How to Negotiate the Purchase of a Used Car
Negotiating with a private seller requires a slightly different approach than with a dealer. Either way, both require that you keep your emotions in check, be patient, and have a couple of alternative vehicles in mind.
If your heart is set on a particular model that's hard to find, you'll be in a disadvantage when it comes time to negotiate. Take your time shopping and try to see as many different vehicles in person as you can. This will really help you get a feel for fair pricing.
Negotiating with a Private Seller
Car dealers know how to negotiate when buying trade-ins, so it's smart to use some of their tactics. First, don't show any emotion when checking out a vehicle. Make sure to point out all the flaws such as scratches, dings, weird noises, stains, etc. This puts psychological pressure on the seller to devalue their vehicle, making it easier to get concessions later.
Negotiation works best if you are easily able to walk away from a deal (or at least make the other party think you will). This is why it's important to have alternative vehicles on your shopping list.
Part of a good negotiation strategy is to always get the other party to make the first offer. Some consider the asking price to be a first offer, but you can do better. Always start off by asking the seller what they really need to do the deal. What's their rock-bottom price?. Sometimes you'll get an eager seller who will lower the price considerably with no effort on your part.
Negotiating price on a used car is usually a back and forth process. With each counter-offer, you need to bring up flaws such as the vehicle's condition or the price compared to others on the market. Devalue the car, then raise your offer slightly each time until you reach your maximum price.
Negotiating with a Dealer
Dealers usually have a 10 - 20% profit factored into their asking price. If you compare enough ads and plot the prices on a graph - with prices on one side and mileage on the other - you'll see a price trend appear. Here's one from Vast.com showing prices for a 2008 Honda Accord.
As you can see, most of the prices are close to the trend line. The ones above are priced with a larger profit factored in while the ones below may only have a very minimal profit. This trend line shows you how much negotiating flexibility you may have with each listing.
Don't be discouraged if you see ads with high asking prices. That just means there is more negotiating room. Likewise, if you see ads with very low asking prices, the dealers may not even be willing to negotiate. It all depends on the pricing strategy of each dealer.
What's important is for you to get a good overall feel of the local market conditions and know whether a dealer is pricing the vehicles above or below the trend line.
Before you negotiate, I recommend you inspect at least 4 or 5 separate vehicles (same model and year) to get a feel for the small differences between each vehicle. For example, you want to know what a car in good condition looks like versus one in fair or poor condition.
It's best to negotiate with a dealer via email or phone. They will try to get you to come to the dealership where they can wear you down and get you to agree to a higher price. It's okay to check out the vehicles in person and take notes, just don't try to negotiate while you're there.
Get pricing from multiple dealers. Tell them you've been shopping around and are ready to purchase a vehicle in the next couple of days, and you want to know what their best price is on the particular model you're interested in.
Use their bids as a starting point for further negotiation. For example, if dealer A gives you a price of $10,000 for a model that has 50,000 miles, and dealer B gives you a price of $12,000 for a similar vehicle, you'll want to get dealer B to lower their price to be more competitive with dealer A.
Let them know the price and mileage of the other vehicle so they can decide what a competitive price is. Keep doing this from dealer to dealer, starting with the ones that offered the worst prices first. Keep going through this process until all dealers refuse to budge any further.
It always helps to let dealers know that you'll be buying the car TODAY. If they know they have a serious buyer who's about to purchase right away, they will be more likely to lower their bids.
When you're done with this process, you should have several prices to decide on. Whichever car you choose to go with, attempt one final price reduction. Tell them you'll come in and buy the car right now if they lower it another $300. Sometimes they will, sometimes they won't - you just have to ask and see.
My Recommendation for Car ShoppersTrueCar No-Haggle, CarsDirect, and Ryde Shopper are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid