Consumers who want a lower price on their vehicle can only get it if they negotiate. However, many car buyers are hesitant to do so and even fewer of them know how to negotiate correctly.
One of the biggest issues in the industry is the perception that car dealers are out to rip you off. However, according J.D. Power, dealers earn a little over $1,000 on average for every new car sold, with 36 per cent of consumers believing that they make more than $3,000. Because of this misunderstanding, many consumers ask for unreasonable prices and end up disappointed when they can’t get them.
If you want to be more successful at negotiating your price, look at the process from the dealer’s perspective. We asked JP Ostiguy, E-Commerce Manager at Zanchin Automotive Group, for some tips:
1. Be Informed
Before you begin shopping for a new car, you need to know what you are talking about. There’s nothing more aggravating for a dealer than negotiating with an uneducated customer.
“Do your research before you contact a dealer,” says Ostiguy. “Dealers prefer to work with informed clients as it speeds up the process.”
Create a checklist of brands and models you are considering and then decide which features and options you want and don’t want. One of the best ways to learn more about your preferred vehicle is by reading car reviews to see what the experts and people who own that car have to say about it. You shoudl also take your time to educate yourself about add-ons and extras offered by dealers, because some of them you may not want or need to pay for.
“Call or contact a dealer before visiting and ask what fees they charge,” Ostiguy suggests. “This will give you a heads-up, so there are no surprises later while discussing the price.”
2. Communicate with the Right Dealer
Not all dealers will meet your expectations – that’s a fact. To make sure you get satisfying service, do some research on the dealerships in your area first.
“Using review sites like Dealer Rater, Google and others will help you refine your search,” says Ostiguy. “Also contact the manufacturer to find out who their top-rated servicing dealers are.”
Sometimes, even if you do find the right dealer, you may still not get a good deal. According to Ostiguy, that’s because some customers have trouble communicating what they want.
“Write all your questions down before going to a dealer,” he says. “Being well-organized will help both the dealer and client.”
3. Set Proper Price Expectations
It’s equally important to set the right price expectations. The basic idea behind price negotiations is to aim for a number somewhere between the dealer cost and MSRP.
Ostiguy says that a customer’s negotiating price should generally be at least two to four per cent above the dealer cost. This percentage may be higher for luxury vehicles or those in short supply. You can learn the dealer cost of any vehicle by consulting a pricing resource like Unhaggle.
4. Be Able to Compromise
If you want to reach a good deal, says Ostiguy, you need to be willing to make compromises, like excluding certain colours, features or other aspects of your preferred vehicle. He also suggests avoiding manufacturer sites because their information on available inventory is often incomplete.
“Don’t frustrate yourself looking on factory sites for vehicles. Factory sites are not often updated and don’t take into account demo’s, sold or damaged units and dealer-to-dealer trades. You will drive yourself crazy looking.”
5. Figure Out Which Payment Option is Right for You
There are three ways of paying for a car – cash, finance or lease. Cash payment requires you to cover the full price from the get-go. Financing a car, on the other hand, lets you pay the price over a pre-set period of time on a monthly basis – with interest. Leasing works in a similar way, except you pay only a certain portion of the car’s price instead of the full amount which results in smaller monthly payments, but at the cost of ownership and often mileage restricitions.
Ostiguy says that it is vital to read your financing agreement thoroughly before signing it – until you understand it. This is important, he says, because there are many different types of loans, like an open loan, future financing, lease to own and many others. Picking one that doesn’t suit your needs may result in higher monthly payments or an undesirable term. He advises to be equally as thorough when signing a leasing agreement or making a deposit as when doing your initial research.
Our general takeaway when it comes to negotiating is very simple – know what you want and then figure out how to communicate that want to the dealer. Car haggling is not always easy, but making the best use of it can yield worthwhile savings.