Everyday Negotiations: Buying A Car
[Volume 1, No. 3]
Next to purchasing a home, buying a car is the largest purchase that most of us will make. Buying a car can also be one of the most frustrating of all of our purchases, one which can truly test our skills of negotiation.
As in all negotiations, planning is probably the single most critical thing you can do to ensure that you get the car you want at a price you want to pay.
A number of helpful books and articles about buying cars have been published. This issue of the newsletter is based on the April, 1990 issue of Consumer Reports, Remer Sutton's book, Don't Get Taken Every Time, and our own experiences, as well as those of people who have attended our workshops. We have quoted liberally from the Consumer Reports article, "How to Drive A Hard Bargain in a Soft Market." This article, along with the Sutton book, outline some basic rules for planning. They are:
- Determine how much you are prepared to pay and how much you can afford on a monthly basis.
- Determine how you're going to pay for the car. Investigate financing options.
- Don't give your heart to any one car. You'll lose your objectivity and, with it, your negotiating edge. Select a few models that suit your needs and your wallet.
- Decide on the type of car you need - large or small, two or four doors, sedan, hatchback, wagon or minivan, new or used. Don't forget, there is a distinction between your needs and your wants.
- Decide what equipment you need. Most models, both domestic and foreign, are sold in two or more trim lines (standard, DX, Deluxe, etc.) Trim lines vary greatly; sometimes it's cheaper to buy a car in higher trim line than it is to buy a basic model and dress it up with options.
- Shop the dealers in your area to determine who has the car you want. Check at least two dealers for each make. Check their reputation for service, their loaner car policy, weekend hours, and whether they work by appointment. What's the chemistry? Does it feel like a place you will find comfortable doing business?
In preparing your offer, find out what the car cost the dealer; Consumer Reports publishes a guide which lists dealers' prices.
Don't forget rebates. Check your local paper to find out what's being offered.
With all of the above information in hand, you are now ready to buy your car. The negotiation process can be enhanced if you remember the following:
- Take the initiative. Ask for your salesperson. Tell him/her that you would like to go to his/her office and discuss price. Let the sales person know that you are prepared to make an offer, a firm offer, that doesn't leave any money on the table.
- Base your offer on the dealer's cost, not the sticker price. In that way you will be able to negotiate up from the dealer's "invoice price", not down from the "sticker"price. The latter gives the dealer too much leverage.
- Insist that the salesperson take your offer to his/her manager. Don't give a deposit. Only give one once your offer has been accepted.
- If this is where you want to buy and they insist that your offer is too low (and you believe they will let you walk), make one additional price concession, but no more!
- When you negotiate with the salesperson, make it clear that you want the rebate up front, as an additional discount off the price of the car, not 30 days later in the form of a check. That will save you sales tax on the amount of the rebate. Keep the deal simple. Don't confuse negotiations over the purchase of a new car with discussions of a trade-in or an auto loan. That can come later.
It is difficult to build trust and create a collaborative climate in situations which are approached as competitive "win/lose" negotiations. Buying a car seems to be one of these situations.
What is possible, however, is to create a climate of mutual respect, based on the wish for a fair and mutually beneficial end to the negotiation. The car dealer must make a profit by selling cars; that's not a disputed issue. It's the buyer's belief that the car dealer may be trying to make too much profit which creates the competitive climate. "What is fair and reasonable profit?" is the question which needs to be successfully resolved for both parties to be satisfied with the negotiation.
Sources of Information
256 Washington Street
Mount Vernon, NY 10553
Edmund's Car Prices - Buyers Guide
Can be purchased in most bookstores
Sutton, Remer: Don't Get Taken Every Time, Viking
Penguin, Inc., New York, 1982.