How to Negotiate the Best Car Price

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While getting behind the wheel of a new or used car can be a lot of fun, few buyers find the process of buying a car an enjoyable experience. With some preparation and persistence, you can get the car you want without blowing your budget. Getting a great deal makes buying a great car even better, and this guide aims to give you the information you need to confidently navigate the car-buying experience and learn how to negotiate car prices.

Car buying is one of the last bastions of freewheeling price negotiation that happens directly between a buyer and seller. However, it’s also one of the most unbalanced negotiations you’ll find. Professional car salespeople work with hundreds of transactions per year, while most car buyers only get a vehicle every four or five years. Fortunately, consumers have better access to vehicle data than ever before.

This guide will walk through three sections for negotiating a car price:

  1. Be Prepared - Do research ahead of time to prepare yourself before you start visiting dealers.
  2. At the Dealership - Work with multiple dealers and know what you should do when talking to salespeople and their managers.
  3. Completing the Deal - Complete the transaction, while protecting the deal you just negotiated.

Be Prepared

Getting a good price on a new or used car starts weeks before you ever go to a dealer or other car seller. Your goals are to have as much information as possible about the vehicle you want, and have a preapproved financing plan in place.

The first step is finding the car you want that fits your needs and budget. Our new car rankings and reviews and used car rankings and reviews are based on the consensus opinions of the country’s top automotive journalists, combined with quantitative data on safety and reliability. When you start visiting dealers, you’ll want to focus on the vehicle you want, not the one they want to sell you.  

Arm Yourself With Information

You’ll want to know everything you can about the car that you are seeking, from its sticker price to the invoice price that the dealer may have paid for it. You can see what other buyers in your area paid for similar cars by looking at the TrueCar Market Analysis report linked in each of our new car reviews. While you’ll often hear talk that a car’s invoice price (or simply, “invoice”) is the price to aim for, the TrueCar information is a more accurate measure, as it’s often impossible to know what a dealer’s true invoice was.

The buying insights at the bottom of many of our reviews show the current demand for the vehicle, helping you identify models that are in high or low demand. If the demand is lower, you’ll like be able to strike a better deal.

Not every car dealership is loved by its customers. There are several sites, from Yelp.com to specialized auto dealer rating sites, which show reviews of car dealerships from customers. While every business has some bad reviews, you’re looking for trends that show you which dealers are better to do business with than others.

Financing Comes First

Dealers typically want to merge all of the components of a car deal into one big transaction. That's potentially a confusing and costly way to buy a car, because you’ll be negotiating financing and the price at the same time. You can take the financing component out of that package by getting a preapproved car loan from an outside lender before you head to the dealer.

Having a preapproved car loan not only saves you a lot of confusion, it’s also the best way to get a great financing deal from a dealership, as they’ll have to work to beat the offer you already have. There are several places where you can get a financing offer, including large national banks, community banks, and credit unions. You’ll typically find the best rates at credit unions, and larger banks usually offer the broadest array of financial services. Still, banks occasionally offer interest rate specials, and a few credit unions rival the size of big banks.

Find the Deals

A great way to save some money without needing to negotiate is by taking advantage of a special financing or cash back incentive. When cars don’t sell at the pace that automakers expect, or they near the end of their product cycles, low-interest financing or rebates are offered to increase sales. The best interest rate deals are zero percent offers, which make the financing free.

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You can find the best deals available each month on our new car deals and used car deals pages. Even if you are getting a deal, you’ll still want to negotiate for a better car price.

The U.S. News Best Price Program can also help you find deals and set a benchmark for the price that you should expect to buy the car for. We work with local dealers to get buyers and lease customers upfront pricing and guaranteed savings off the MSRP.

At the Dealership

So you have information about the vehicle, its pricing, and the deals available. Now, it’s time to visit dealerships, both virtually (via their websites) and in person. You’ll want to budget enough time to test drive the car you are considering and work with multiple dealers to get the best price.

Timing Matters

There’s an old axiom that you can save money by going to the dealership right before closing time, so they'll make you a great deal so they can go home for the evening. While that's not really true, some times are better to shop for a car than others.

Like other businesses, car dealerships have monthly, quarterly, and annual sales goals for both salespeople and the dealership as a whole. Find one that has yet to reach their goal, and you might find a fantastic deal. With the way some manufacturers structure their deals, they'll get a bonus on all of the cars sold in a certain period if they make a goal. If you're the lucky buyer of the last vehicle they need to get the bonus, you're in a great position to get a deal.

The urgency to meet goals typically ramps up on the last weekend of the month, quarter, or year, but Saturday or Sunday may not be the best times to shop. Dealerships tend to be busier on the weekend, so they might not want to spend a whole lot of time with you if it doesn't look like you're going to be an easy sale. You have a better chance of a good deal on a weekday, according to data from TrueCar.

Shop at Multiple Car Dealers

In the past, shopping at multiple dealers meant driving miles and miles and wasting a lot of time. You’ll want to visit at least one dealership to take a test drive and check out the colors available on the vehicle. Beyond that, you can get in contact with several dealerships’ internet sales managers, and do much of your car shopping from your living room. In some cases, you can negotiate a price and buy the car online, and have it delivered right to your house.

There are many benefits to shopping at several outlets. Getting price quotes from multiple dealers, and letting each one know that there are other dealers in the game tells them that they have competition to beat. Second, despite the “invoice price” that you’ll often hear about, different dealers pay different prices for the vehicles that they sell. Find a dealer that who paid a lower invoice than others in the area for the car that you want to buy, and you’ve found a dealer with more room to haggle.

Dealers frequently trade cars among each other to get the right model, trim, and color for their customers. In many cases, the offers you get from multiple dealerships are on the same car. If you go for their offer, they'll make a dealer trade to get it onto their lot.

Remember It Is a Business Transaction

Though it’s easy to develop an emotional attachment to your dream car, it’s important to remember that the buying process is a business transaction. The less emotion involved, the better. You want to remain polite and cordial, yet firm, when you’re dealing with the salesperson, the finance manager, or the internet manager.

Your main task is to get the best deal possible on the vehicle. The mission of the dealership (or private seller) is to get the highest price with the most profit they can. Both goals are OK, as long as all parties act in an ethical and legal manner.

Realize, however, that salespeople are skilled negotiators, trained to move you incrementally to the deal that they want you to accept and to the vehicle they want you to buy. You need to have a firm budget that you’ll stick to, the confidence to advocate for yourself, and the information to back up the price that you want to get.

Some customers go to the dealership with the intent of bullying the salespeople into giving them a good deal. That's a strategy that's doomed to fail, as people are much more likely to give a break to someone who is pleasant and professional than someone who is being a jerk.

Avoid Distractions: Price Comes First

When it comes time to negotiate a good price, the car’s price is likely the last thing that the dealer will want to talk about. Instead, they'll want you thinking about the monthly payment instead of the total cost of the car. Often they’ll use a form, known as a Four Square, to make the deal that they are offering seem more appealing to you.

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You, on the other hand, need to remain steadfastly focused on the right price for the car – not the financing, the value of your trade-in, or anything else. When they try to talk about the trade-in, you say that you need to talk about the price first. When they try to talk about financing, tell them you already have a preapproved offer so you can take that topic out of the conversation.

Some dealerships have gone to the model of no-haggle pricing, with fixed prices on all of the vehicles they sell. If their fixed price is in the range that you are willing to pay, that’s great, but understand that they are likely to try to get more profit out of the deal by selling you expensive financing, costly add-ons, or lowballing your trade-in value.

Don’t Focus on the Payment

A common, and often successful, sales strategy is to get the buyer to focus on the monthly payment. While you might have an amount that you can afford in your mind, only looking at how much you can pay each month isn’t a good way to buy a car. Instead, you want to concentrate on the entire cost of the car, including the cost of its financing. That starts with negotiating a reasonable price on the vehicle and then getting the lowest-cost financing deal you can find.

When you focus on the payment, the salesperson and their finance manager can play around with the rest of the numbers. For example, it’s easy to get a low payment when you extend the loan out to seven or eight years. Unless you to the math to determine the total cost, you’ll never get an apples-to-apples comparison.

Here’s an example. Let’s say you’re buying a new SUV with a sticker price of $30,000 and paying nothing down. With a five-year loan and an interest rate of 5 percent, our auto loan calculator shows that your monthly payment would be $566. Multiply the $566 by 60 (the number of months you’ll be paying) and you’ll see that the total cost, including financing, is $33,960.

Extend the loan to seven years, and you'll have to pay a higher interest rate because there's inherently more risk in extending the financing. We’ll say 6 percent for this example, though in reality it might be even higher. The car loan calculator shows payments of just $438 per month, which is a significant savings each month compared to the $566 payment. Multiply that $438 by the 84 months in the loan term, though, and you'll see that your $30,000 SUV is going to cost $36,792.

In short, that “favor” that the car dealer just did for you by lowering the payment will cost you about $2,800 extra over the course of the loan. It will also put you at risk of owing more on the car than it is worth for a good portion of the loan term. Cars depreciate rapidly during their first few years of life, and in some cases, the depreciation outpaces how fast you can pay it off. This is referred to as being upside-down or underwater on your car loan.

In general, you want the shortest loan possible with a payment you can afford. You don't want the length of the loan to exceed the vehicle's powertrain warranty, if possible, because you'll be exposed to the potential of expensive repair costs while you still have car payments.  

Separate the Trade-In

“What are you driving now?” might seem like a harmless question from a dealer representative, but it’s really a negotiation tactic for them to work your trade-in into the transaction. You, on the other hand, want your trade-in to be a separate transaction. Saying that you haven’t decided what you are going to do with your old car might put them off for a time, but know that they’re going to continue to try to make it part of the deal.

When the value of the trade-in is included in the deal, the salesperson gains another number that he can use to disguise the real cost of the car. If, for example, they lowball the value of the trade by $1,000, they can drop the price of the vehicle by $700 and still make it look like you got a killer deal, all while making an extra $300.

Knowing the value of your trade-in before you go to the dealer can help you to avoid falling for this tactic. Don't rely on the amount that the dealer offers you, as it may not be an accurate market value.

If you’d rather not deal with the battle to separate the trade-in from the rest of the deal, you can sell it yourself and use the cash to make a more substantial down payment on your new ride. While selling it directly to another person will often get you the highest price, it can be just as intimidating to negotiate with a private party as it is to haggle with the dealer. You can also sell it to another local dealer or one of the growing networks of used car supercenters. You’ll get a price that’s closer to the wholesale value, but they usually make the process easy and take care of all of the paperwork.

One potentially expensive downside of not including the trade-in with your new car purchase is that, in many states, you subtract the value of the trade from the cost of the new car and only pay sales tax on the difference. Even if that’s the case, you’ll want to delay any talk of the trade-in until as late in the negotiation process as you can.

Be Ready to Walk Away

Being prepared to walk away from what you think is a lousy deal is the greatest strength you can leverage and the dealer's worst fear. Sometimes you'll want to leave just because you have a bad feeling about how you are being treated in your face-to-face conversations, while other departures can be a strategic negotiation tactic aimed at getting the dealer to relent.

Like everything else in the car buying process, there’s a right way to walk and a wrong way. Do it the wrong way, and you’ll burn your bridges and have wasted the time investment you’ve already made.

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The right way to do it is to say something like “I can see we’re still pretty far apart with the price of the car. Please call me if you can find a way to get it lower.” Then be sure to leave your contact information. You might get a call back right away, it may take a few days, or the call may never come. If they don’t call you back, give them a call near the end of the month. If they think they can make a sale without a ton more effort, they’re liable to jump at the opportunity – especially if they’re near a sales goal.

If a salesperson ratchets up the pressure and says you need to buy today, you should consider it a red flag, unless there's an incentive involved or it's the end of the month. Creating a false sense of urgency is an age-old tactic used by salespeople in all industries to negotiate a quick deal.  

Don't expect a callback if you walk out in a huff, cursing along the way. They'll figure you're not worth the hassle of trying to negotiate with. Keeping your cool as you walk out makes you look like a well-informed and disciplined shopper that just wants a good deal.

Negotiating a Price

Negotiating a car price is a bit of an art, a bit of a dance, and a bit of a science. Trained negotiators will tell you that the first person to talk generally loses, while the person who holds their cards close to the vest, doesn’t volunteer a lot of information, and is patient often comes out better off in the end.

Some dealerships operate quickly and efficiently, showing that they value your time and that they are willing to give you a price quote that’s a good deal up front with little negotiation. You still need to know some of the methods that dealers use so that you are prepared to counter their efforts and get a fair price.

Ask the salesperson what they want for the car. This puts a limit on how much they can ask for because once the price quote is out, they can’t just simply raise the price. On the flip side, as soon as you state a car price that you’re willing to pay, you can’t negotiate any lower.

During negotiations, remember that unless the vehicle is in high demand, you should not be paying MSRP (sticker price) or the made-up “market adjustment” figure on the addendum sticker next to the main window sticker. The dealer is entitled to a fair profit, though. If there are any incentives available, be sure to subtract them from the sticker price, and then set your target price (the most you want to pay for the car) somewhat below that.

Whenever you are talking to someone face-to-face, don't feel like you need to keep talking to fill gaps in the conversation. Make an offer, justify it with the pricing data that you found before you started visiting dealers, and then stop talking. It's natural to want to fill in voids in the conversation, but often you'll weaken your negotiating stance when you do so. Instead, let the salesperson fill in the gaps, or just break out your smartphone and start checking your email if you feel you need to be doing something other than sitting there.  

A common tactic is trying to wear you down by making you wait as the salesperson goes back and forth to his or her "manager" to discuss your deal. Politely explain that you have limited time, so if their repeated delays continue, you'll have no choice but to leave. And be prepared to do just that. They may chase you across the parking lot to make sure that doesn't happen. If you genuinely have the time to stay, bring a book and park yourself in the showroom to show that you don't care how long it takes to get the right price.

Sometimes you’ll be asked to sign the offers that the salesperson is presenting to their managers. Typically, those documents are meaningless. They’re just designed to mentally lock you into the agreement that the salesperson is guiding you toward. The only documents that really matter are those you’ll sign in the finance office a bit later.

Some salespeople will try to guilt you into making a deal that you don't want by talking about the time they have invested with the test drive and all work that they have done to get you a great deal. Remember that it is their job to do just that, and they'll be just fine even if you walk away.

Throughout the negotiation, keep a calculator or a calculator app on your smartphone out where it can be seen. When any calculations need to be done, do them yourself so that you both understand the numbers and avoid the chance that the sales rep can cloud the outcome of the calculations. Just demonstrating that you know how to do the math lets them know that you are serious.

The Online Option

Some buyers hate the confrontational face-to-face interaction that they have at car dealerships. For these shoppers, working with a dealer’s internet manager to buy a car online is a chance to negotiate without the extra stress of being there in person. Internet managers know that are likely competing with a number of other dealers, so they will likely negotiate a fair price more quickly and without a lot of counteroffers.

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Requesting price quotes from multiple dealers online is an easy way to get an apples-to-apples comparison of different offers.

Negotiate the Extras

The price of the car isn’t the only thing that you can negotiate. Whenever you give an inch toward your target price, ask for something in return. Some of the things that you can request are a reduction in some of the transactions fees, such as the documentation fee. Note that some fees are fixed and can’t be changed, such as taxes, registration, and destination fees (the cost of shipping the new car to the dealer).

Beyond money, you can ask that they include accessories, such as floor mats, or services like lifetime oil changes. Some dealers love the free oil change giveaway because it makes customers feel like they got something of value. It costs the dealer relatively little, plus it keeps you coming back to their service department. It’s common for dealerships to make more money in the service department than they do selling cars.

Completing the Deal

Once the price is set, the negotiations are over, right? Well, no, there’s still more work to be done. You’ll be shuttled to the dealership’s financing office, where a finance officer will tell you about the plethora of other things you can buy for your car.

Negotiating Financing Offers

Dealerships make a tremendous amount of money by marking up the interest rate on financing packages from third-party lenders. If you come to the table with a preapproved car loan, however, you have an offer they have to beat in order to get your business. Without a competing financing offer, you'll be at the mercy of the dealership for whatever loan terms they want to offer. In most cases, they don't have to disclose the markup on their financing they offer.  

If you don’t already have an auto loan in place, it’s critical for you to know your credit score. When you know about your own credit history, you’ll know what kind of financing you deserve to get and can refuse any offers that are not appropriate. Watch out for financing offers with prepayment penalties that make it difficult to refinance your car loan at a later date.

Be sure that you have our car loan calculator saved as a favorite in your smartphone’s browser so you can compare any deals that they offer, without having to rely on their calculations.

Avoid Expensive Add-Ons, but Ask for Extras

Car buyers will also be offered a host of add-ons, ranging from fabric protector to pricey extended warranties. The finance officer will tell you of the many benefits of each add-on, and of the importance of buying them today so that they can be included in your financing. If you buy extras at the dealership, you can expect your out-the-door price to go up by hundreds or thousands of dollars.

The part about being able to include it in your financing is true, but it’s a horrible idea to do so. You’ll get the pitch that an add-on will only add a few dollars to each payment, but that’s a smokescreen to hide the real cost of the product. Here’s an example: You’re told that a fabric protectant package will only add $12 to each payment. If you’ve taken out a six-year new car loan, you’ll pay that $12 each month for 72 months, for a total of $864. Do you really think that you’re going to do $864 worth of damage to your interior? No, probably not.

Adding extras to your financing also raises your loan-to-value ratio (LTV), making it more difficult and potentially more costly to borrow. Having a high LTV at the beginning of the loan increases the chance that you’ll have negative equity, or be underwater, on the loan.

Fact is, there’s really no urgency to buy most of the extras you’ll be offered. Many are offered outside of the dealership, and they’re often available at much lower prices. Even items such as extended warranties are available from banks, credit unions, and car insurance companies. If you later decide you want something the dealership offered, you can be assured that they’ll sell it to you months or years after you buy the car. Before you buy, be sure to do a Google search on the item and brand so that you can identify any products or companies that have sketchy reputations.

Read Before You Sign

OK, you’re finally getting close to the finish line, and you really want to hop behind the wheel of your new ride and head home. Before you do, there’s just a bit more work to be done to protect your wallet. You need to read each document presented before you sign. Pay close attention to the price of the vehicle, the amount that you are getting for your trade, the out-the-door price, and the terms of any financing deal that you have accepted.

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If any parts of the documents are incorrect or incomplete, don't sign the paper. Even if you are told that they'll fix the issue before they submit it, don't sign the paper. It is a whole lot easier to fix a problem before your signature is attached to it than afterward. If there is anything on the documents that you don’t understand, insist on an explanation before you sign.

Don’t Leave Until the Deal is Done

Before you drive away from the dealership, you need to make sure that the financing offer was fully approved by the lender, and did not just receive tentative approval. Often the dealer will tell you that they'll let you take the vehicle, and they'll finish up the financing paperwork on Monday when the lender is open.

A few days or a week later, you’ll get a call from the car dealer saying that there was a problem with the financing, and you need to come it to sign for a new finance deal, which is often much more expensive than the one you thought you were getting. By then, you will have fallen in love with the new car, and they won’t present you with any alternatives to signing the new papers.

A couple of things could have happened. One, your financing may have actually fallen through when the dealer honestly thought you would be approved.

Second, a more insidious reason could be that the dealer never thought you would be approved for the original loan and may not have even submitted it for approval. This is called yo-yo financing, and the goal all along was to put you into a much more expensive car loan with a higher markup for the dealer. By letting you take the car home, they figure you’ll get attached to it and won’t see another option.

Some states have laws about yo-yo, or spot, financing. Some of those rules favor the consumer, and some favor the dealer. It's best to avoid the problem altogether by bringing your own funding to the deal or making absolutely sure that the agreement is finalized before you take the keys.

More Resources From U.S. News & World Report

Whether you’re an expert at buying cars or a novice, the team at U.S. News Best Cars offers resources to help you find the right vehicle, negotiate a great deal, and enjoy years of low-cost driving. Our new car rankings and reviews guide you to vehicles that meet your needs and budget, while our used car rankings and reviews add ownership costs to the equation to help you find the perfect pre-owned car.

Not every new car is a home run. Automakers needing to move slow-selling and aging models use incentives to pick up their sales pace. A new car incentive gets you a discount without the need to negotiate. We track those offers and bring them to you on our new car deals page, lease incentives page, and used car deals page.

Not all shoppers like to negotiate the price of their new car. That’s why we offer the U.S. News Best Price Program, where you’re connected to local dealers with guaranteed savings off the sticker price. On average, buyers save more than $3,000 off MSRP when they use the program. 

In addition to savings off MSRP, getting the best interest rate on your car loan can save you thousands as well. Compare rates from up to four lenders with MyAutoloan to get the best deal.