How To Negotiate Car Prices (2024)

The Covid-19 pandemic coupled with supply chain disruptions have driven auto prices sky-high, making it all the more important to try and negotiate for a more affordable price.

Consumer prices for new and used vehicles are expected to remain at their current high levels for all of 2022 before returning to some semblance of normalcy. However, not everyone has the luxury of waiting for prices to drop before buying a car.

If you need to buy a car in a high-priced environment, there are still ways for you to get the best deal. We’ll walk you through ways to negotiate for a lower price.

6 Tips for Negotiating a Car Price

1. Do Your Research First

Before you head for the auto dealership, do your homework. There are a number of established online resources, such as Kelly Blue Book or Autotrader, that will show you the manufacturer’s suggested retail price—which is their recommended price for selling the vehicle. It can also give you an idea of the price you might be able to negotiate at a dealership versus a private seller.

You can also research various dealers in your area to learn what special incentives they may offer that could drop your bottom line. These include cashback offers, price discounts on particular models, zero percent financing deals or leasing deals.

2. Know What You Can Afford

Part of the reason for doing your research first is to help establish your budget. If you intend to use cash, then the amount you have available will dictate your negotiating room. However, if you are going to use an auto loan, then you might have a larger budget, a broader range of car buying options and more room to negotiate.

Even if you plan to rely on an auto loan, you might need (or want) to bring a down payment to lower your closing costs or reduce the overall loan amount. Take the time to evaluate how much spare cash you feel comfortable putting down.

3. Leverage the Dealer’s Cost

Online resources available through websites like Kelly Blue Book and Autotrader also tell you the dealer’s cost—or the invoice price—for your preferred vehicle. If it is a used vehicle, then search for the car’s book value, which is the original cost minus depreciation. Use this information as the foundation for your negotiation.

Rather than negotiating based on the manufacturer’s suggested retail price (MSRP), keep your bid focused on the dealer’s invoice cost (or the car’s book value). Your wiggle room is typically between what the dealer paid the manufacturer (or previous owner) for the vehicle and the price listed on the lot.

4. Know Your Trade-in Value

If you plan to trade in your current car as part of the transaction, use the resources we mentioned earlier to know its worth before setting foot in the dealership. You can also browse sales ads for similar vehicles (make, model, year) to determine its market value.

If your car is in good condition and an in-demand model, you can leverage this during negotiations with the dealer. This is especially true in the current environment, where the dealer might be enticed by the possibility of earning a profit from selling your used car.

If you get a good trade-in offer, jump on it. If not, you can always sell the car yourself to get more money or take it to a dealership that specializes in used cars to get competing quotes.

5. It’s OK to Walk Away

Prepare yourself for the possibility that you might leave without your desired vehicle that day. It will be better for your state of mind, and bank account, if you don’t allow yourself to get pressured into a bad deal.

It will be easier for you to walk away if you have a shortlist of dealers, and private sellers if you’re buying a used car, for your desired vehicle.

After Negotiating, Read the Paperwork (Before Signing)

You have done the hard work—researched, haggled and agreed on a price. Now it is time to sign paperwork to complete the purchase. Remain vigilant before signing the paperwork and be sure not to skip the sales contract’s fine print for any fees and hidden costs. The dealer may attempt to throw in extras—usually unnecessary add-ons—such as extended warranties, gap insurance and tire protection.

Given how much it costs to buy a car, the last thing you want to do is pay even more for add-ons, if you don’t need them.

Don’t be afraid to ask a lot of questions and for the dealership to remove any unwanted extras.

Negotiating Fees In the Paperwork

Be sure to also ask questions about any fees the dealer charges you, including destination, documentation, title and registration fees. Some of these fees are the dealer’s costs being passed on to the customer and cannot be avoided. However, you may be able to negotiate away others or compare dealers ahead of time to see which ones don’t charge excessive fees.

There is no harm in asking questions and negotiating any unreasonable fees.

Negotiating for Used Vs. New Cars

Regardless of whether a car is new or previously owned, there is one principle that applies to both situations: Successfully negotiating down the purchase price can save you a lot of money.

The main difference will be how much you can negotiate off the retail price:

• New cars. It is considered reasonable to start by asking for 5% off the invoice price of a new car and negotiate from there. Depending on how the negotiation goes, you should end up paying between the invoice price and the sticker price.
• Used cards. You tend to have more wiggle room with used cars. Depending on how much information you already have about the car’s value and condition, you can start by requesting a larger price discount and then negotiate from there.

Either way, it is essential to shop around and be prepared to walk away if you don’t get the perfect deal that works for you. The dealer might try to seduce you with the attractiveness of the overall package, but the price of the car is what ultimately matters to your bottom line. If the price is not right, walk away. There will likely be another opportunity to buy a car down the road.