Tips on how to Negotiate with a Used Car Dealer
The biggest tip to learn on how to negotiate with a Used Car Dealer
is to understand that most everything is based on the Dealer’s perception of the customer’s goals, financial situation, and negotiating skills.
As long as they see a customer as knowledgeable and shrewd, the dealer will more likely shoot straight, and talk more about the vehicle specifics and qualified value. Conversely, if the Dealer perceives a customer as less informed, they might try a bit harder to maximize their profit through vehicle pricing, higher interest rates, full-priced extended warranties, or superfluous salesmanship. Just keep in mind, though, that a car dealership is in the business of making money. They are not in business of giving away their vehicle. So, no matter who you are, they will try to maximize their return on investment (just like any other business or any private party trying to sell their own car on a street corner).
Additionally, to help in their bottom line, used car dealers will often try and stretch a customer’s limits – and that is mostly regarding vehicle price and/or monthly payment. However, let’s say a customer is looking for a $20,000 vehicle with a budget of $200 a month. Basic math dictates that without a $10K down payment, financing $20,000 is more inline with a $400 pmt (at 7.9% at 60 months). An informed customer is actually better for the dealer, because they are starting on the same page of realistic numbers. Most dealers offer a
Loan Calculator on their website to assist customers do just that.
Also, from a bank’s point of view, a higher mileage or older vehicle carries more risk than a new, less mileage one. It’s a simple matter of the potential risk calculation on how long the vehicle should serve the customer without major breakdowns. A person may not be able to make it into work and pay their car payment if their vehicle is broken. Therefore, banks will typically offer to lend a much smaller percentage of the price on an older vehicle. This means a higher interest rate and higher required down payment. Yet, there are many viable
in-house financing options.
So, how do you become a knowledgeable and shrewd used car buyer? First, find out what type and style of car you need or truly want. Educate yourself on websites like
www.edmunds.com and
www.KBB.com websites regarding fair pricing, reviews, an safety ratings. Second, really know what your credit ranking is by running your own credit history before you even start car shopping. The government provides you with one free tri-bureau credit score each year (without a credit score) at
www.annualcreditreport.com. Third, determine what rates are available at local banks for a given year and mileage vehicle. Again, banks often offer higher rates and shorter terms for older, higher mileage vehicles (remember risk), and their rates can usually be found directly from their website. Just realize that their posted rates may be for grade A credit scores (720 or above).
Now, you will be ready to start shopping. At this time, bear in mind that you're simply “looking” to make comparisons. But, start by shopping for cars
online before visiting the actual lots. Why? Most dealers advertise the cars they may have available for sale online, making easy shopping for potential customers. Also, many car dealers offer lower prices online than found on their lots. Should you tell dealers you saw one of their cars listed for X amount online, they ought to honor that price.
If you are able to physically visit different car sales lots,
do not allow each dealer run your credit unless you found a vehicle you would like to move on. Every time your credit runs, your score decreases. Bring the credit report that you printed from
www.annualcreditreport.com along with you, and specifically ask the dealership what rate of interest they are able to provide you with without running your credit. Before you start talking interest rates, terms, etc., just be certain that this is the right vehicle for you. Also, you will find that the used car dealer will bend over backwards for you if you commit to buying the vehicle at that time and if all numbers were to work out to “your complete satisfaction”.
Any time you become seriously interested in a vehicle, obtain the exact Kelly Blue Book or Edmunds.com value. You'll need the car's make, model, features, mileage, as well as the dealer's zip code to get an accurate value. Blue Book provides three different values: trade-in (budget friendly), private party (middle), and retail (the very best). Keep in mind that retail values quoted by Kelly Blue Book are negotiable, not firm, numbers, and they also assume that your car was in "excellent condition." Only 5% of used cars for sale are in reality in excellent condition. KBB also conveniently offers a “Fair Price” range, which ensures the customer of obtaining a haggle-free
just price of the vehicle of their choice.
Before ending the negotiations, record everything that needs repair or cleaning (i.e. ashtray missing, rear view mirror loose, trunk dirty, etc). For anything the dealership can't correct, demand a reasonable reduction in price.
If you are actually at the dealership, be inclined to exit at any time. In choosing a big purchase like a used car, you should be certain about what you are getting into. Also, aim to build rapport with the dealer and your sales rep. The more they like you, the greater they'll be in a position to negotiate and make you happy. Just have fun, be smart, be realistic, and find a great vehicle at a great deal.
Happy Driving!
The Car Lot
6167 E. Speedway Blvd
Tucson, AZ 85712
(520) 882-9200
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