When buying a new or used car from a dealership, most buyers want to get the best deal possible. Negotiating the price down from the sticker price is a common strategy used by savvy car shoppers. The good news is that dealers have some flexibility to come down on price, so negotiating can often lead to real savings. However, not all buyers are skilled negotiators, and sometimes it can be intimidating to haggle with seasoned sales professionals. Understanding when and how to negotiate for a lower car price can help buyers strike the best deal.
Should you negotiate the price of a car?
In most cases, the answer is yes – you should make an effort to negotiate down the price of a new or used car at a dealership. Dealers intentionally price vehicles higher than they expect to sell them for, knowing that most buyers will engage in some negotiation. If you agree to the first price they offer, chances are you are overpaying. The only cases when negotiating would not make sense are on certain limited-availability specialty vehicles that are in very high demand. But for most normal car purchases, taking the time to negotiate can potentially save you hundreds or thousands of dollars.
New Cars
New cars typically have the most room for negotiation. The MSRP (Manufacturer’s Suggested Retail Price) on the sticker includes quite a bit of profit margin built in. Experts recommend targeting a sales price that is 5-10% lower than MSRP on a new car. However, discounts can sometimes be 20% or more below MSRP if you negotiate well.
Used Cars
Used car prices are less flexible than new cars, but you should still negotiate. NADA and Kelley Blue Book can give you an idea of what a fair price is for the used car you are considering. Aim to negotiate the price down a few percent below fair market value. With private party sales there is also room to negotiate, often 5-10% below asking price.
When to negotiate the price
The best time to negotiate price is after you have selected a specific vehicle you want to purchase. You’ll have more leverage after committing to a particular car. However, you may want to start the negotiation process before settling on one car, in order to compare deals across similar vehicles. Waiting until after you’ve chosen “your” car helps you negotiate the best on that one vehicle.
During negotiations, a smart time to ask for a better price is when the salesperson leaves to speak with a sales manager. When they come back with a counteroffer, you can respond with a lower counteroffer of your own.
Additionally, negotiating at the very end of the month or before a holiday weekend can work in your favor. Salespeople are more motivated to make a deal to meet quotas at month’s end. Holiday weekends tend to make them eager to close sales as well.
How to negotiate the price
When negotiating with a car dealership, there are some effective strategies to employ:
- Do your research beforehand on fair prices. Use NADA, Kelley Blue Book, Edmunds and TrueCar to estimate the car’s value.
- Check deals being offered by other dealers on similar vehicles.
- Come prepared with printed price quotes to back up your target price.
- Point out competing deals you’ve been offered if applicable.
- Start the negotiation lower than your ideal price to leave room to go up.
- Mention any flaws or wear-and-tear on a used car as bargaining points.
- Point out you have financing already if you do – don’t negotiate based on monthly payment.
- Be willing to walk away politely if you can’t get close to your target price.
Negotiation phrases
Here are some polite but effective phrases to use when negotiating:
- “I’m very interested in this car, but I can’t agree to that price.”
- “I understand there need to be some profit in this for you, but I can only pay X amount.”
- “I’ve seen similar vehicles listed for X. Can you match that?”
- “The most I can do is X. Take it or leave it.”
- “If we can agree on X price, I’m ready to sign papers today.”
Dealership negotiation tactics
It helps to understand some of the common negotiation tactics dealers may use, so you can respond appropriately:
“Let me check with my manager”
Many times a salesperson will pretend to check with their manager and then come back with a slightly lower counteroffer. They are hoping you will see it as progress. But you can respond with an even lower counter, within reason.
Monthly payment negotiation
Salespeople often want to negotiate based on monthly payments. But focus on the total purchase price first – that is what truly matters. The monthly payment can then be adjusted based on your financing terms.
Lowball trade-in offers
Dealers will often quote an unreasonably low price for your trade-in. Be prepared with evidence on what your trade is worth. Get quotes from other dealers as well.
Spot delivery
Beware of dealers who let you drive the car home without signing final paperwork, also called a “spot delivery.” This is usually a high-pressure tactic and can complicate negotiations.
Extended warranties
Dealers will encourage extended warranties and service plans, claiming it will save you money. But most people don’t use all the services, so carefully consider whether it is worth the extra cost.
Leasing vs buying
When negotiating a car deal, you’ll also need to decide whether to lease the car or purchase it outright. Here’s a quick comparison:
Leasing advantages
- Lower monthly payments
- Drive a new car more frequently
- Minimal downpayment needed
- No hassle selling or trading in the car later
Buying advantages
- No mileage limits
- Can customize and modify the car
- Build equity in the car as you pay it off
- No return inspection or wear-and-tear charges
- No need to negotiate a residual value
In general, leasing makes more sense for those who like driving new vehicles frequently, while buying tends to be a better long-term value.
Preparing for car price negotiation
Going into a car price negotiation fully prepared will help you succeed. Follow these tips:
- Shop around to different dealers and get quotes.
- Narrow down the specific car model and trim you want.
- Calculate fair target prices using online tools and resources.
- Get pre-approved financing if not paying cash.
- Check your credit report for errors beforehand.
- Bring copies of quotes and fair price estimates to the dealer.
- Be ready to walk away if your price isn’t met.
What’s a good offer on a car?
What constitutes a “good” offer on a car depends on the type of car and market factors. In general:
- For a popular new car, aim for 7-10% below MSRP or invoice price.
- On a used car, target around 5% lower than NADA/KBB fair value.
- Deals up to 20% off MSRP are possible on slow-selling models.
- At minimum negotiate 2-3% below asking prices.
Check fair market prices from multiple sources, and compare quotes across dealers to establish a good target price range as you negotiate.
When to walk away
If a dealership won’t come close to your target price after several negotiation attempts, sometimes the best move is to politely walk away. However, make sure you have shopped other dealers first and have quotes to justify your price. Here are some good times to call it quits:
- The dealer won’t match competitive prices from other deals.
- They keep giving tiny concessions while standing firm on price.
- You have negotiated reasonably but are still too far apart on numbers.
- The salesperson becomes rude or hostile.
Walking away may motivate the dealer to reconnect with a better offer before you purchase elsewhere. Or you can simply move on to another dealer.
Is negotiating harder with used cars?
Negotiating the price down is generally harder on used cars compared to new. Here are some of the reasons why:
- Profit margins tend to be smaller on used cars for dealers.
- Trade-in values are harder to negotiate since the dealer assumes more risk.
- There are fewer competing offers from other dealers on any given used car.
- The overall supply is lower and demand higher for used cars currently.
However, used car prices are less fixed than new cars with sticker prices. With preparation and persistence, savings can still be found in most cases.
Negotiation tips for women
Unfortunately, women often face more difficulty negotiating car prices than men. Here are some tips to help level the playing field:
- Bring a male friend/spouse to negotiations if possible.
- Speak assertively and don’t hesitate to counteroffer.
- Bring information showing you’ve done research on fair prices.
- Ask direct questions and insist on clear answers.
- Be ready to walk out if you aren’t being taken seriously.
- Consider alternatives like car buying services that negotiate on your behalf.
When is negotiating not worth it?
Trying to negotiate prices down might not be worth your time and effort in certain cases:
- When buying a high-demand specialty vehicle that is rare in your area.
- If you need a car right away and don’t have time to shop around.
- At dealers with transparent, no-haggle pricing policies.
- If you dislike negotiating and don’t think you will be effective.
Weigh the time and potential savings against how far you’re willing to take the negotiation process. For many car purchases, the savings justify putting in some time and effort to negotiate.
Successful negotiation case study
Here is an example of how negotiating can lead to big savings on a car purchase:
Laura’s new car
Laura wanted to buy a new 2022 Honda Civic LX sedan in Meteorite Gray color. The MSRP on this trim and color was $22,550. Other dealers in her area were advertising this car for around $21,500. After researching invoice pricing, she set a target of $20,500 out-the-door based on quotes she received.
At the first dealership she visited, the salesperson started at $23,000 asking price. Laura showed the salesperson the other $21,500 quotes she had, and mentioned the $750 manufacturer rebate currently available on the Civic. The salesperson came back and offered $22,000. Laura responded that she could only pay $20,500 based on her research and budget. The salesperson acted like they couldn’t go that low, but agreed to speak to the manager.
After some back and forth, and insisting $20,500 was her best offer, the dealership agreed to that total price, including taxes and fees. Laura saved $1,500 below truecar average price and $2,000 off MSRP by negotiating. She was prepared with competitive quotes and her target pricing, allowing her to negotiate effectively.
Conclusion
Negotiating for the best possible price takes effort and preparation, but can result in significant savings when buying a new or used car from a dealership. Do your homework on fair prices, know your budget limits, and don’t be afraid to politely walk away if needed. The potential savings are well worth learning how to successfully negotiate car prices. Just remember to stay calm, reasonable and friendly even as you bargain hard. Knowing when the dealer has hit their bottom line and when to accept a reasonable offer is also key. With the right negotiation strategies, many car buyers can save hundreds or even thousands off sticker and asking prices.
