In this article I will teach you how to negotiate the best price on a new car in 3 steps.
As a former Mercedes-Benz car salesman, I can tell you no car dealer is going to sell you a car for a price they’re not comfortable selling it to you for. There are no master negotiators when it comes to car buying. To get the best price you need to execute a simple strategy, and hope the factors that are beyond your control align in your favor.
Time your purchase as best you can, collect recent sale price data on the specific make and model you want, and then shop your offers with the competition.
When is the best time to buy a car?
In a separate article I cover the best time to buy a car in more detail.
In short, car buying is a month to month business. Car dealers are most likely to give you a better discount when they’ve yet to hit their numbers for the month. This means buying on the last day of the month instead of the first day of the month can net you as much as a one-percentage-point greater discount off Manufacturer Suggested Retail Price (MSRP). Shopping in slow months like December, January, and February put you in a better position to find a dealership who has yet to hit their unit goals for the month.
Shopping on the slowest days is to your advantage as well. Buying on a slow Monday as opposed to a busy Saturday can net a one-half-percentage-point difference.
The single best day of the year to buy a car is January 1. Unbeknownst to the typical car buyer, car dealers will often extend their fiscal year to January 1 or 2, depending on the calendar. This means that not only is January 1 or 2 a holiday promotion in a slow month, its financially accounted as the end of December. This means it’s the end of a fiscal quarter, and most importantly end of a year.
New Years Day car sales are the last chance for sales people to hit their monthly unit goals, and the last chance for managers to hit their end of fiscal quarter and end of year goals. Based on True Car MSRP data between 2011 and 2015, January 1 averaged the largest MSRP discount of any day on the calendar (8.5%). December 31 was the next biggest MSRP discount day at 8.3%.
The average last day of month MRSP discount over that data set was 7.7%, which means the MSRP discount on January 1 was 0.8% points less. On a $35,000 car that 0.8% New Years Day advantage over the last day equates to $280. Compared to the average first day of the month MSRP discount, New Years Day was 1.6% points less. On a $35,000 car that 1.6% advantage equates to $560.
Collect Sale Price Data
Your research responsibilities are minimal. Use a website like True Car to find the recent selling prices for the specific vehicle you want to purchase. I’ve attached a screen shot of example results below:
Although you can see the lowest selling price for the car you want, you can’t always depend on that number to be a realistic expectation. There are other terms of the low deal we simply don’t know (Was the trade in under-valued? Did the customer also buy high margin add-ons or warranties?). You’re better off averaging the lowest three pricess to give you a more realistic expectation of what’s possible.
Use this information to ground you counter offers at the negotiating table in reality. Remember you need to work off the car dealer’s reality.
Shop Your Offers
Let’s assume you’ve timed your purchase as best you could. And you have the recent selling prices in hand. Once you go to the dealership for a test drive and get a formal offer. Make your counter. Once they’ve rebuttal-ed, shop this offer to three (3) or more dealerships nearby or even out of state to get a sense of what else is possible.
Competition is your friend and dealers are willing to talk price through back and forth email quotes.
Presence is your leverage though, and you’ll never get quite as good of a price remotely as you could sitting in the chair at the dealership. Dealers feel the extra pressure to close the sale if you’re sitting in their house demonstrating the willingness to walk away.