A couple of months ago, I wrote about how to buy a used car. I went through all the steps except for negotiating because its a topic deserving of its very own post. A post which Ill tackle today.
Now to begin, heres my honest confession: I suck at negotiating.
And it becomes really apparent whenever I negotiate for big purchase items like cars. When Kate and I had to buy a new car last year, I stunk it up. It wasnt for a lack of trying. I was actually excited about the chance to improve my negotiating chops. I felt ready to walk into the dealership and make a deal.
Fearless Negotiating: ... Best Price: $2.95 Buy New $7.20 (as of 09:10 UTC - Details)
But I punted. When the dealer started putting out numbers, I hemmed and hawed.
Thankfully, Kate is a kickass negotiator. I think its her Italian heritage that makes her so good. Maybe the Polish. I dont know. Shes just good at it. She saw that I was flubbing it up and took over the reins and got us a good deal.
As we drove away in our new car, Ill admit that my manly ego was bruised. And I could tell Kate was disappointed that I hadnt been able to take the lead.
I thought, Im the man damnit! I should know how to negotiate and not have to let my wife do it.
Perhaps thats not too mature. Im definitely lucky to have a wife who knows how to haggle like an Arabian bazaar merchant. But Id like to be able to hold my own in this arena as well.
The Art of Manliness: ... Best Price: $1.99 Buy New $7.70 (as of 12:35 UTC - Details)
So I used the experience to double down on my efforts to improve my bargaining skills. In an effort to prepare myself for the next time we have to buy a car, I did some research, asked guys I know for their negotiating tips, and went along with a friend who was buying a car. Heres what I learned along the way.
Knowledge Is Power
In the negotiation game, knowledge is truly power. And in the car buying business, the car salesman usually has the most information. Think about it. When the average buyer walks into the dealer, hell immediately divulge to the salesman which car he wants, how much he can pay per month, and which vehicle hes trading in.
Teach Yourself Car Buy... Best Price: $3.78 Buy New $13.58 (as of 09:20 UTC - Details)
Meanwhile, the salesman gives away no information that would help the buyer. Information like how much the car really cost the dealership, how low theyll really sell it for, or whats the real value on the buyers trade-in.
Who do you thinks going to get the better deal in this scenario? The dealer, of course. Hes the one with all the information!
Thus, to minimize the amount you pay for a car, you need to do two things: 1) hold your cards close by not telling the dealer exactly what youre looking for or how much youre willing to pay and 2) find out as much information about the car you want to buy before you walk into the dealership.
Know How Dealers Make Their Money
Consumer Reports: Used... Best Price: $19.39 Buy New $160.55 (as of 10:10 UTC - Details)
When youre talking with a dealer, its important to know that dealers make money three different ways with each customer.
- They can make money on the front end of the purchase by selling the car for more than what they paid to buy it.
- They can make money on the back end, selling you things like financing, extended warranties, and dealer add-ons like rustproofing.
- If the dealer includes trade-in value, they can make money on the difference between what they pay for your car and what they get when they sell it.
Most buyers just focus on #1. However, car dealers might actually make more money on numbers #2 and #3. Thus, when you start negotiating for a used car, take into account things like financing and the trade-in value of your current car when calculating the final price.
How to Negotiate for a Used Car
Buy cars that are at least two years old. Why two years old? Well, theyre new enough that they still look nice and probably dont have a lot of problems. But more importantly, a new cars wholesale value drops between 45 and 55 percent of its original sticker price after two years. What a bargain!
Kelley Blue Book Used ... Best Price: $2.13 Buy New $9.95 (as of 10:40 UTC - Details)
Read Consumer Reports annual auto issue. Consumer Reports annual auto issue comes out every April and has a used car section that gives you info like lists of most reliable and least reliable used cars and frequency-of-repair records for recent model years. This information can help you create a list of used cars you want to check out.
Get the big picture value. Once you have a list of possible used cars, get an idea of how much they generally go for by checking the Kelley Blue Books Guide to Used Cars and the National Automobile Dealers Official Used Car Guide. Dont just rely on the website versions of these value guides. The websites wont give you a cars wholesale price, just the retail value. The wholesale price is what dealers use to determine how much they should pay for a car. After paying the wholesale price, dealers jack the price up for retail. You want to buy the used car for as close to the wholesale price as possible.
However, dont take these values too literally. The values in the Blue Book or Official Used Car Guide dont reflect the specific situation in your specific market. For example, your town might have a glut of Astro Minivans (Why are you buying an Astro Minivan?), so the price on those will be less than the blue book value. So youll need to
Fine tune your estimate. Find out what the going price is for the cars you want in your area. Check out autotrader.com for prices in your area.
Check the dealerships to see if they have the car. Look on autotrader.com, call around to the dealerships or check their websites to see if they have the used car you want and what theyre asking for it. If they have the car youre looking for, swing by the car lot and write down the cars Vehicle Identification Number. Youll need it later.
June 25, 2010