Buying a new car can be an exciting time. However, the buyer should consider all the ways that a dealer makes money from the customer, such as financing or car trade-in. The dealer can sell a warranty to a customer and charge more for the warranty than what the warranty is actually worth. Obviously, a dealer marks up the worth of the car. They can charge between 3-10% more than the manufacturing suggested retail price (MSRP). While that may not sound like a lot, a car that sold for $30,000 can mean $3,000 profit for the car salesperson. There are also many other ways that a dealer can make money from the customer, however, if a customer can walk into a dealership knowing how to negotiate, than the customer and dealer may be able to come to an agreement that ensures everyone is satisfied.
The first thing a buyer should consider is knowing what you want before you go to the dealership. If you are shopping with a spouse or partner, make sure that you both are on agreement before you walk into the dealership. Having an agreement before hand allows you both to present a united front. After deciding on your vehicle, test drive the vehicle and walk away. Many people enjoy the comfort of driving a new car, and the salesperson may try to convince you that you need to buy the vehicle now otherwise it might not be available later. While that exact vehicle may not be available, rest assured that vehicle can be found again. Showing the salesperson that you can walk away is always a good negotiating strategy. Also, plan to shop near the end of the month. Dealers have quotas to make and near the end of the month if they have not hit their expected target, they may be more willing to negotiate a fairer price.
If you are willing to put the time and effort into getting a fair price for your trade-in, consider selling your trade-in car separately. Dealers tend to underprice the trade-in, thus allowing them an even greater profit. If a dealer buys your trade-in for $5,000 and the car value is actually worth $7,500, than the dealer has just made an instant $2,500 profit. If the dealer proceeds to sell your trade-in to another customer for $9,000, than the dealer has just made another $1,500 profit. The total profit price for the dealer is $4,000. Private buyers may pay what the car is worth and maybe even a little more.
There are some other things to watch out for when you are negotiating. Try not to tell the dealer offhand if you have other financing lined up or they might try to make up for the lost revenue in another charge. Watch out for the hidden fees. Some dealers may charge you for cleaning the car; however, if the car is new, there is no reason for the cleaning. Before signing the papers, make sure to see the itemized charges and get the bottom line price. Autos.com provides prices from local dealers. Try getting the quote from the website and let the salespeople negotiate around that number.
The best thing a potential buyer can do is research. A buyer should research the car price, financing, and a trade-in. If a buyer is prepared, negotiating a fair price can be simple. Just make sure that you look at the bottom line pricing before signing the paperwork.