Buying a new car is a big decision with a lot of moving parts. To get the best deal, you should come prepared to negotiate the price of the car you're interested in. If the idea of negotiating over a car is new or foreign to you, you may have reservations about how best to proceed. Chase Auto offers our best tips for how to negotiate a car deal in your favor below.
What is MSRP and how much off MSRP can I expect for a new car?
Before learning how to negotiate a car price, it's a good idea to get familiar with how dealerships price their vehicles. For starters, MSRP stands for "manufacturer's suggested retail price." The MSRP is also often referred to as the "sticker price," and it's often the price buyers see displayed on various vehicles on the lot.
While manufacturers can set MSRPs, they cannot set the retail prices that dealerships actually use. Instead, MSRPs function simply as suggestions for dealerships to either follow, raise, or lower as they see fit. Since an MSRP is not necessarily the final going price of a vehicle, it is a good starting point for negotiations. Dealerships are looking to make a profit on their vehicles, so they generally want to make sure a vehicle sells for more than the invoice price they originally paid for that vehicle. This invoice price is lower than the MSRP, and there's usually wiggle room between these two points that a buyer can target successfully.
To do so, buyers should look into the market value of the vehicle they are interested in before starting any negotiations. The market value is an average that usually falls somewhere between the MSRP displayed on a vehicle and the invoice price a dealership paid for the vehicle. A successful negotiation for a buyer involves using this information to their advantage, resulting in either lowering the going price from the MSRP or by getting other types of discounts or cash rebates that work in their favor.
Tips for how to get the best deal on a new car
Now that you know more about dealership pricing, it's time to learn how to negotiate a new car price to your advantage. While lowering the price of the vehicle you're interested in is the ultimate goal, there are some negotiation tactics that are better than others. Before proceeding on your own, consider the following tips for how to negotiate a car deal:
1. Do your research
To best prepare for a car negotiation, it's important to do your research beforehand. First, you'll want to look into the market value of the car you're interested in. The market value of any particular vehicle relies on a number of indicators such as supply, demand, options, and incentives, and it can give you an idea of what other buyers are paying for similar vehicles. With this information in mind, you'll be in a better position to set and secure your target price.
Next, you'll want to look into various dealerships that offer the vehicle you want. It can be to your benefit to know how much a dealership paid for the vehicle. While the invoice price may give you some idea, many established dealerships obtain vehicles from manufacturers at a discount. If this is true for the vehicle you're interested in, you may have even more wiggle room in your negotiations.
2. Shop around to find the best offers
No two dealerships are the same. This means that the new car you're looking for may be priced differently depending on the lot you're at. It's a good idea to shop around and ask various dealers for a quote. Not only can this clue you in on who is offering the best deal right off the bat, but it also gives you leverage with other dealers. By pulling a better offer out of your back pocket, dealers may attempt to beat their competitors' prices.
3. Negotiate more than just the selling price
Dealers who readily work with you on the final selling price of a vehicle may try to make up some of that money elsewhere. To do this, dealers may try to offer you deals on other products that aren't really deals. For example, they may mention that since you're getting such a good deal on the price of a car, you can afford a better extended warranty. Regardless of your savings on the selling price, you may still want to carefully consider your options for further negotiations.
4. Get clear on the final selling price
Similarly, a big part of how to negotiate a car price successfully involves avoiding confusion about the final selling price. There are a lot of moving parts that work in tandem to produce a good deal on a vehicle. This means it's also easy to get lost in the details and then suddenly feel surprised to find new fees, taxes, and other costs tacked on right at the end. To make sure a deal doesn't sound too good to be true, ask the dealer to give you an "out-the-door" number that covers all these various expenses upfront. You should also request that the dealer break these costs down for you so you can make sure nothing unexpected slips into your deal.
5. Keep track of your offers
There are many benefits to shopping around, but keeping your offers organized can really help you obtain the best deal. Getting your offers and all their small details in writing can help you stay organized as you work with multiple dealers. At the same time, having these notes handy as you negotiate can go a long way for securing the right vehicle for you.
When you're ready to negotiate the price of your car, follow the above tips to make sure you get the lowest price possible.