Originally Posted by williamf
Here is a sure fire way to get the best deal. Walk into the dealer. Tell him you are paying by cash or you have your own financing. Tell him the only thing you want to take about is the price. ...
I would argue that one should never commit to the dealer how you intend to pay until you have settled on a price. I have several reasons for saying this, however I know too that my reasons are debatable, and that each of us must make a judgment call as to what approach we are going to use when dealing with a car purchase. That said, here are my reasons for refuting William's suggestion:
- Dealers already think anything you say other than, "Yes, I'll buy it for that price, " is a lie. Telling them you will pay cash and then changing your mind at the very least demonstrates that you had no idea of what you wanted to do as goes paying for the car, and at the worst, confirms their perception that you are a liar. People at car dealerships have a saying: buyers are lairs.
- I believe that the dealer will accept a lower price on the front end -- the selling price of the car -- when they know, or at least reasonably expect, that you will finance the car rather than pay cash. The reason for this is that the dealership makes additional money simply because you do finance the car, and the fact is that most folks do finance (or lease) their car purchase. If you tell them you are paying cash, they know there is no back end money to be made, so they have to be tougher with keeping the selling price high enough to meet their profit need for the car. If you then switch to financing the car, the only person losing out in that deal is you the buyer because you have yielded an element of your advantage -- the dealer's presumption that you'll be financing and thus that he can make up the sum he yielded in the selling price on the back end -- by saying you are paying cash.
- One of your levers in the negotiating process is your anonymity. Don't give it away easily; hell don't give it away at all if you don't have to. What you aren't explicitly asked, and I do mean explicitly, you don't offer. If you are asked indirectly, which is to say the dealer makes a leading remark, if you have no neutral response, say nothing. You are under no obligation, or even expectation, to respond to every statement they should happen to make. Believe me, any good negotiator is going to make oblique statements of all sorts in an effort to draw information out of you while giving up no information themselves.
In my opinion, it's never a good idea to lie during a business negotiation, or, to be honest, at any other time. If during the period of negotiating the car's price, you are asked directly about something other than the price of the car, either claim indecision, or better yet, answer the question with a leading question. For example, if asked will you be financing the car, respond by asking: do you think I seem rich enough to pay [whatever YOUR last offered price was] cash for a car? If they should simply re-ask the question in some for or other, follow up with another question: Well, what does how I plan to pay for the car have to do with price of the car? It is the price of the car what we are discussing right now, or am I mistaken about the nature of this conversation? If they press no further, you say no more on that matter. If they answer honestly and tell you that they would be willing to take a lower price because you'll be financing, you can tell them truthfully whether you will finance or pay cash. At that point, you must not lie. No good relationship ever resulted from either party's lying to the other.
Now, if you do indeed plan to finance, be sure you have gone to a bank, a bookie or whomever it is other than BMWNA from whom you can also get financing for the car. The reason for this is that in addition to battling for the lowest price, if you aren't paying cash for the car, you should also battle for the lowest interest rate on your car loan. The only way to do this is to have outside financing in place before you go to the car store to buy the car. Ideally, you'll buy your car during business hours. The reason for this is so that once the car store has come back to you with a loan offer it'll have in it a rate. Knowing that rate, you should immediately call your external loan officer and ask them to beat the rate BMWNA offers. Alternatively, you should show the BMW finance guy/woman the loan offer you got from your external source and ask them to beat it by at least 1.5 percentage points. Do this right there in front of the car store's finance person and make them and the external loan officer bid for your business. They will at that point be directly competing for your business and they know you have the credit worthiness to get the loan.
If for some reason, either of them needs time to come back with a counter offer on the rate, simply give the dealer $1000 to hold the car for you. That way, they won't be able to sell it to someone else who may show up after you leave and on whom they can make more money.
Lastly, in addition to how you plan to pay for the car, the other thing you are likely to be asked about before the car's price has been agreed is the car you might trade in. No matter what they may ask about your trade in car, your response should follow the same approach as your answers to questions about how you pay for the car, with a question in response to their question being your best response. Where the trade in topic differs is that under no circumstance should you actually commit to trading it your car until the price of the car you'll buy has been determined.
Once again, just as with the price of the car and the interest rate on the car loan, the value they will give you for your car is negotiable. And once again, you need to know what your car is actually worth. That means you will have to have done your research, in advance of going to buy the new car, to know what the retail and wholesale value of your car is. You need to know the wholesale value because if the dealer buys your car from you, he will never pay you retail for it because he can buy any number of cars just like yours at a car dealers auction where he will pay wholesale for them.
As goes your car, if you have a ton of mods on the car, be aware now that they are completely and totally useless to the dealer. He'll have to remove them in order to sell your car to another consumer or to a wholesaler, so their presence will reduce the car's value in the dealer's eyes. This is because the wholesale market for cars is based on stock cars not modified cars. If you need to get a retail price for the car, you need to sell it yourself to another consumer, not the car dealer.
Now, be aware that the dealer's first offer for your trade in will be far below a fair wholesale price. That's because they know most consumers haven't the first idea of what the actual wholesale value is for their own car. If he offers you a fair price, you can haggle for a bit more if you want to, but knowing his first offer was fair (you did your homework right?) will tell you that you won't get much more, so don't waste your time pressing too hard if that's the case.
If he completely low-balled you, you will need to haggle back and forth to get to a price that's fair to you. Now if your trade in isn't a car the dealer can sell on his own used car lot, and if it's more than 3 to 5 years old and/or in less than very good shape mechanically, structurally and physically, it won't be, you will have a hard time getting the full wholesale value for it. The reason for this is that new car dealers, more so than most used car only dealers, have the money to pay (at car auctions) the highest prices for the highest quality used cars.
(Yes, some massive used car outfits such as CarMax are the exception to that axiom about who can afford to pay for the best used cars in the wholesale arena. But even so, that just means that what I'm saying as goes negotiating with a new car dealer also applies for the most part to outfits like CarMax, although they may put a 6 year car in fine shape on their own lot, whereas a BMW dealer, won't, expect perhaps for some specialty car.)
If your trade in is an excellent specimen and but 2 or 3 years old, you can push as hard and as long as you want because it is something the dealer can put on his lot, especially if he hasn't many cars like yours to offer. Again, do your homework; see what the dealer's used car inventory contains before you start the discussion about your trade in's value and what the dealer will give you for it. You need to be able to make arguments that speak in terms that matter to the dealer's business. So, your arguments must be like the following:
- "I know my car is worth a good deal more on the wholesale market than what you are offering me, and you know it too. Please stop insulting me with low ball offers like the one you just made and offer me a fair price."
Notice that here you didn't tell him any specific amount nor did you lower your expected price. All you did level-set him and tell him what you both knew to be true. You will not suggest any price to him until he offers something within $1000 to $1500 or so of the wholesale value of your car, or until he explicitly asks you what you wanted for your trade.
- My car is in fine shape mechanically, structurally and physically, and it's never been smoked in or in an accident. Plus, it has below average mileage. I know you will shampoo the carpets and perform some additions checks on the car and whatnot, but we are apart by X dollars and I know it won't cost you that much to do those things.|
- I've looked at what kinds of cars you have in your used car inventory and my car is very representative of the types of cars you like to keep in your inventory to sell. So it's not as though you will have to just pass my car on to wholesaler. You can put it on your lot and make plenty of money from selling it.
- I noticed that because my car is [whatever it is that distinguishes your car from those in his inventory -- color, fewer miles on it, manual transmission, whatever...] and it's quite compatible with your existing used car inventory, that it provides you with a good profit opportunity, a better opportunity perhaps than some of the cars you have that are similar to it.
- OK, let's both be reasonable. I know my car is, at wholesale, worth [$2000 over the actual wholesale value] but I knew you weren't going to pay that much because you don't have to, but you do need to pay me a fair price because you aren't the only person who would buy my car. So I am willing to let you have it for [$1500 over actual wholesale value]. If you can do that, we have a deal.
Now be aware that this statement opens the door to flat out money haggling. It is the last line of argumentation you should use. You should also be aware that when you use any of the preceding lines of argument, you are subject to the dealer responding with: Well, what did you think we'd pay you for your trade in? By asking you that, the dealer is telling you he'll not countenance any further lines of rational justification for upping his offer until you give him a concrete number to work off of. When asked that, this bullet is your answer.
You should use the tactics and arguments above as needed be they to get to the point where the dealer's offer for your trade is within the region that one could call reasonable, if the dealer's first offer was in that region, to get even more money for your trade in.
Now, if or when it does get down to back and forth money negotiating because you no additional business-driven lines of justification, just be aware that if you are back-and-forthing on money alone, and you aren't already within range of a reasonable price, you've failed in executing the strategies above and you aren't going to get very far or very much more money. Even so, follow good doctrine, and when they offer 100 more, you offer to take 50 less than you last asked for. If they offer 25 more, you offer to take 12.50 less than your last offer, or you can offer to take 25 less than your last offer. Now, personally, if they don't capitulate at that point and make a big move, I would most likely ask them if their last offer will be good if I were to come back later and ask them to buy my car at their last offered price? If they say yes or no, I would just not have my trade in be part of the deal to buy the new car. You'll have to make your own decision based on your own financial situation.
The one thing that is undeniable is that from the get go, the dealer has the upper hand in the negotiation of the price of the used car you want to trade in for his new car, and even if you don't know that, he does know it. He's in the business of buying and selling cars day in and day out; you aren't. He knows exactly what your car is worth and what he can sell it for and whether he'll keep it or move it on to a wholesaler; you don't. The approaches I've suggested above make you at least appear to be more savvy than average and hope that in seeming so, you'll seem to the dealer to be one of the few private consumers who's on equal ground with him. If you can pull that off successfully, any businessman with a fair degree of integrity will give you a reasonable price for your trade in.
One last point worth noting: you have far more leverage when buying a new car than you do when buying a used car. The reason is that if push comes to shove, you can give the dealer a $1000 deposit, have him order the new car you want at the price you've already agreed on and shop his offer while wait for the ordered car to arrive. And you can try to sell your existing car for more than he offered you. When buying a used car, you have no way to ensure that the car you want to buy can't be sold out from under you while you try to find a better price for your trade in. So again, like your financing, get some quotes on the sale of your trade in car before you start discussing it with car dealer from whom you'll buy your next car. At least that way, you have some flexibility in whether you accept an offer you obtained previously. And like your loan, once you get to the dealer's final offer for your trade in, call the place that gave you the better offer and ask them if they'll honor it in an hour when you can get there, and if so, can they give you the money at that time. Do this in front of the car dealer from whom you are buying the car. If you do end up selling your car to someone other than the car dealer, give the dealer $1000 to hold the car until such time that you'll have the money for your trade. If the person/company who is buying your car is paying by check that is not a cashier's check, ask the car dealer if they'll accept that check as part of your down payment if you endorse it over to them. In most cases they won't, but depending on who is providing that check, the dealer might.
(If it's a bank cashier's check, it's no big deal at all for the money's actual existence and availability is not in question. A cashier's check means the money was there at the time the check was written and the money will be held by the bank/cashier until the party to whom the check is made out comes to collect. A certified check only says that the money was definitely there when the check was written; there's no guarantee the money will be there when the check is presented for payment.)
Now, if you want to, you can offer to assist the dealer if they have some way to write the sale to include in the current month's business, while also retaining possession of the car you're buying, if for some reason it's plausible that you won't actually have the cash from the sale of your trade it until the following month. It's just a gesture on your part, but it reflects your understanding of the dealer's business model and cycle, as well as reflecting that he is better off, from an audit standpoint, if he's got the paperwork to support booking the sale in the current month rather than next month. If you give him a deposit, odds are he'll book it in the current month anyway, but at least you made the gesture and it cost you nothing to do so, and it further built a positive rapport between you and the dealer.
I know that's far more than my, or anyone else's two cents worth, but that's what I think. What I don't think is that someone who's got no experience applying the principles of tough negotiation can apply all these things their first up at bat. Just use the info here and do the best you can. If you know someone who's good at this stuff, have them accompany you and let them run the show. The car dealer has that someone; he's called the Sales Manager. That's why he appears when the salesperson can't close the deal; he's a tougher negotiator and he's armed with far more knowledge than the salesperson. So if a sales manager does show up, you are doing what you need to be doing. Keep at it and bring out your big guns (your stronger points of argument, your phone to call the folks who've given you better offers on your trade, your friend, your continued persistence, whatever it is...) just like the dealer did.
Negotiating is an art. And just many folks don't like to draw pictures or sculpt, they don't like to negotiate because they just aren't good at it. And that's totally understandable. It's human.