Ask many Americans which they would like to do more, go to the dentist, or negotiate with a car dealership. The dentist would be the choice of many, if not most, of them. It doesn't have to be that way, though. You can take the pain out of negotiating the price of a new car purchase or lease and get a great deal by following some simple rules.
Avoiding the anxiety of buying a new or used car starts with preparation. Going to a dealership to haggle over a price is one of the last steps in the process. It starts with knowing what car, truck, or SUV you want, right down to the trim level, options, and color. Great places to start include our new car rankings and reviews and used car rankings and reviews, where we strive to answer the questions shoppers have when they’re in the market for a new or used car. Learning about the best way to finance your purchase, make the leasing versus buying decision, and avoiding common traps also help take the stress out of the car-buying process.
In the following sections, we’ll show you step-by-step what you need to do to set yourself up with the knowledge to negotiate successfully. We'll then look at some negotiation strategies for you to use, and even those used by the salesperson and finance manager.
1) Knowledge Is Power
Today’s consumers have more information about vehicles and the car-buying process than ever before. That includes copious online information about features, car prices, and auto loans. You can learn about every phase of the process, from trade-ins to car deals, financing, and auto insurance on your computer, tablet, or mobile device. The online resources provide timely information that can answer even the most obscure car-buying question.
Beyond our new and used car rankings and reviews, our comparison tool lets you see how different models stack up against one another. Our new car deals, lease deals, and used car deals pages show you the best incentives manufacturers currently offer. Finding the right deal allows you to save thousands of dollars without negotiating the discount.
You don't have to visit a bank to learn about your financing options. It's easy to apply for financing from multiple banks, credit unions, and other lenders from the comfort of your home. Several sites will provide you with numerous financing offers with just one easy online loan application.
Never go into the buying or leasing process without knowing your credit score. The last place you want to learn about a ding in your credit is when you’re sitting in a dealership’s financing office. Many credit card companies and sites such as CreditKarma.com will provide your score for free. Just beware of sites that make you sign up for expensive credit monitoring services to see your score; they're generally not worth the money.
Used car shoppers have an easy way to separate the cars they should consider and ones they should just walk on by. Websites such as Carfax.com and AutoCheck.com provide vehicle history reports that can show you problems with a pre-owned car before you waste time looking at lemons.
Not every car costs the same to insure. Even vehicles within the same class can have dramatically different repair costs. Getting insurance quotes when you are car shopping can save you from sticker shock after you've already committed to an expensive-to-insure new or used car. Our auto insurance center can help you find the information you need to make an informed decision.
2) Remember It Is a Business Transaction
It’s easy to fall in love with a new or new-to-you used car. Car salespeople want you to form an emotional bond with any vehicle you're thinking of buying or leasing. It makes their job much easier when they know you're committed to a particular car.
Getting a vehicle can also be loaded with emotions and anxiety, because the path to the new ride goes through an uncomfortable and sometimes confrontational negotiation process.
Here's the thing: Buying a car is a business transaction — nothing more, nothing less. Unchecked emotions can get in the way of you getting a good deal. As pleasant as the dealership staff may be, they are not your new best friends.
You are simply trying to get the car you want for the lowest price. The dealership and its salespeople are trying to maximize the profit they get from the sale or lease of the vehicle. There’s nothing wrong with either side, as long as they both act professional, polite, ethically, and follow legal requirements.
Some buyers go into the process thinking they can bully their way to a great deal. By being super tough, they'll intimidate the salesperson into making a great deal. However, what will usually happen is the salesperson and their manager will find a way to stick it to the rude, obnoxious customer. It's harder for them to jam a pleasant customer with a lousy deal than a nasty customer they don't like.
On the flip side, some salespeople will attempt to confuse, persuade, and perhaps even intimidate you into taking a deal that's not good for your wallet. That's why it's essential to have a friend along who can see that happening, even if you don't.
Successful car salespeople are trained in negotiation skills. They handle up to hundreds of car deals each year and excel at moving you incrementally to the deal they want you to take. Most car buyers only buy a car a couple of times per decade, so you can see how the playing field isn’t level from the start. You do, however, have the strongest position – you can always walk away. Information and resilience are the other tools you have to help keep things equal.
Being polite and level-headed is the name of the game wherever you are in the car buying process. For example, the test drive is a chance for you to become familiar with the car, not demonstrate your abilities as a high-performance driver. Showing off during a test drive will get you thrown out of a dealership, and all of your hard work in getting a deal together will have been wasted.
3) Don’t Focus on the Payment
This is one of the most critical pieces of car-buying advice we give, but it's also the one that buyers most frequently ignore. While you need a car payment that fits into your monthly budget, focusing on the monthly payment alone is the fastest way to getting a horrible deal.
A big secret of the car business is that if you can keep customers focused on the monthly payment, you can play with the other numbers in the transaction to get the profit you want. The customer will end up paying far more in the long run, and they’ll never realize they got a lousy deal. It’s easy to make customers think they’re getting a great deal if you can keep them focused on just the one monthly payment number.
Instead, you want to look at the car's total cost, including financing, fees, and add-ons.
To find that number, you multiply the monthly payment by the number of months in the loan, then add the value of your trade-in, any down payment you're making, the cost of add-ons, taxes, and fees. The total is the real cost of the vehicle.
A common trick is to extend your loan out to six, seven, or even eight years, which lowers the monthly payment, but greatly inflates the total amount of interest you’ll pay. In addition to the extra interest, you’ll also face the possibility of needing costly repairs on your aging car while you still have car payments to make. The longer the loan, there’s more chance of having an underwater car loan, which means you owe more on the car than it is worth. Our guide to long-term car loans shows you all the ways that they're a terrible deal.
4) Know the Deals
When there's a new car on the way, or a vehicle is just not selling as fast as automakers desire, they'll offer money-saving discounts. For buyers, that means financing deals that reduce or eliminate the cost of interest and cash back offers that reduce the vehicle's price. Lease customers can get deals that lower their monthly payments, reduce the amount they have to pay at signing, or both. Both purchase and lease deals are no-haggle ways of dramatically paying less for a new car.
While you don’t have to haggle to get a deal, a salesperson may not volunteer that there’s an offer available. Unless you have done your research and know about the offers, you can’t be assured of getting the good deal you deserve.
So, where do you find the deals? Excellent places to start are our car deals and lease deals pages. We extensively research the marketplace to show you the best offers from nearly every brand. Our used car deals page shows the financing incentives automakers frequently offer on certified pre-owned cars.
It’s important to note that most car deals are only available to car shoppers with excellent credit. Exactly how good varies by the automaker and their financing arm. If you’re a member or former member of the military, a first responder, or a recent graduate, you can take advantage of special deals available from many carmakers. Our guide to military and first responder discounts shows you the best ones.
5) Think About Financing Early
An easy way to give the dealership’s car price negotiator the upper hand is to have them arrange your financing. While getting you a car loan may seem like they’re doing you a favor, they’re really selling you one of the most profitable products a car dealership sells. Adding financing into the negotiation process also gives them another, often confusing, lever they can adjust.
Lenders pay dealerships to arrange loans and allow them to mark up the interest rate. Depending on the state, dealers don't even have to disclose that they've hiked the rate they're offering. In some cases, a dealership will suggest a financing deal that makes them the most money, rather than giving you the best deal.
Instead, smart buyers know to never get within a mile of a car dealership without having a pre-approved financing offer in hand. It doesn't matter whether it's from a bank, credit union, or some other lender. It's just important to have one. If you don't, the dealership's financing office will have no incentive to search for better financing. When you use your own pre-arranged financing, there’s one less variable that’s on the negotiating table.
You must understand the terms of any loan you are considering. Beyond the interest rate, you also need to know the length of the loan, whether there are any prepayment penalties, and what fees are charged by either the dealership or lender.
When you start your search early, you'll also discover if there are any dings on your credit. They could complicate your car purchase, make it more expensive, or eliminate your ability to lease a vehicle. If you do have bad credit, be sure to read our guide to buying a car with bad credit before you go any further.
6) Separate the Trade-In
Another item the salesperson will want to mix into the stew is that your car deal is the value of your trade-in. You don’t want that to happen, as it adds another ingredient to the recipe of confusion. If you do, you need to watch the transaction closely to ensure that they're not using the trade-in's value to push other numbers around.
An experienced salesperson can show you a great price on your new car by lowballing your trade value. They can show you a fantastic trade-in value by jacking up your car's price or adding another year onto your financing.
How do you avoid it if you have a trade-in? First, be undecided about whether you're going to trade-in your car or not, and force them to structure the deal as though you are not. Then you can bring the trade-in up at the end. Along the way, you'll want to have checked the current value of your car to ensure you're getting a reasonable price.
Another way is to sell the car yourself, either to another dealership or a private party. If it's relatively young and in good shape, take it to a dealer of its own brand. They may be able to resell it as a certified used car, which makes it more desirable to buy from you. Some used car superstores, such as CarMax, have streamlined processes that make selling your car easy and quick.
You can also seek an instant cash offer, which gives you a price you can expect from any dealer who participates in the program. It's a relatively new and easy way to unload your old ride.
You can also sell your car to another private party. Private sellers will likely get the most money, but it doesn’t come without some hassles, including its own negotiation process. Our guide to selling your car can guide you through the process.
7) Negotiate the Price First
Your main goal as a buyer is to get the lowest possible price on the vehicle. The salesperson, on the other hand, wants to get the most money for their dealership. Negotiation is how you get to a number somewhere in the middle. They will usually want to include your trade-in and financing when putting together a deal because it can create complexity and confusion. It allows them to move you to a costlier car-buying experience. You want to keep the components separate, focusing on the price of the car.
Be sure that the car's price is its out-the-door price, including fees, taxes, and any add-ons. You don't want to negotiate a great price, only to see the savings go away with inflated costs on the final paperwork.
There’s a saying about negotiation: The first person to speak loses. While that’s an oversimplification, it is true that once the dealer suggests a price, they can’t go any higher. One you say how much you’re willing to pay, you can’t get any lower. In the bartering back and forth, you should always have a fact-based reason why you can’t go any higher, and force the salesperson to have a provable reason to justify their counter-offer.
It's natural to want to fill in any gaps in the conversation by talking. That's a strategy that a trained salesperson will use to try to get you to take their deal. Please don't fall for it. Say what you want to say, then be quiet, no matter how deafening the silence is. When the salesperson finishes, don’t say anything until there’s a question.
A car dealer is entitled to a certain amount of profit – that’s how they stay in business. So don’t make your initial offer insultingly low. The final price will likely fall somewhere between the dealer invoice cost and the window sticker's price, less any available rebates. That's the real window sticker we're talking about, not the fee and add-on-laden addendum sticker that you'll often find alongside the official Monroney sticker.
Obviously, you shouldn't expect a great deal if you're looking at the hottest new sports car on the market. If you're looking for a mainstream model or a slow-selling vehicle, the dealer will be more likely to meet you at a target price that's somewhere in the middle.
It is essential to know what you can negotiate and what is non-negotiable. Don't waste your time trying to negotiate the destination charge on the window sticker, but do question any additional freight charges a dealer might try to sneak in. You won't be able to negotiate taxes or registration costs. Still, junk fees such as advertising fees, documentation fees, and other miscellaneous costs should be discussed. If the dealer has added something to the car that you don't want, you should request it be removed and note that you won't pay for it. That includes things like window etching and nitrogen in the tires.
8) Timing Is Your Key to Savings
Let's get this one out of the way now. Showing up at the dealership right before closing time won't get you a great deal on a car. It's an urban legend that went something like this: If you show up late, they'll give you a great price, so they can lock the doors and go home. What will likely happen is you'll annoy them, and they'll ask you to leave. A motivated salesperson will stay all night if they have to.
A better way to time your purchase or lease is to look at the calendar. Like many businesses, car dealerships and their salespeople have commissions and bonuses based on the ends of months, quarters, and years. Buying a car toward the end of those periods gets you much better odds of negotiating a great deal. Of course, that’s only true if the salespeople and their dealership haven’t already hit their goals.
It helps if you are ready to go, with financing in place, to make the most of the timing. Miss the end of their bonus period by even one day, and any incentive they have to make you a good deal will be gone.
9) There’s More Than One Dealer
Getting prices from multiple dealerships used to be a huge hassle. Now it’s easy, and it helps you avoid one of the most common mistakes of car shopping: Getting prices from only one dealership. By getting prices on a car from more than one dealership, you can compare them against one another. It doesn’t hurt if salespeople know they’re competing against each other for your business.
It's easier today, because you don't even have to leave your house. By visiting multiple dealers' websites and opening up discussions with their internet sales managers, you can request offers and barter back and forth. Following shutdowns stemming from the coronavirus pandemic, most dealerships now have robust online sales processes.
It’s a good idea to check with dealers where the car you want may not be as popular. A Toyota dealer in the country may have a hard time selling Priuses, for example. By the same token, a downtown dealer may want to get rid of the massive Ram 1500 pickup that’s taking up half their lot.
Even if you have found the perfect model, trim, and color at one dealer, be sure to ask other dealers to price that precise configuration. Dealerships often trade vehicles, and you may have multiple outlets vying to sell you the same exact car.
10) Avoid Costly Extras
Just when you've come to an agreement on price, and you think you're nearing the end of the car-buying process, you'll be ushered into the dealership's financing office. If you're not careful, the financing and insurance (F&I) office can be a perilous place for your wallet.
It's where you'll be pressured to buy add-ons. Some may be cheap, while others cost thousands of dollars. There is time pressure involved because the dealer wants to include the add-ons in the deal and possibly include them in your financing. They’re very good at selling the products and can make it sound like you need things such as gap insurance coverage before you can leave the dealership.
Here’s the truth. Most of the things you are offered are available outside of the dealership from third-party companies. They can be purchased at lower prices elsewhere. Even if it must be purchased at the dealership, they’ll be more than happy to sell it to you even months or years down the road.
Gap insurance, for example, may be required by your lender or leasing company. Still, it can be included with the rest of your auto insurance or purchased from your lender. You need to research not only any product before you buy, but also the company behind it. Our guide to gap insurance talks about the insurance product in greater detail.
11) Read the Paperwork
Buying or leasing a car can be an exhausting process. Before you leave the dealership, however, you’ll have a stack of paperwork to sign. No matter how anxious you are to get on the road, it’s critical that you read and understand every document that’s put in front of you.
You want to check all of the numbers, making sure the car price is correct, as are any loan terms and trade-in values. Watch out for any add-on or unexplained fees that have appeared at the last minute. It’s a good idea to have a sharp-eyed friend or family member along to double-check the documents. Never sign a form that is incomplete or incorrect. It's much harder to correct errors once a document has your signature on the bottom line.
Never leave a dealership with a new or used car unless you are certain that the lender approved your financing and all of the loan paperwork is complete. Without those safeguards, you can fall prey to an old-timey scam known as yo-yo financing.
Yo-yo financing starts off with a dealership assuring you that you're free to drive away in your new ride. They might not tell you that your purchase is still contingent on the lender approving the financing. Sometimes they'll genuinely believe that you'll qualify. Other times the financing officer will know that you don't have a chance of getting the loan deal they offered, and you agreed to.
About a week or so after you've left, you'll get a call saying that there was something wrong with your financing, and you need to come back and work things out. When you return, you'll be faced with a much more expensive financing package. At this point, many buyers see no other way than to sign the new documents and pay the outrageous price. There will be a high-pressure push to get you to sign, and after a week, you may have developed an attachment to the car.
What you should do if this happens to you is immediately start looking for financing from local credit unions, online lenders, and banks. Get pre-approved for the best deal you can get, and have it in hand when you go back to the dealership. If you can't get a good enough deal that the vehicle's affordable, you need to be prepared to drop it back off at the dealership and walk away.
12) Be Prepared to Walk Away
While it might seem that the dealership has all of the power in the negotiation and purchase process, it's really all in your hands. You have the greatest strength, and it is to walk away from a deal that you don't like. It's a power that far too few shoppers take advantage of.
Many people won't walk away because they're embarrassed, or they like the salesperson. You have to get past that and remember it's a business transaction. Others are reluctant to walk away from the time they've invested in the process. The truth is, if you've invested your time in a bad deal, not walking away will see you spending your money on that lousy deal for the length of your loan. It's a poor decision that can haunt your pocketbook for years.
One way salespeople try to prevent you from walking away is by having you sign the offer sheets during the negotiation process, as if your signature locks you into the deal. It doesn't. The agreement is not final until you sign the last documents in the financing office.
It is important to walk away the right way. Don’t leave fuming angrily, leaving skid marks in your wake. Instead, say something like, "it looks like we're still a ways apart, but please call me if you can find a way to make this deal work." If they're close to goal at the end of the month, you'll get a phone call. Sometimes they'll even chase you across the parking lot.
More Car Shopping Tools From U.S. News & World Report
At U.S. News & World Report, it’s not just our goal to help you find the right car, but also the right car price, auto insurance coverage, and financing. Our new car rankings and reviews are the place to find a ride that fits your needs and budget. Our used car rankings and reviews add cost of ownership information into the mix, ensuring you're finding a vehicle that can provide years of low-cost travel.
The U.S. News Best Price Program connects both purchase and lease shoppers with local dealers offering pre-negotiation car prices. It will also help you find dealerships with comprehensive online buying programs and home delivery options. Shoppers save an average of more than $3,000 when they use the program.
It's not the most fun part of car buying, but getting the right insurance will make sure you're covered when bad stuff happens, while saving you money along the way. Our auto insurance hub shows you how to find the cheapest insurance in your state, the coverage you need, and money-saving car insurance discounts.