Car NegotiationPersonal Finance
The price you pay for identical cars varies widely based on the timing of your purchase, dealership’s sales, and negotiation skill. All of these can be used to get a lower price.
Negotiations begin with preparation. Get the MSRP and Invoice price you acquired during your vehicle research. Email several dealerships, asking for the car’s MSRP, while clearly showing you know the invoice price dealers pay for the car. Ask them to notify you of discounts, rebates, and incentives they are allowed to deliver. Ask if dealers are allowed to negotiate a price or if prices are static. If they can’t or won’t negotiate vehicle prices, ignore them. You need to negotiate to spend the least amount of money possible. Nothing is off limits, including your vehicle price, trade-in value, and loan interest rate.
Beware that car salesmen are prepared. They’ve practiced for you. They will have an emotional, psychological, or financial reason why they shouldn’t lower prices. Every objection is thousands of your dollars. If you feel like you’re on the losing end of a deal, simply walk away. Cars are depreciating assets. There’s no reason to pay more than you need when trying to build wealth. You can find other options, colors, or details elsewhere. Don’t get attached.
You can also buy your vehicle somewhere other than a dealership. The internet is filled with classifieds, auction sites, and private car listings. You’re not promised a better deal if you do buy elsewhere. Individuals selling their only car are highly averse to losing money in negotiations. They will also have a strong emotional attachment to the vehicle. Dealers can take a loss here or there, especially if the car’s been on the lot for a long time. The salesperson will avoid it if possible since it’s their commission and job on the line.
Your negotiations must use awareness. Time your negotiations for periods of time where demand is low. Buying sports cars in the dead of winter will help you negotiate a lower price. It’s likely that they’ve been sitting on the lot due to low demand. Dealers already feel under additional pressure to move these items and are more willing to reduce prices. Any periods of slow sales will result in increased willingness to move products.
Be wary that dealers will attack you in other negotiations to compensate for losses in a single place. If you’re negotiating for lower prices, the dealer will understate the value of your trade-in. If you’re using the dealer’s financing department, they will try to give you a higher interest rate. Negotiate everything.
There are other ways to handle this. Acquire your financing from your retail bank, credit union, or another source. Negotiate for your rate and compare bank ratings for prequalification. Don’t inform the dealership that you have acquired financing for the difference until it is time to hand them the check. They will think you’re using their financing to cover the difference between your down payment with trade-in and the actual price of the car. They won’t be able to compensate with a higher interest rate quote, saving you money long term.
You should negotiate other benefits and issues as well. If you’re trading in a car still under a loan, negotiate that the car is paid off within the month by the dealership. Many dealers simply let you continue to pay the loan until the car is sold. Force them to pay the car off by the last day of the month: 29th, 30th, or 31st. Have it written on paper and raise hell at the dealership if they don’t follow their arrangement. Call the lender and be sure the debt is paid off.
There are non-negotiable charges you should be aware of as well. The first is the destination charge, which is essentially the cost of transporting the vehicle to point of sale. The name might alternatively be destination, handling, delivery, transportation, shipping or freight. You can’t negotiate these charges, or eliminate them. If you’re buying a car, you will pay them. They typically only come with new cars. The cost is equalized across almost all cars made by a brand. It’s usually between $400 and $1000 per vehicle, depending on its manufacturing origin.
The last non-negotiable charge is sales tax. If you live in a state with a tax on sales your price will increase drastically after taxation. You will need to review the sales tax rate before negotiating your car price. As of 2013, you pay no sales tax within Delaware, Montana, New Hampshire, and Oregon. Alaska has no formal sales tax but allows municipalities to levy their own taxes. If you are close to these states, or any state with sales tax less than yours, you may be able to buy the car in those states and transfer it to your own. In order for this tactic to work, your state must not tax recently imported vehicles. This will be stated in your tax code.
Your state’s tax code may recognize that trade in reduces the amount of money exchanging hands, and thus the amount paid from sales tax. The state comptroller’s website should display this information. If not, search for trade in value in the tax code or contact them directly.
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