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The Slickdeals Approach to Negotiating the Price of a New Car (Updated July 22, 2010)

thelnel52 2,541 March 26, 2010 at 02:29 PM
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Last Edited by thelnel52 July 22, 2010 at 12:44 PM

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By: Alex Craig (SD User: thelnel52)

Preface: There have been numerous threads in the past (on this site and on others) that have dealt with the topic of buying a new car. The approach that follows is the author's (who worked as a car salesman for all of a summer) suggestion, based on personal experience, advice from elsewhere on the web, and basic econ theory. We plan to update this article periodically if users have suggestions for improvement. Although it is a work in progress, it has been verified to work and is more effective than what the majority of new car shoppers end up doing. Also, stay tuned, as more "Slickdeals Approach to..." posts are coming, covering other auto topics (selling/buying a used car, financing a car) as well as other general financial topics...

March 26, 2010
Updated July 22, 2010

NOTE: The article originally featured carsdirect.com as the first source for information. A user pointed out that truecar.com actually does a better job- I gave the site a try and found that (1) the prices seem to be lower for a number of different cars and (2) there is much more information, including holdbacks, average prices paid, etc. That's why, in the update, I changed the links. Also, I reached out to TrueCar.com and a representative of the company will be here, in this thread, starting Friday the 23rd of July to answer any questions that you guys might have about TrueCar specifically or car buying in general.

Some people know offhand how many lb-ft. of torque a Mustang GT has and how long the Prius' battery is under warranty. Without even thinking, they know the tissue on a 3-series, what a money factor of .00015 translates to in terms of APR, and when the Hyundai Genesis is due for a redesign. They know how to find if a dealer is close to a volume bonus or if he's struggling to pay his lease, and they know how to figure out how many days a particular car has been on the lot. Armed with this information (and tons more), these people can walk into a dealership, stare into the dealer's soul, and get the absolute best price. If you're one of these people, skip to the end of this post, because it will bore you, but please stay around to answer some questions below.

For the rest of us, the Slickdeals approach to negotiating the price of a car, although not as effective as the soul-reading approach, is beautiful in its simplicity. I worked as a car salesman, and about 95% of the people who bought from me could have done better if they had followed the approach outlined below. The overriding goal is to get the dealers competing with one another for your business; there are only three steps.

1. Find a Starting Point
Once you know the model and the options you desire, go to www.truecar.com, build the car, and SAVE THE PRINTOUT (this will be handy for the rest of the negotiation)

2. Get Them Bidding
Send a message to every dealer of that make within a 100-mile radius (this can be done by going to the brand's website and searching, most of the time there is a "contact us" button) that includes:

a salutation (better if you can find a specific name, but "Fleet Sales Manager" is ok)
the specific model and options you desire,
the date you will purchase the car,
an indication that you are soliciting "bids" for two days
an indication that bids should not include taxes or dmv fees, but should include everything from the dealership (including destination charges, etc.)
the TrueCar price,
your phone number and email address,
your name
(use the letter below as a guide):

Dear Fleet Sales Manager,

I am planning on purchasing a new '10 Ford Edsel EX, with the comfort package. I am indifferent to the color. For the next two days, I am taking bids- please contact me with your price for this car, with these options, inclusive of the all fees except for tax and dmv fees. If you have the lowest bid, I will come in on Monday morning at 11:00 to take delivery. As a starting point, I have a bid from TrueCar of $21,324 on a car with an MSRP of $24,333, including destination charges.

I can be reached at 909.234.5678 or by responding to this email.

Sincerely,

Mr. Slickdeals

3. Declare a Winner
Wait two days- Save emails, and if a dealer calls, be polite, but as direct as possible. Ask "what is your bid and what is the MSRP of that particular car?" and write the numbers down. Next, ask "what is your name and do you have a direct number?"- write that information down, too. Also note the time and date that the call took place.

Once all of the bids are in, hopefully there's one clear winner. If no one could beat TrueCar, then just go with TrueCar dealer. If you end up going with a dealer, email the fleet manager and say "Your offer of x for y with z options was the lowest. Please let me know the VIN and I would like to come in Monday to take delivery". When you come in, make sure to have a copy of this email and his response (or your notes from the phone conversation), just in case there's a "misunderstanding".

Note 1: The 100 mile radius suggestion is applicable if you life in an area that isn't particularly densely populated, such as the central valley of California. If you live in an area with car dealers every five miles, then you can probably reduce that number. If you live in North Dakota, then you might expand it to 250 miles.

Note 2: You can also include more than one make/model with your note. In fact, it's preferable that you do. Just think- if you're buying a 52" LCD tv, you don't just go out looking only at Samsungs. You probably find prices for a Samsung, a Sony, a Panasonic, an LG, and a Vizio. It's tough to tell what the best deal is until you know what the prices are relative to one another.

If you have a better method, or suggestions to make this method better, please post below.

Thank you Andy Newson for the image above

Image: Andy Newson / FreeDigitalPhotos.net

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#16
You guys have some very good comments. I'll agree that the email approach has the downfall of making you seem like a less sincere buyer, but I'm not really suer what a better approach would be.

As to the comments regarding finding the invoice, my problem with using invoice (or MSRP) is that it's just a piece of a puzzle. If you remember, when the ps2 came out, MSRP was $300 (I think), but you couldn't buy one for less than $500. Cars work the same way. I'm sure that, in the near future, it's going to be a lot easier to get a Camry for invoice -$500 than it was two months ago.
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Quote from kubel View Post :
What happens if I can get an employee discount from a family member (Ford A Plan). Should that be said up-front or wait until I get a winning bid and then say "by the way, I have an A Plan pin number"?
First, good article.
We qualify for Chrysler, GM, and Ford's family plans (alot of family work for or retired from Big 3). I never tell the dealers up front that I qualify. As the op suggested, try getting bids from many dealers within a 200 or more mile radius of your home. Then, ask the winning two or three if the can beat their bid using your employee discount. In my experience, the employee discount usually results in a higher price, except when you're looking at a high demand, low or no discount from MSRP vehicle.

Also, I've purchased nearly all of my cars over the internet or phone, setting foot on the dealer's property only to take delivery. Ask to deal with the internet sales mgr- that is often helpful. Unlike other comments here, I have not had any problem getting dealers to take me seriously over the internet or via phone. Show you're informed and serious, and you'll be successful.
Slickest new vehicle negotiated to date: Purchased in Nov. 2005: a new, 2006 Chrysler sticker of $22,677, paid $12,950 after employee pricing, dealer concessions and Chrysler employee cash incentive. The employee price was $18k+. (I just paid state taxes and licensing in addition to the $12,900) Drove 6 hours to pick it up. This kind of deal isn't commonplace, but you can save a bundle using methods like those in the op's article.
Last edited by cayman123 March 27, 2010 at 09:06 PM
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#18
I've actually performed a very similar song and dance in on New Year's Eve in 2004, actually the song and dance starts earlier in the week, but you get the idea. A few suggestions to tighten this strategy up and make it easier for people who just aren't good at cars (I'm one of these folks):

1) When you decide on features if they are not included in the base model, find the model of the car you want that does include them and not much that you don't want. If you can find this, the dealers will be able to quote apples to apples much more easily and it considerably shortens the dickering by you. For example, I wanted a 2005 Hyundai Elantra with leather seats. The base model didn't have those, but the Elantra GT did and a few other options that I found desirable. Therefor I was able to simply ask each dealer their best price on a Hyundai Elantra GT instead of some car+list of options.

2) Notice in my story how I mentioned New Year's Eve? I have no real way of knowing how well a dealership is doing or how much they may need sales, what I do know is standard business quarters end every 3 months and most sales figures in any business is calculated based on these timeframes. Start this process a week two one and a half weeks before the end of a quarter and as the OP said, indicate you're willingness to actually buy on a specific date, 0-1 days before the end of said quarter. To give you folks an idea, I had 3 employees at a very large dealership in my town working til 11pm on New Year's Eve to finish selling me that car.

3) Have financing in place before you start this process, if you go to the dealership and they can do a better deal, great, take it; just don't get hung over a barrel at the last moment. This one is pretty obvious to most folks here but it's important enough that I said it anyway. For what it's worth, the dealership got me a better rate at my same lender than I could get, it was win-win.

4) Know that often you will get offered different models or options than you're asking for: "we have a hatchback Elantra" or "we have one with a moonroof." When this happens be very firm, if these items don't bother you say "I'd be willing to have a X with a Y, but since I don't really want Y I will not pay extra for it." Most likely you'll get an offer for exactly what you want after that if you have it, or the dealer might decide to throw something in gratis, but you're unlikely to get a moonroof for free. Obviously if you really hate the idea of whatever option they are offering, simply state, "that's not really what I'm looking for."

5) You may not think color is important, but that "red sunset" color may turn out to look an awfully lot like pink when you go to pick it up. If color is at all important to you (and if a pink or baby vomit colored car would bother you, it should be), check the manufacturer's website and pick every single one you can live with, let them know "color isn't terribly important but if you have it in black or silver I'd prefer that."

6) Make sure every time you get a best price call back the dealers on your list and ask them if they can beat it. They will get tired of hearing from you but they will either beat that price or drop themselves out, mark the latter off your callback list. This may sound like a lot of work, but each time you take 20 minutes to call and knock 100 bucks off the price you just made the equivalent of 300 bucks and hour tax free.

7)EDIT: I forgot to mention, often you will call and ask for a fleet manager and be informed they don't have one and would you speak to so and so. There's not much you can do about this even if it is untrue, just speak to whoever and they'll either play ball or disqualify themselves.

My reward for all this work was actually not the car, though I've enjoyed that too. The real reward was my cell ringing as I was going to pick up my new Elantra GT, "Hello, this is so-and-so at random-dealership, are you still interested in this Elantra GT?" "Hello! I'm actually on my way to pick up an Elantra GT for X dollars at another-dealership, if you can beat that price by at least 100 bucks I'll drive straight to your place instead." pause, "I don't know how they're even able to sell an Elantra GT for that cheap, I'm sorry." "Hey no problem man, happy new year's!" click.
Last edited by blacklynx March 28, 2010 at 12:15 PM
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#19
blacklynx,

Very good points. BTW- that phone call as you were picking the car up must have felt great.
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#20
Similar to the aiming for the end of a quarter...if you dont know when their quarter ends, or just want a new car sooner, buying as close to the end of the month is best since they will usually offer a little more incentive to help make their monthly goals.

and its interesting to hear about getting bids before mentioning employee discount works that well...I am getting a new car later this year, so I will try that out (and other points mentioned). Thanks!
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#21
Love all the tips even though some of it seems like hard work.

I just purchased a 2010 Nissan Maxima. Waited until the company offered $3,000 cash back. Once they had that offered, I call Costco who connected me with a dealer for the Costco price. The Costco price was $500 below invoice. I already knew carsdirect.com price was $500 above invoice. So the Costco price was exactly $1,000 below the carsdirect price. With the $3,000 rebate, it brought down the price to $3,500 below invoice. Drove out of the dealer with a price that I was happy with.

My friend followed all the bidding methods at a time when the rebate was only $2,000. He did well, but still ended up paying $400 above what I paid. Plus, he paid $1,500 for a warranty that I purchased much later for $800.
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#22
Quote from msanchez187 View Post :
Love all the tips even though some of it seems like hard work.

I just purchased a 2010 Nissan Maxima. Waited until the company offered $3,000 cash back. Once they had that offered, I call Costco who connected me with a dealer for the Costco price. The Costco price was $500 below invoice. I already knew carsdirect.com price was $500 above invoice. So the Costco price was exactly $1,000 below the carsdirect price. With the $3,000 rebate, it brought down the price to $3,500 below invoice. Drove out of the dealer with a price that I was happy with.

My friend followed all the bidding methods at a time when the rebate was only $2,000. He did well, but still ended up paying $400 above what I paid. Plus, he paid $1,500 for a warranty that I purchased much later for $800.
Congrats on getting a good price. Also, if you feel like taking a punch in the mouth, tell your friend that (almost without exception) buying a warranty from the dealer is a great way to give any money you might have saved right back.
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#23
Quote from blacklynx View Post :
3) Have financing in place before you start this process, if you go to the dealership and they can do a better deal, great, take it; just don't get hung over a barrel at the last moment. This one is pretty obvious to most folks here but it's important enough that I said it anyway. For what it's worth, the dealership got me a better rate at my same lender than I could get, it was win-win. click.
This is an exellent point. In buying my car, I had already secured financing from my credit union at a 4.49% interest rate. When I went to the dealer, I told them I had financing from my credit union at 3.99% on a special they were currently having. I told them I would not go with any other financing unless it was at least half a point lower. Anything higher was not worth it to me since the credit union made it so easy for me to make the payments by taking the money from my paycheck (not true) They got me financing for 3.49%.

Next important point. You can spent weeks and weeks fighting to save $100 on the price of the car, and then turn around and pay 10 times that amount in financing. All your time and effort goes out the window. Even though my payment for my car is in the $200 range (I gave a down payment), I'm sending $1,500 payment per month. If you can afford to pay cash for your car, take the financing anyways and pay off the car within the next month or two. My plan is to pay off my car with 12-15 months, thus, saving even more money as compare to paying it off in 60 months.

Also, a lot of people will claim that the best car to buy is a 2 year old car since all the depreciation happens the first 2 years. NOT true. I looked for a 1 to 2 year old Nissan Maxima and ALL the ones that I found (to my liking) were going for a higher price than what I paid for my brand new car.
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#24
Quote from vyahoo View Post :
My approach is similar, but slightly better. Try this method.

1. Go to carquotes.com and pick all the cars you are interested. You will have to pick a financial institution,- pick any credit union. Give your details. You will get a detailed brochure of the car, options, invoice price, ongoing rebates and a pre-negotiated price on the car, and a dealer to go to, whom to contact, etc. It will also give you the rebates, etc. Note the dealer name, price.
If you do not like to hear from the dealer, register for a Google voice phone number. Callers can leave all messages they want on that. You can call them back using the same number...nobody need to know your real number.

2. Go to Zag.com, buy a car, and pick a car, options. This will give you a price on the car without
actually giving your details. Note this price down. Don't give any details here.

3. Go to Edmunds.com and see if there are any 'manufacturer to dealer' incentive on the car. Note that down.

4. Avoid the dealer nearest to your house. Reserve that for the very last.

5. Pick another dealer for test driving the car. This dealer should not be the one from 4, and should not be the one from 1. Test drive the car and mention to the dealer that you did not like it, so that you are never bothered by them.

6. Collect one more reference price from carsdirect.com. Note that down.

7. Now you have 3 reference prices from 1, 2, and 6.

8. Go to cars.com and invite bids via email from different dealers. Avoid dealers from points 1, 4, and 5. You can do 3 dealers at a time. You can repeat the bids for as many dealers as you wish...for as long as you can travel. You will get a bid, if you mention that you are serious about buying and are willing to do business with in the next 5 days. Make sure the bid includes destination charges, and carpet floormats, which the dealer rips you out. Request him to itemize the quote - price, - rebate - dealer cash, + destination charge. Verify the prices and dealer cash info from e-brochure from 1 and information from 3.

9. I would pick dealers couple from two different neighboring states as well. Sometimes rebates are regional... if you pick a different region, you may be eligible for a different set of rebates. That is truely for a MOTIVATED bargain hunter...like me. You can ignore this one if you are not.


10. Pick the lowest of the bids from 8. Compare it with the prices from 1, 2. Subtract 500 from the lowest bid and then invite fresh bids again - stating that this is the lowest bid. Allow the dealers to get back to you with their revised bids. You can continue this process a couple of times more, - either by picking different dealers each time or same dealers and asking them to respond to a revised bid. You can play one dealer against the other openly.

11. Once the price stops going lower, you have hit rock bottom. Note that price and the dealer. Thank dealer that responded with the price you got and the dealership that gave you the price and mention that you are buying the car from the winning bid.

12. All along, keep watching the inventory on the dealer from 4, from his website. Watch out for cars that have been sitting for a long time. You can do that for a couple of other dealers too if you are motivated. If you are a credit union member, pre-apply for a loan and be ready with the best rate you can get outside..

13. Go to the dealer in 4. Ask for the car/color/options... Ask for a test drive. Act like you are one of those impulse buyers.. Ask him what specials the dealer will offer him in terms of service - like free oil changes, free loaners, carwashes, etc. Let him boast about how good a dealer he is.. He will cough up a lot of freebies. Tell him that you are pleased and will buy the car and ask him what his best deal would be. Compare with your notes. If the offer is better than what you already have, then you are good. Else, make an offer of $500 below the price from 11. Tell him that you will buy it now if he honors that price. 99% chance that you will get it. Close the deal - making sure that you do not buy anything extra - like fabric protection, rust proofing, mudguards, or extended warranties. You can shop for all that later on.. The dealer will ask you to finance thru him. At this point, you can say that you have an approved loan - rate from your bank.. He will hate that but will beat that rate by at least 1%. If you have been following this dealer's inventory and the car you have picked has been on the lot for some time...then you can use that to your advantage as well.

14. If you cannot get it for that price, then just walk away and wait for a day or two. If he does not call back, then you have the dealer /price from 11. You are good to go there and close the deal.

15. If 14 does not work, then you have the deal from 1 and 2. You have multiple options for the same car. You are truly powerful at this point.

16. I have bought 2 cars using this method. My friends, family, everybody has used this method, accounting for dozens' of cars without ever stepping into a dealership for negotiations ( other than test driving ).

Try it out and any feedback is welcome.
Sorry, I didn't have time over the weekend to give a response that would do justice to your post.

You have some very good ideas. I think your best idea is getting bids, removing $x, and soliciting other bids. I haven't done exactly that, but it seems like you could marry this idea with the initial approach and, with just a bit more effort, end up very close to the best price.

Also, someone else mentioned this, but I would imagine that the incentives are tied to where you're registering the car. I'm not sure, but since the dealer already has to figure that out to get appropriate tax information. If anyone knows for sure, please chime in. I know that I'd be willing to take a $200 flight and spend a day to save $1000 or so. (at least until Mr. Slickdeals gives me a big raise.)
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#25
Quote from msanchez187 View Post :
This is an exellent point. In buying my car, I had already secured financing from my credit union at a 4.49% interest rate. When I went to the dealer, I told them I had financing from my credit union at 3.99% on a special they were currently having. I told them I would not go with any other financing unless it was at least half a point lower. Anything higher was not worth it to me since the credit union made it so easy for me to make the payments by taking the money from my paycheck (not true) They got me financing for 3.49%.

Next important point. You can spent weeks and weeks fighting to save $100 on the price of the car, and then turn around and pay 10 times that amount in financing. All your time and effort goes out the window. Even though my payment for my car is in the $200 range (I gave a down payment), I'm sending $1,500 payment per month. If you can afford to pay cash for your car, take the financing anyways and pay off the car within the next month or two. My plan is to pay off my car with 12-15 months, thus, saving even more money as compare to paying it off in 60 months.

Also, a lot of people will claim that the best car to buy is a 2 year old car since all the depreciation happens the first 2 years. NOT true. I looked for a 1 to 2 year old Nissan Maxima and ALL the ones that I found (to my liking) were going for a higher price than what I paid for my brand new car.
You make a lot of good points. One thing that I would consider, though, is your monster over-payment idea. If your rate is 3.5%, you could end up a little ahead paying the minimum and keeping your money in something paying >3.5% (after tax considerations). Given that 5% is possible in checking accounts in some regions, link, this seems possible.
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Quote from thelnel52 View Post :
Congrats on getting a good price. Also, if you feel like taking a punch in the mouth, tell your friend that (almost without exception) buying a warranty from the dealer is a great way to give any money you might have saved right back.
Forgot to mention that you wrote a great article. I will use your method next time and compare it to going with the Costco price. I would update on how that goes, but that won't be for some time. I tend to keep my cars for a long long time. I still have my '91 Maxima, '00 Integra, '05 Ram 1500, and now my '10 Maxima. Wait, maybe with this pattern, I'll end up buying some kind of mini van or large SUV in 2015.
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#27
Quote from thelnel52 View Post :
You make a lot of good points. One thing that I would consider, though, is your monster over-payment idea. If your rate is 3.5%, you could end up a little ahead paying the minimum and keeping your money in something paying >3.5% (after tax considerations). Given that 5% is possible in checking accounts in some regions, link, this seems possible.
Good point. Didn't do the research to see if I could find something that would be safe and pay me over 3.5% interest rate. None of my banks, including my ING account is offering me anything worth looking into. But now that you mention it, it may be worth looking into.

If you have a suggestiong that would in any way improve my life, I always welcome it with open arms..
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#28
Quote from thelnel52 View Post :
I know that I'd be willing to take a $200 flight and spend a day to save $1000 or so. (at least until Mr. Slickdeals gives me a big raise.)
I tried this approach. I had negotiated a price of a truck to be $3,000 less in Texas than the lowest price I was getting in California. It was all going well until I told them that I was in California. They told me they couldn't sell to me. Something to do with emissions or the added equipment that cars in CA come with that the cars in TX lack.
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#29
Quote from thelnel52 View Post :
Sorry, I didn't have time over the weekend to give a response that would do justice to your post.

You have some very good ideas. I think your best idea is getting bids, removing $x, and soliciting other bids. I haven't done exactly that, but it seems like you could marry this idea with the initial approach and, with just a bit more effort, end up very close to the best price.

Also, someone else mentioned this, but I would imagine that the incentives are tied to where you're registering the car. I'm not sure, but since the dealer already has to figure that out to get appropriate tax information. If anyone knows for sure, please chime in. I know that I'd be willing to take a $200 flight and spend a day to save $1000 or so. (at least until Mr. Slickdeals gives me a big raise.)
Thanks. Your article was very good. But, can you share some inside stories of the dealerships ? What does a dealership feel when you use smartbuying techniques like these ? Is the salesman getting squeezed out ? Also, if you guys have noticed, the invoice prices and MSRPs are getting close to each other for many cars. Earlier, they used to be a good 2K apart. Nowadays, it is just around 1k. That is obviously some design there.

Invoice price is no holy grail.. it is just the dealer's list price. One would never know what the true cost of the car for the dealer was. Is there any trick to know that ? As a salesman, what were the numbers you were exposed to ?

The Dealerships/sales force - they got to eat too. Somtimes, I do feel sorry for them. But for too long, they have held the aces, pretty much mistreating the customers.

If you are trying to buy a car in Florida - there is a ridiculous fee of around $800 per car - DEALER ADMIN FEE!!!!.. And it applies for used cars too... That is the most absurd thing I have ever heard...
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#30
Quote from msanchez187 View Post :
I tried this approach. I had negotiated a price of a truck to be $3,000 less in Texas than the lowest price I was getting in California. It was all going well until I told them that I was in California. They told me they couldn't sell to me. Something to do with emissions or the added equipment that cars in CA come with that the cars in TX lack.
CA generally requires vehicles to be certified to meet CA smog laws in order to be registered in the state, which usually requires additional emissions equipment. You also cannot buy a vehicle out of state to try to escape CA sales tax, because as soon as you try to register the car in CA, you will have to pay the "use tax" which is the same rate as the sales tax. That applies for any car brought into CA within 1 year after purchase.
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