I’m a big fan of negotiation. It’s all strategy and there’s always tricks you could do. Mark Cuban used the “24 second” shot clock trick on Shark Tank. Another trick is to use silence. Silence is the killer that can make the other side very uncomfortable. I’m not an expert on negotiation by any means, but I have recently gone through negotiating a car price and will detail what I found out. To this day, I still don’t know if I won but I think I got a great deal out of it. Buying a car for the first time is something that the majority of people go through, which is why I will share my experience to learn what to do and what not to do.
It’s one of the very few times that I’ve negotiated for something. A car is a depreciating asset that costs a good chunk of change to purchase. I didn’t know what to expect and I didn’t know what to do. I’ve negotiated to save $75 on my phone bill before, but never for something of this magnitude. There were a lot of mistakes made and a lot of lessons learned while going through this process.
Know the Car You Want
A car has many characteristics. Some are slick, some are expensive, and some are economical. Defining what you are looking for helps. I was overwhelmed by the wealth of choices out there and didn’t know where to look, especially because I knew nothing about cars. Negotiating a car price is never easy under these conditions.
Some of the things that I did want was a car that was fuel efficient and had a great price. I looked up dealers around my area (it was in Austin, Texas this past May) and didn’t even know which ones were reputable. I went online to look for reviews. Since it’s a salesman driven business model, I expected bad reviews across the board. Surprisingly, I found one with a 4.1 star review from Google Reviews.
Next, I had to find a car that I wanted. Since I didn’t know what car I wanted, I filtered the choices down following these criteria 1) can’t cost more than $10,000 2) has to be an automatic. That narrowed the choices down to about 5 cars. Great. I had a list and I went down to the dealer after a day to make the purchase.
Choose the Car You Want
I ended up really liking the 2015 Nissan Versa Note SV Hatchback. It had 39,134 miles on it (the previous owner must have done a lot of driving in a year) and the price was $9,700. A quick google search shows that it has an MSRP of $16,330.
This price is probably inflated though because the website probably used the statistic that a car will be driven an average of 12,000 miles a year. The car I was looking at had more than 3x the average. But with this in mind and after test driving it and having the dealer walk us through the car specs, it was time to go to the negotiation table.
It was a tough process. I didn’t know how I should have responded to the majority of the time. He used speed of talking very well to his advantage. He talked fast so I would have a harder time comprehending and thinking of the best response. It gave me a clue that he really wanted to sell the car.
Negotiating a Car Price
When I told them that was the car I wanted, they muttered “I don’t know if we can do more than a couple hundred dollars off the price.” Then I asked something not very smart. I asked “then could you take off a couple hundred dollars?” Big mistake. I needed to start lower, I shot myself in the foot by asking this because then they asked “so if we do $9,500 right now, do we have a deal?”
Well, now I look bad. They gave me exactly what I wanted, how can I say no?! Even though I realized I made a mistake, I asked for a couple more hundred dollars off to $9,300. I wasn’t prideful enough to care about how I looked by asking. However, they wouldn’t budge. Then they went on to explain that they are going to send the car off to the auction anyways for$9,500 so it was either selling it to me or selling it to the auction dealer.
It doesn’t make sense that they would be able to sell it to an auction dealer for the same price as a consumer but I don’t mention that. Instead I still ask for just a little more to sweeten the deal. They wouldn’t budge and in the end, I took the $9,500 offered price. After taxes and additional fees, it came out to be $10,400.
What I Learned During the Process
1. The Amount of Time in Inventory Matters
The car that I was looking at had the lowest price in all of Texas based on mileage and model. I had the sense to check AFTER making the purchase (when I should have checked before). The car was priced so low because it was on inventory for a long time. 128 days, in fact. Any days above 90 days in inventory spells trouble for the dealer.
Knowing this gives you more leverage when negotiating a car price. A simple question of “how long was this car in inventory” gives you clues how badly they want to sell it. If they avoid the question and doesn’t answer in a straightforward manner, it’s been in inventory for a long time.
2. Look for Value Beyond a Lower Price
Since I knew nothing about cars, I couldn’t exercise this lesson. But now, I know what to negotiate for. For example, I had to buy a battery for my car 2 months after buying it because it was almost eroded and it wouldn’t start without jumping it. There was also a coolant cap missing. If I had been familiar with looking under the hood of a car, I could have easily spotted a coolant cap that was missing and would have asked about how old the battery was.
I could have requested for the battery to be replaced and to place a coolant cap where it was needed. If I had gotten it, I would have saved the $167 I spent for both items. Instead of looking to get a lower price than $9,500, I should have asked for additional non-cash items. Some non-cash things to ask for are: 1) a spare key (most dealers should offer this) 2) full tank of gas 3) new tires 4) new battery 5) car washed 6) free servicing.
3. Find Out How Much They Paid For the Car
This one’s tricky. It’s not information that they are happy to disclose. It doesn’t hurt to ask, though. A simple “how much did you pay for the car?” can give you clues by reading their facial expression. I was surprised though that this specific dealer showed me through their software how much they paid for the car. They were losing about $1000 by selling the car at this price. I don’t completely believe that, because I don’t think they would consistently sell cars that makes them lose money, but if it was true, I got a fantastic deal.
4. Find Points of Leverage
When it came to negotiation, I thought that it was just a haggling of prices. However, I am wrong. Especially when it comes to negotiating a car price. There’s no compelling reason that the seller would concede if the buyer doesn’t communicate their points of leverage. There’s always leverage points, you just have to find them.
For example, I could have offered to leave a great review on Google Review, Yelp, or any other review websites if they lowered the price even further. Also, there was a high number of competitors around the area. Therefore, I should have done research on the cars that their competitors had to see if I could have gotten a better deal.
A simple “thank you for the offers, let me browse other dealers to make sure that I’m getting the best deal” could have gotten me a slightly better price.
In summation, I got lucky. The car was in inventory for 128 days resulting in a record low price, the dealer didn’t ask if I was financing the car or paying for it with cash (dealers hate customers who pay straight cash), and the day that I went, it was slow so they were eager to make a sale. On top of getting a great deal, I learned a lot of things while negotiating a car price.
However, that’s not to say there weren’t mistakes. Consider me as the guinea pig that went through the process so you don’t have to make the same mistakes I made!
Readers, have you gone through negotiating a car price? Are there additional things that I should mention? Let me know in the comments below!
My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!
Read more about me here.
Latest posts by Finance Solver (see all)
- Would You Invest $1.5K for a Non-Guaranteed Chance? - January 11, 2017
- Starting a Thousand Mile Journey With a Single Step - December 14, 2016
- 5 Seconds Can Save Ten Dollars - December 10, 2016