Unlike with some stores, you can often negotiate on the price of a car before purchasing it. To help you get the best deals on a new vehicle, we researched this topic to give you all the information you need to negotiate effectively.
Depending on the dealership and car model, you can typically negotiate a 5% to 15% reduction in the sticker price of the new car.
Want to learn how to negotiate when purchasing a new car? Keep reading to learn how you can slash thousands off your new car purchase.
How Much Can you Negotiate on a New Car?
Purchasing a new car can be a frustrating process that requires countless hours of research, and walking around a car lot. Negotiation is a big part of car shopping, but many people do not negotiate properly and spend thousands of dollars extra.
Car salespeople are willing to negotiate but will send you walking out of the door if you make outrageous demands like a 10,000 dollar reduction on the price of the new car. Being realistic and learning what the invoice price and MSRP are will help to receive a great deal on your new vehicle.
MSRP (Manufacturer Suggested Retail Price)
Also known as the sticker price, the MSRP helps dealerships set the price for their cars to earn the maximum profit. When a car dealership receives a new car, the automaker will include a price suggestion, but this price is not fixed. In most cases, the MSRP is not a set price, and many dealerships are flexible in their final prices.
Invoice Cost
The invoice cost is the price that the dealership paid the automaker for the car. This price is typically 20% lower than the MSRP of the vehicle. The dealership will not sell a new car below this price because they would receive no profit from the business transaction. The closer you get to the invoice price of the vehicle, the better deal you will receive.
Finding the Middle Ground
To give yourself the highest chance of finding the best deals, take the time to review the invoice price and MSRP of the car before visiting the dealership. You will be negotiating to find the middle ground with the salesman between the invoice price and the car's sticker price. Work your way up from the invoice price and start by offering 2% above the car's invoice price.
This offer will start the negotiating process for the car and make finding good deals easier than negotiating the MSRP down.
Negotiating on Popular Car
There is an exception to the rule when negotiating for a new car. If the vehicle is in-demand and selling very often, the dealer will be less likely to negotiate below the MSRP of the car. You are unlikely to be able to negotiate down the price of a Mercedes G-Wagon and any car model of Tesla.
Will Dealerships Sell Below MSRP?
The MSRP is merely a suggestion, and many dealerships disregard the price when making negotiations with potential buyers.
When negotiating with a dealership for a car, the dealership will use the MSRP as the starting point for negotiating. You are almost always able to negotiate with the dealership to sell below the retail price of the car.
How Much Can You Get off MSRP on a New Car?
When negotiating on a new car, the dealership wants to make as much profit as possible. The dealership also intends to satisfy the customer, so you will need to strike a balance when negotiating to receive the best deal on a car.
Depending on the model of the vehicle, a general guideline to follow is offering $500 to $1500 above the invoice price. Negotiating up from the invoice price will set the tone to the salesman that you know the actual value of the car.
The method of negotiating from the invoice price is a better option than attempting to negotiate down from the MSRP.
How Much Below MSRP is a Good Deal?
A good deal would be $1,000 to $3,000 off of the MSRP of a new car. This discount could be more or less depending on the model of the vehicle and the dealership's personal negotiation rules for its salesmen.
The price depends on the difference between the MSRP and the invoice price of the vehicle.
Can You Ask the Dealer for Invoice Price?
A good car dealership will always show you the invoice price of a car if you ask to see it. Some dealers will opt not to reveal the cost to prevent you from negotiating up from the dealer's price.
If the dealer does not show you the invoice price of the car, you can still use a website like Edmunds.com. You can view both the MSRP and invoice price of any vehicle for free with Edmunds. To find the invoice price and MSRP of the vehicle, type in the model of the car into the search bar.
How do you Haggle with a Car Dealer?
Haggling with a car salesman can be intimidating for someone looking to buy a new car. To set yourself up for success, spend some extra time to prepare before stepping foot in the car lot.
Preparing for Negotiations
Pre-Approve Financing
To prepare for negotiating, start by getting pre-approved for financing from your bank. Being pre-approved for financing will let you set the maximum price you are willing to pay. You can use this to your advantage while haggling on the price. A car salesperson will find a way to meet your budget.
Check Multiple Dealerships Online
To ensure you get the best deal, research different car dealerships, and see which dealer has the best prices. Check dealerships where your car might not be as popular. An example is purchasing a hybrid car at a rural area car dealership where trucks are more popular.
Haggling with the Dealer
Be Willing to Walk Away
The most important rule for any negotiation is to be willing to walk away from the deal if you can't agree to a price in your range. The process of finding a great deal may take longer, but if you are patient, you will eventually find a dealer that meets your requirements.
Email Dealerships
For people who want to skip the negotiation process in-person, emailing the car dealership is a great alternative. Buyers can discover the best deals available without having to visit each dealer by merely inquiring about a specific car model.
Deal with the Manager
Regardless of how you contact them, the best person to talk to is the manager of the dealership. The manager makes the final decisions and isn't earning a commission from the purchase of the car.
What Should you Not Say to a Car Salesman?
While it is essential to have a list of questions when purchasing something as significant as a car, you also need to know the stuff you shouldn't say to the salesmen. To give yourself the upper hand, these are three crucial things that you should never mention to car salespeople.
1. "I Don't Know a Lot About Cars."
This is probably a car salesman's favorite phrase. When you don't know a lot about cars, a car salesperson will use it to their advantage to sell you additional features, warranties, and upgrades for a vehicle.
2. "I Need to Buy a Car Today."
In desperate situations, you may need to purchase a car as soon as possible. If a car salesperson hears you need a car quickly, you have a higher likelihood of overpaying for a new car. Do not rush the car buying process. Borrow or rent a car for a few weeks to give you more time to find great deals on vehicles.
3. "I Love This Car!"
If you let the car salesman know that you like the car, the salesman knows they can increase the price of the vehicle. Being attached to a specific vehicle will make the salesman's life a lot easier for securing the final deal.
How Much will a Dealership Come Down on Price on a Used Car?
Negotiating for a used car is different from a new vehicle because of the hidden problems the used car may be hiding. You can also use the mileage of the vehicle to your advantage during negotiations to bring down the price. In most cases, you can reduce 5% to 15% of the asking price of the used car.
Conclusion
Learning the invoice price and MSRP are the keys to finding the best deals on a new car. Be realistic in your negotiating and understand car dealerships are businesses. They need to make money too, so they are not likely to go below invoice price.