You don’t have to pay the first price the dealer quotes. Here’s how you can negotiate new car price when you buy you next car.
If you ask the average car buyer to name their favourite part of the purchase process, negotiating the car price is unlikely to be at the top of the list. This step can be anxiety-inducing for all sorts of reasons, from dealing with confrontation to not being confident in what constitutes a good deal. We can’t do the price wrangling for you, but we can offer some tips to help you negotiate buying a new car like a pro.
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For a while during the supply shortages brought on by the pandemic, inventory was limited and negotiating a new car price was next to impossible. Those days are firmly behind us, and it’s now common again to talk dealers down on many types of cars, SUVs and trucks. Read on to learn more about how to negotiate new car price and get a good deal on a new vehicle.
Can I negotiate a new car price?
It’s often possible to negotiate the price on a new car. There may be some flexibility in the manufacturer’s suggested retail price (MSRP) as well as the fees charged by the selling dealership. Exceptions to this are models that are advertised with all-in pricing, in very high demand, or are rare and highly exclusive.
First, crunch some numbers on your own (to avoid the monthly payment trap)
Before you even respond to that first new car ad that catches your eye, take the time to run some numbers. This will help you understand what you can realistically afford so you don’t get talked into any bad financial decisions.
Experts recommend that your car payment should be 10% or less of your monthly take-home pay. Your total car expenses — including the car payment plus insurance, parking, fuel, etc. — should be below 20%.
Once you land on a monthly payment and term length that works for you based on current interest rates, you can look back to the top of the form for an idea of what vehicle price you can actually afford. Treat this as your target “out-the-door” price, meaning the full cost of the vehicle including MSRP, options, fees, and sales taxes. This information will be very useful as you move through the next steps and start negotiating the car’s price.
An important detail: This is for your information only! We don’t recommend sharing any of this information with the salespeople at a dealership. We’ll explain why later in this article.
Next, pull together some research
Now, it’s time to start making a list of the vehicles you’re interested in and gathering up their estimated out-the-door pricing. Check each automaker’s website for the model’s pricing, including any discounts or incentives currently being offered at the corporate level. (Dealers aren’t required to charge the prices advertised on an automaker’s corporate website, so consider this more of a guideline.) Do the same thing for a handful of similar models so you have a feel for typical prices in the segment that interests you. It’s a good idea to take a screenshot or printout of this so you have it handy during your negotiations.
Next, start checking new vehicle listings and dealer websites to see how their prices compared to the general figures you’ve collected. This will help you decide which dealerships to contact. Be sure to research each dealership online to check its reputation. It’s not unheard of for dealers to buy fake positive reviews on sites like Google Maps to make themselves look more appealing. Forums or Facebook community groups are sometimes better places to find real customer feedback.
Consider making a separate trip for a test drive
Here’s a hot tip: you do not need to walk into a car dealership and announce that you’re actively shopping for a new car. In fact, it’s a smart idea to test drive a vehicle on a completely separate dealership visit before you initiate the purchase process. This way, you won’t get swept up in any excitement or sense of urgency. You’ll be able to shop around and take your time with making a decision. Simply tell the staff you saw a car that might interest you and you’d like to take it for a test drive. You likely won’t need to provide anything further apart from a driver’s licence and some collateral to make sure you bring the car back. Check out our tips for how to test drive a vehicle here (link to previous section).
Get pre-approved for a car loan quote by one or more banks
When you finance your new car through an automaker’s finance division, the dealership makes money. Knowing this in advance can give you some leverage in negotiations. To help with this, take the time to contact your bank, and maybe even one or two more, to see what interest rates are being offered and get pre-approved for a car loan. If you arrive with this pre-approval in hand, the dealership may be motivated to offer you a better rate to secure your business.
Negotiate in the style that works for you
With this information in hand, you’re ready to start negotiating with dealers. These days, there are several ways you can approach it.
If you love negotiating in person — or if you’re comfortable with it at the very least — you can go the traditional route and meet with a salesperson at a dealership. Negotiating a deal from start to finish in person can take several hours. Set aside plenty of time so you don’t feel rushed.
If you’re not as comfortable with face-to-face negotiations, communicating with salespeople by email is another option. This lets you take your time while you consider counteroffers. You’ll also be able to negotiate with multiple dealerships at once. You can bounce figures around between dealerships and try to get them fighting for your business.
If you’d rather skip negotiating entirely when buying a new car, Genesis and Tesla both offer no-haggle pricing in Canada. The price you see on the website is the price you pay.
Time your purchase thoughtfully
It sounds like an urban legend, but it still holds true: salespeople have quotas to fill. If you shop toward the end of a month, end of a quarter (late March, June, September, or December), or end of the year, a sales representative may be more motivated to give you a better deal to get the sale on the ledger.
Keep your cards close to your chest
One trick some salespeople use is to ask for your target monthly payment shortly after you walk in the door. You know this figure from the research you did earlier, but do not divulge it! The sales representative will use this info and try to talk you into a more expensive vehicle with a longer financing term to match the monthly payment you want. This costs a lot more in the long run, not only in the extra price you’ll pay up front but also in the additional interest you’ll pay over the loan term.
Instead, don’t budge on negotiating the out-the-door price, including MSRP plus options, fees, add-ons, and sales taxes. Because you’ve already done the math, you know what out-the-door price you should target to get a monthly payment you can afford with the financing terms you want. If you keep this information to yourself, you may be able to get the car for even less.
Only after the out-the-door price is settled should you mention financing or a trade-in vehicle. The salesperson will ask, but you’re not obligated to tell them anything until you’re ready. Simply state firmly that you’re not interested in discussing financing or trade-in terms until the cost of the car is settled.
Overall, try not to get emotionally invested. If a salesperson senses early that you’re excited and committed to the deal, they’ll have the upper hand. To get the best deal, you need to be willing to walk away.
Start at a lower price than the MSRP
Once you’re ready to start negotiating on a specific car, how do you decide on a starting offer?
The best way to do this is to check the dealer invoice price. This tells you exactly how much the dealer paid the automaker for the car. To make a profit, the dealer needs to sell it to you for more than that amount. (Technically, they may be able to sell it at a profit for slightly less due to something called a holdback, which is an incentive the automaker pays to the dealer once the sale is done.) Don’t ask for exactly the dealer invoice pricing: a dealership is a business, after all, and needs to make a profit. Start slightly higher and expect to work your way up slightly from there.
Some keen negotiators have had luck getting dealerships to give up this information directly, but it’s very uncommon. In Canada, there are several websites you can check to find dealer invoice pricing information, including Unhaggle, Car Cost Canada, and the Automobile Protection Association. (A fee and/or sign-up is required for detailed information, but Unhaggle will give you a ballpark for what people usually pay for free.)
If you don’t want to dig up the dealer invoice price, you can subtract a percentage off the MSRP as a starting point. The right amount can vary from 1 to 5%. If the vehicle is expensive and not very popular, if there’s already a discount or promotional interest rate on it, or if you know a particular car has been sitting on the dealer’s lot for a while (which costs that dealer money), take a higher percentage off the price. If the car in question is more affordable and/or is a hot commodity, go with a smaller slice.
The salesperson may start by telling you your price is way off and counter with a much higher figure. Come up in small increments from your figure, not down from theirs. Eventually, the salesperson will likely start going back and forth between you and the dealership’s sales manager calculating counteroffers. It’s normal for this to happen several times during the negotiation process.
Know which fees are negotiable at the dealer level
On top of the MSRP, there are additional fees on a vehicle transaction, and most of these are negotiable, too. Freight and PDI, also called the destination charge or delivery fee, is the cost the dealer pays to transport the car from the port or assembly plant to the dealership. Administration fees for filling out paperwork and registering the vehicle are common as well. Both these fees are typically negotiable to some extent.
Not all salespeople are out to get you
As a stereotype, automotive salespeople don’t have the greatest reputation for looking out for their clients. We’ve reflected the lowest common denominator in the advice provided here. But it’s important to know that not all salespeople are out to get you. There are some good ones out there who genuinely know their stuff and want you to be happy with your purchase. If you get the sense a salesperson is genuinely listening to you, it can be worthwhile to listen to them as well. They may actually guide you into a car that would suit you better on your terms. But do so always bearing in mind that it’s your money and your decision.
When do you know it’s time to say yes to a car purchase agreement?
You’ll know you’re ready to agree to a sale when you’ve got a quote in your hand reasonably close to what you were expecting, and you’re satisfied you’ve negotiated every angle. Check in with yourself to make sure you’re comfortable with where you’ve landed on the out-the-door price and your monthly payments. Most importantly, you should be confident you’re getting a good deal and you’ll enjoy the car you’ve chosen. And you should feel you’ve been treated with respect.
Make sure the invoice is exactly right before you sign
There are no cooling-off periods when buying a car in Canada, so once you’ve signed that contract, there’s no backing out. Don’t agree to or sign anything at any point in the negotiation process until the price, financing, and trade-in terms are all to your satisfaction. Double-check that all the numbers are correct and any changes you’ve negotiated are reflected accurately on the invoice before you sign on the dotted line.
If something feels off, walk away
If you follow the steps outlined above for negotiating a new car price, you should never feel rushed or pressured at any point in the process. If you ever do start to feel the intensity ramp up, or if you feel you’re being treated unfairly, you’re fully within your rights to take a breather or even walk away from a deal entirely. There are plenty of cars out there. You deserve to feel you’re getting value for your hard-earned money.
Continue to Section 10: How to negotiate the price of a used car
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