ways. First, it allows you to compare prices between dealers, so you can choose the one with the lowest number (or leverage that number with a different dealer). Also, if a dealer has a lot of inventory, it may be more motivated to make a deal.
Call ahead to make sure the listed vehicle you want is actually in stock. Ask for the person’s name when you do, and make an appointment for your visit. Dealers may say they have a car on the lot when they don’t, just to get you there in person and to check out a different vehicle (you’re already there anyway, right?). If you haven’t researched that other vehicle, don’t be tempted.
If you’re not inclined to speak to someone at the dealership over the phone, CarGurus also lets you send a direct message asking for the best price on a specific vehicle—just use the "Contact Dealer/Seller" form on our listing for the car you want. If what the dealership offers matches what you’ve researched, you can save yourself some serious time and hassle. You can also Subscribe to alerts, so we'll let you know if the price on other cars you’ve considered drops.
Shop at the Right Time
Big car sales dot the calendar, from President's Day to Labor Day to other non-holiday events. You certainly may get a good price at those times, though salespeople may also be a bit tougher to negotiate with because of the “huge savings” they’re already offering you. You also may not push as hard, because the marketing makes you think you’re already getting a large discount—and for a limited time.
Instead, many people look to the last few days of the month, as well as the end of a year’s quarter (March, June, September, or December), as the time to get the best price on a new car. At these points, dealerships may be more motivated to make a deal to make room for more inventory (an upcoming year’s models, in particular) or to hit internal or external sales targets. The latter is an important negotiation advantage for you.
Dealers receive incentives from manufacturers for hitting certain sales goals. These can be large amounts. So if a dealership is short of its number, its salesforce may be more inclined to make a deal with you—perhaps at the expense of the dealership’s profit, since it will earn more by hitting that bonus than they’d make on your single sale. Of course, there’s no promise that a dealer will be short of its sales goal (inventory numbers may give you a clue), but it’s worth a shot.
Short of that, you’ll likely have better luck shopping for a car on a weekday. Dealerships are typically less crowded on weekdays, but salespeople aren’t any less motivated to make a deal. As a result, you may get a more attentive—and flexible—salesperson in the middle of the week.
Negotiate Costs Individually
Price isn’t the only way dealerships make money. A dealership can also earn profit via your trade-in, car accessories, and financing details. Don’t let it lump all of those numbers together. That tactic can make a sale price seem lower than it really is.
Instead, consider each amount when formulating your ideal number. Research your trade-in value to ensure you get appropriate compensation. Know exactly what features you do and don’t want. And understand your financing options before you head to the dealership. Then, when the salesperson mentions one of these topics, ask to talk about them separately.
When it comes to financing, the salesperson may reframe the negotiation based on a car’s monthly payment amount. After all, if the difference between a $28,000 car and a $30,000 car is just a couple extra dollars per month, isn’t that worth the upgraded or extra features?
That’s a tough, effective sell. But while monthly payments are important in ensuring your new car fits your budget, you shouldn’t focus solely on them, particularly if structuring the deal around a monthly payment results in more months being added to your finance term. Doing so can make the sale price seem smaller than it is, which is the salesperson’s goal—and definitely not yours.
Have the Right Mindset
Salespeople are personable for a reason. If you like them, you’re more likely to give in to them. So when it comes time to negotiate, be polite but firm. Let the salesperson know you’ve done your research and that you’re ready to make a deal. The goal is for everyone to be happy at the end of the negotiation.
Be aware of your strengths and style as a negotiator. If you don’t like the “dance,” tell the salesperson your best and final offer right away and why you think that’s a fair number. Otherwise, start below your target number and negotiate up—slowly. If the salesperson keeps pushing the price, see what additional features you can get thrown into your deal. Oil changes? An extended warranty? Always try to get something in return.
Don’t be afraid to ask for the number you want. Be patient and persistent to reach it. Set aside a whole day to go to the dealership, and plan to be there that long. Dealers will try to wait you out and go back and forth with their sales manager with offers and counter-offers to wear you down. Remember: You can always walk away and buy your new car elsewhere—and that means the power in the negotiation is ultimately yours.