Car Coach: Negotiation Tips for Used Cars

Negotiation Tips for Used Cars

Used Car Buying Strategy
Get Ready to Negotiate
Your Advantages
Setting Your Starting Bid and Ultimate Target Price
Dealer Tactics and How to Counter
More Dealer Tactics
Your Best Tactics
Parting Comments on Negotiation
Negotiating Dealer Add-ons

Used Car Buying Strategies

Use the Auto Mall search engine to find a car you like and contact the dealer by calling the phone number on the detailed search results page. If you went for a test drive at the dealership, make an appointment with the salesperson you met with if he treated you well. If you don't know anyone, make an appointment with the Internet manager or sales manager. The salesperson will probably ask lots of questions. Be polite but noncommital -- "We can talk about that, but first let's talk about this". Don't tell the salesperson the amount of your pre-approved loan. Tell him/her that you are definitely going to buy a car, but not necessarily from them -- there are other cars in the running. State that you have researched the price for the trade and the car via the Internet. This establishes your credibility.

Handle the trade-in first. If the value of the trade is acceptable, make an offer on the car and begin to negotiate. Always negotiate using your starting bid as the base -- don't let the salesperson talk sticker price. Start with a bid based on Car Coach knowledge and allow yourself to be worked upward -- a very small amount at a time. Sign a buyer's offer, if necessary, saying you'll buy at a given price, but don't give a deposit until the offer is approved in writing. Make sure the price includes tax, tag, title, and dealer charges. Don't give your driver's license or credit card in place of a deposit.

After you reach agreement, and have negotiated dealer add-ons, have the salesperson fill out a complete contract. Make sure the contract includes tax, tag, title, and dealer charges. Compare the "amount due" to your ultimate target -- if it is above your limit, stop the transaction. If the figure is okay, make a complete copy but do not sign. Tell the salesperson that you want to take overnight to make sure you understand everything in the agreement.

After you completely understand the contract and agree with all the figures, go back to the dealer and complete the transaction. Before you take your car home do a thorough inspection of the car including a brief test drive and compare the VIN numbers and equipment on the contract with the vehicle's VIN number and equipment on the vehicle.

Get Ready to Negotiate for Your Vehicle

Car Coach gives you knowledge to visit the dealer with confidence. You should take a folder containing your research, a few tools for your Do-It-Yourself inspection, and a good friend to keep you to your plan:

a printout showing the researched value of your trade-in
pad of paper, pencil, highlighter, calculator
(used car) a printout showing the average retail price for the used car you want
(used car) the address of your mechanic and means to pay for a used car inspection
(used car) printout of the Pocket Buyer's Toolkit containing inspection checklists
(used car) DIY inspection kit consisting of a flashlight, mirror, tire pressure gauge, weak magnet, and a good friend that will help with the inspection
a copy of your plan including your ultimate target price and the dealer add-on options you decided to buy

Your Advantages
A well-informed consumer can generally do rather well buying a car. Let's take a look at some buyer's advantages:

You can pick the time and place
You can go to any dealer when the time is right for you. Maybe the best time is near the end of the month or the end of the quarter, when the dealer needs just one more sale.

You can walk out -- the seller can't.
What's more, the seller can't make you stay. You have the power to initiate selling and terminate it -- the salesperson can't do either.

It's your money.
You have the right to spend your money how and when you wish. The salespeople have to defer to you if they want you to spend your money.

Your power grows with time spent -- the dealer's power weakens.
As salespeople put in time and effort and negotiations progress, they become more concerned about losing the sale -- they don't want to fail after investing so much time. Your power increases right up to the point where you sign the contract -- and then it immediately decreases. As you agree on early items like the trade-in price, you become a probable sale and are even more valuable. The salesperson will do almost anything to avoid a deadlock, while you can allow the deadlock and walk out. You should get enough power and respect to make sure that what was promised to you is delivered.

You can come armed with information, really know what you want, and have your financing in order.
Through the use of Car Coach, you know what a good deal is for the car you want to buy. You go in knowing what a good deal is, and know there are other places to buy your car if this dealer doesn't please you. If you know what a good deal is and convince the dealer that you're a real buyer with money, the sales force should just try to settle.

Setting Starting Bid and Ultimate Target Price

Set your trade-in expectations based on the Car Coach wholesale value -- try for full wholesale value, but settle for a price that is within a few hundred dollars.

Set your used car starting bid based on the Car Coach average retail price -- try to get 5% below average, but settling anywhere below the average price is a better than average deal.

It's very important to set your ultimate target price -- this is the total cost including the car, options, add-ons, taxes, tags, title, destination fee, etc. minus your trade in. This is your walk-away number -- and you need to steel yourself to walk away if the dealer won't sell you the car without breaking your budget. Set it too low and the dealer will not take you seriously -- you will seem like an uninformed buyer making a lowball offer and not negotiating in good faith. Set it too high and you may not get the good deal you are looking for. It's better to go to the low side initially -- if you negotiate with several dealers and none of them are interested in doing business at that price, you can raise your ultimate target price and try again.

Dealer Tactics and How to Counter
Professional salespeople learn techniques and spend years applying them, and learn which ones work on different types of buyers. If you recognize the techniques, you are much less likely to be confused or manipulated.

Take it or leave it
This tactic is used to force you into an early decision. You don't have to take it or leave it, you can always negotiate.

Making you feel guilty
Examples are when a salesperson tells you that he really needs the sale, that you're wasting his time, that he wins an award with one more sale, that he considered you a friend, etc. You are not forcing the dealer to sell you the car at a loss. Any good salesperson will attempt to make you his friend and to elicit your sympathy. You are there to buy a car, and that is all. You are not there to make a friend. Keep a businesslike distance between you and the salesperson.

It's written right here
Dealers have an array of facts, figures, forms, rules, etc. that are written down, and hence we assume they are set in stone. You should always assume that anything written is negotiable, that any item can be adjusted. If you've done your research, you will know what items cost, which costs are fixed and which are not -- just because it's written down doesn't mean that it's unchangeable. Question everything!

California Approach
What do I have to do to get you to buy a car today? -- This tactic may be used over and over again until all objections are understood and countered. The hope is that the buyer will sign just to end the pressure. Sometimes a salesperson will accept your needs and reach an agreement, then take it to the boss who says that the dealership can't do what the salesperson agreed to. Your best approach is to know what a good deal is, ask for it, and tell the salesperson you don't like to be pressured.

Good Guy/Bad Guy
The salesperson becomes your friend, but the sales manager keeps bringing up problems that the salesperson helps you solve. Keep a formal distance between you and the salesperson. Keep asking for a deal that is fair to you.

Control through questioning
The salesperson does need to ask qualifying questions to find out what you need, want, and can afford, but this technique goes beyond that. It involves demanding answers or answering your questions with a closing question. Example: (You) -- "Do you have this car in blue?" (Salesperson) -- "If I do, will you buy the car today?" The response asks that you make a decision about buying prematurely. Example Response: (You) -- "I would like an answer to my question please. Do you have this car in blue? When I get an answer, I will be better able to determine if I am going to buy or not."

Team approach
You are introduced to many salespeople with different responsibilities -- sometimes multiple people at one time or in succession to work on you until they wear you out. Don't allow more than one salesperson at a time to work with you. Tell the salespeople that you want to continue to work with the same salesperson.

Delay
This tactic extends negotiations so that you get nervous or tired and just want to get the deal done as quickly as possible. When you are waiting for the salesperson to come back with a counteroffer, make him uneasy by getting up, walking around, going outside, etc. Give the salesperson a time limit -- your time is valuable too. If things drag out, say that you want to leave and come back tomorrow .

It's the last one -or- Good for today only
This is an attempt to force you to make an immediate, perhaps premature decision -- the salesperson wants to force you into a commitment. You should be willing to pass up this car if everything isn't exactly right. Example Response: (You) -- "Then, maybe I'll miss it". A deal is good for as long as somebody wants it to be good. Stick to your own plan -- if you lose it, you lose it.

More Dealer Tactics

Only the payments are important, right?
This tactic is an attempt to give the salesperson lots of running room by working with the term of the loan or asking for a larger down payment. If you're not careful, you won't even know the price you actually paid for the vehicle. Don't let the salesperson get you talking about monthly payments -- you already know your pre-approved loan payment. Only talk about the price of the new vehicle, and fight hard for the lowest price.

Only the difference in price is important, right?
Used to confuse a buyer by linking the trade-in transaction and the new vehicle transaction. Keep each transaction separate -- handle the trade-in agreement before you talk about the new car, and hold the dealership to the fixed, firm numbers for your trade.

Lowballing
Used when the salesperson feels that you are very concerned about the new car price, but relatively unconcerned about what you get for your trade-in. The salesperson tries to focus your attention on a reasonable price for the new car and gives you very little for your trade. It can also be used if you are adamant about getting a good price for your trade-in (such as for a down payment) -- he will give a good price for the trade-in but charge full price for the new car. To counter this, make the salesperson understand that the only thing of importance is a good price for your trade-in -- then after you get it, that the only important thing is a low purchase price. Don't give back the good trade-in price. This is why having the fixed trade-in price written down is helpful, especially if you had the salesperson sign at some point.

Verbal promises
During your conversation, many things will be promised to you verbally. Sometimes a dealership will try to take back some of these items later. Every time something is offered, write it down and keep a list -- even better, have the salesperson or his boss initial the items agreed upon. Save this list for the closing and refer to it when you are examining the completed agreement. Ask that all verbal agreements be reflected in the contract, and don't sign until you have everything you were promised. Get really upset if promises aren't honored. If you're having problems now with a sale at stake, think what it will be when it's time to honor service commitments.

Limited authority
This is used by a salesperson to back off any agreement he has made by indicating that he isn't really authorized to make it. For example: The salesperson makes an agreement with you, but also says, "My boss may not go for this." You, however, are expected to be able to make and stick to all your agreements. Ask the salesperson at the onset of negotiations if he has the authority to make a deal. If he won't give an answer, is evasive, or tries to change the subject; tell him that he obviously doesn't have authority. You want to deal with someone who has authority to negotiate with you.

Nibbles
Dealers are good at continually asking for small concessions. Don't give anything away without asking for something back. Never let a little nibble go unanswered -- ask, ask, ask. Nobody will give you anything unless you ask.

Good faith deposit
Giving a deposit is one of the strongest signs of commitment. If a salesperson will not take an offer to his boss without a deposit, demand that he do it. Let him know that until a firm price is agreed on, you will not commit to the sale.

If I can, will you?
This tactic is used either to get a buying commitment, see if you are a real buyer, and perhaps to probe your limits. The best way to handle it is to become a broken record -- keep restating your terms. If he gives you what you want, of course you will buy right then and there.

Stonewalling
Granting concessions slowly and grudgingly -- an attempt to provoke the buyer into compromises just to get the negotiations going. You must be willing to outwait the salesperson or come in at a time that is so inconvenient that all he wants to do is get the transaction over with. Starting the negotiations one or two hours before closing may be a good tactic if you can still be fresh and alert yourself.

Upcoming Price Increase
A scare tactic designed to get you to move really quickly because the vehicle will cost more next time you come in. Ask the salesperson to document the price hike -- note the date it becomes effective and check if it applies to your chosen car. If the salesperson can't produce the document, disregard it and go on negotiating at your own speed. If it does apply, note it and keep negotiating at your own speed.

Your Best Tactics

All deals are win-win. If a dealer thinks he's losing he won't sell you the car at the price you're willing to pay for it. Don't worry about the dealer, he won't take a bad deal - worry about you!. Here are a few techniques that you can use when negotiating a car deal:

Broken Record
Often used by kids to wear down parents, the buyer won't budge from their position and just keeps repeating his point of view endlessly waiting for the seller to give in. A more refined form is to restate your position with a reasonable explanation added. Example: (You) "I know that you want to sell the car for $20,800, but I can only afford $19,000". (Them) "I would love to make a sale, but my boss won't take a sale with almost no profit; you have to come up with more money". (You) "I know the deal is not great, but at $19,000 you will be making a good profit". (Them) "We would lose money at that price" (You) "Look at my figures - you will see that $19,000 is fair." The cycle is repeated endlessly until a deal is reached or you leave -- there is really no counter to this technique if it is done well. It is exceptionally powerful because the salesperson can't shut off or throw out a stubborn customer who may be a buyer and just keeps plugging away.

Yes, but
Used to counter the salesperson's arguments without being obnoxious -- less confrontational than other tactics. (Them) "The list price for the car is $28,995, and at that price these cars are almost flying off the lot." (You) "Yes, I understand how you might want to get full price for your car, but I won't pay that much money."

You Have to Do Better Than That
Forces the salesperson to do something to rescue the sale -- sometimes making a concession without even knowing what it will take to save the situation. Works well when neither you nor the salesperson will budge. (You) "You have to do better than that." (Them) "If I can get my boss to accept $300 less, will you buy a car right now, today?" (You) "I didn't make myself clear. You have to do considerably better than that, and yes, I really do want to buy a car today."

Create Tension
Actions or reactions that are unexpected create tension. If a salesperson has invested time and energy in the negotiation and thinks that you may buy a car, nothing creates tension like threatening to walk away. You can also create tension by placing requirements on the salesperson, such as giving time limits, asking to see his manager, etc.

Just Ask
The mere act of asking often results in your getting as much as using any other technique. This style of asking for more and more, usually politely, pays off. Even if you don't get the whole thing, you often get some piece of it. The secret is to keep on asking until you get what you want. Don't back off at the first sign of resistance, do it until you get serious resistance.

Parting Comments

He who mentions money first usually loses
Premature mention of money marks you as the more anxious person, the one who is feeling the strain. When you mention a price, it is tough to retract it.

Don't discuss money until you know what you are buying
Money belongs at the end of a negotiation, after you have determined exactly what it is you're getting and what a good price is.

Don't bid against yourself
It is tempting to fill silent space with talk. Don't do it. It may result in giving away something or lowering your offer without a corresponding concession.

Leave if a dealer uses unfair practices

Misleading Advertising - bait and switch, misstating lease payments to be monthly payments, etc.
Large Deposit - requiring a deposit when presenting an offer or a large deposit to seal the deal
Four Square System - statement of desired payment, desired trade, desire new car price, and your signature. Then the salesperson starts to work on each square separately, starting with a figure far apart from yours and scratching through successive figures. When through, the paper is illegible and the buyer is frazzled and confused.
Excessive Turnover - new people are constantly introduced into the deal asking for more money, each free from the verbal commitments made by other salespeople.
Nickle and Dime - after negotiations are over, a salesperson leaves and returns with note after note, each asking for a little more money.
Yo-Yo contracts - contracts that allow the dealer to change the deal after delivery. This may result in a dealer call that inform you that "Your contract wasn't approved at the figures you wanted". Many times you can't do anything except pay the higher amount, since the dealer has sold your trade-in before they call.
Lost Keys - salesperson can't "find" the keys you gave her to get your trade-in appraised, making you a captive customer and giving her more time to convince you to buy a car.
Disrespect - as a potential buyer, you deserve to be taken seriously and treated respectfully. If your salesperson makes you feel uncomfortable, tell them flat out what is bothering you -- salespeople have bad days sometimes too. If the behavior doesn't improve, just leave.

Negotiating Dealer Add-ons

Discussion of the add-on items usually happens in the dealership's finance and insurance (F&I) area. You visit the F&I office after you sign a contract to buy a vehicle. Part of the task is to fill out paperwork and sign documents; and almost always there will be discussions about leasing the vehicle, financing through dealer lenders, and the features of various add-on items that make money for the dealer. Don't feel pressured to accept dealer installed options you don't want just because they have already been applied to the car. Ask that they be removed or that they provide a car without them. If they really want to sell the car, they will drop the price or remove the options from the contract.

Follow the strategy you set for yourself before you walked into the dealer. You should have a budget that includes a "not to exceed" figure as a part of your strategy. It's easy to spend hundreds or thousands of dollars in F&I if you don't hold to your budget. You should have a pre-approved loan or other arrangements so you can pay cash. If you finance through the dealer, the F&I salesman can play with the monthly payments to make it sound like you are not paying much more for the extras. You keep things much simpler and make yourself much harder to manipulate if you already have arranged for financing.

Ask the F&I officer to explain the appearance of any last-minute fees. If they seem redundant or unjustified, try protesting them. The negotiated price is already providing the dealer with a fair profit, so additional fees should not be paid. Necessary Fees that should be paid:

Destination Charge
Sales Tax (if applicable)
License and registration fees (vary from state to state).
Documentation Fee -- this should reasonably be lower than $200 or so.

Extended Warranty
Make sure you know if there is any remaining factory warranty or extended warranty on the car. Extended warranties, if available, make sense for used cars if they don't break the bank. While extended warranties are expensive, they are negotiable and may also be offered by companies not affiliated with the dealer. Do your research so you can negotiate for a reasonable price. If you have the misfortune to need an expensive repair after your factory warranty expires, warranties are well worth it.

Credit Life Insurance
This specialized term insurance pays off the auto loan balance if the insured is disabled or killed. The price may be higher than similar term insurance from an insurance agent, and term insurance proceeds are more flexible since they can be used to pay off the car loan, mortgage, and other bills.

Auto Insurance
You probably already have auto insurance on your current vehicle and have already talked with your insurance agent about insurance for your new car. Bring an insurance card, since you need to show proof of insurance before you leave the dealership with your car. If this is your first vehicle, research insurance companies in your area and get a price quote before you sign papers for a car. Auto insurance fees are often significant and need to be included in your budget.

Anti-theft Devices
The dealer will likely offer alarm systems and vehicle recovery devices such as LoJack, window etching with the VIN, etc. Alarm systems installed at the factory often work better than aftermarket versions, but may not have all the newest functions. Recovery devices such as LoJack aren't really alarms, but send location information so that police can find the car if it's stolen. Ask your insurance agent if having one installed would provide a lower premium.

Rust proofing
Most late-model cars and trucks are effectively rust-proofed at the factory and come with relatively long rust-through warranties. Many automakers recommend against additional rust proofing, and in some cases additional rustproofing will void the rust-through warranty. Since rust may occur as a result of deep parking lot chips, buy a tube of touch-up paint along with the car and fill in minor chips quickly to prevent rust.

Paint Sealant
Generally no longer needed because of clear coat paint used on today's cars.

Appearance and protection packages
Factory floor mats may be of interest because they give a perfect match to the shape and color of your car's interior.

Administrative Costs
The dealer should not charge separately for his cost of doing business.

Advertising Fees
If the dealer has inserted the an ad fee into the contract that was not shown on the invoice, ask that it be removed.

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