Timing plays a key role in getting a great deal on your next vehicle
Don’t just focus on the monthly payment
No other consumer product gets negotiated as much as a new car, and we won’t even get into used vehicle negotiation. That’s a different animal for a different day. The fact of the matter is that buyers expect to have some wiggle room on the price of the new car they want, and dealerships are expected to show flexibility.
Granted, things have changed slightly in the negotiation game. With online shopping becoming more and more prevalent in the automotive industry, dealers understand that buyers want a more streamlined, faster process. Well, at least, the successful dealers understand that. The ones that make it easier for their clients to complete a sale from their comfort of their own home and make the process as direct as possible will win out.
At the end of the day, few like to negotiate. The dealer doesn’t like it, and most consumers hate haggling as well. It’s a tiresome process that ultimately only leads to a few hundred, maybe a thousand dollars off the original price.
When I was selling cars at Volvo and Subaru back when I was completing my Bachelor’s degree, this was my strategy. I would try and cut to the chase, understand what the buyer wanted to pay as quickly as possible, and didn’t hesitate one second to pull out the dealer invoice on the car in question. The invoice served as proof to potential clients that no, we didn’t make $10k on a Volvo C30 and what they were asking was unreasonable.
We made about $800 on a C30, a grand on the S40 and V60, and maybe $1,500 on a base S60. A base XC60 or XC70 gave us about $2,500 and a base XC90 was about $3,000. Add about 75% for top-of-the-line models. Sure there was room to negotiate something, but it was never as much as people thought.
At Subaru we made roughly $600 on an Impreza, but a WRX STi had about $4,000. Outbacks had a healthy profit margin as well, roughly $2,000. Same for Foresters. Actually, all Subaru vehicles had healthy profit margins and because you sold a lot more of them, life as a Subaru sales rep was and is still good to this day.
That said, by the time September rolled around we barely had any inventory left, so asking for a significant price reduction on the last Subaru Outback 3.6R we have in stock wasn’t going to get your anywhere. And that WRX STi? Back then it was a hot ticket item and we only 1 or 2 every year. If anything we’ll boost the price on you.
There’s a few simple rules to negotiation that I’ve learned over the years.
- If you can’t afford the car’s MSRP, you can’t afford the car period. No amount of negotiation will change that.
- See negotiation as a partnership, not a confrontation
- The fact that more information than ever is available online is keeping dealers honest, but you still have to watch out for the bad apples
My experience in sales leads me to get a lot of questions from friends about how they should negotiate their next car. At MI we regularly get asked if such and such deal is fair. And so with that in mind, here are three tips to negotiate the price of your next car.
Timing is critical to getting a great price on your next vehicle
Models that have just arrived on the market are in hot demand and dealers likely have low stock. These are not models you want to try and negotiate. On the other hand, in the next few months dealers will be looking to get rid of 2020 models in favor of 2021 models coming in. Heck, some 2019 versions of unpopular cars may still be on dealer lots. These are the ones that you want to negotiate.
You may want a specific vehicle that’s just arrived on the market and that’s fine, just don’t expect to get a lot off the price.
There’s also truth to the fact that buying at the end of the month or at the end of the year can get you a better deal. Dealers get bonuses for the number of vehicles sold per month and per year, and sales reps get those bonuses as well. If you come in during the last week of the month ready to buy, you can sometimes benefit from a dealer’s urgency to reach their sales objectives.
Pick a car on the lot
There’s nothing better for a sales rep than selling a car off the showroom floor. It creates continuity, there’s not hassling with transport, and the sale can get finalized the same day. The owner walks in and will likely notice there’s a car missing. It clears space on the dealer’s credit line. It’s all good stuff.
You’ll get a bit more off the price if you can focus on a vehicle in the showroom or on the lot, granted the dealer has a lot of them.
Negotiate the price of the car, not the payment
It’s easier to play with the numbers if a buyer is only looking at the monthly payment. Negotiate the price of the car from the top. In other words, don’t say “I want to pay $600 a month max”. Figure out how long you want to be paying for the car, then work on the price from there. For example, tell the dealer that you want 60 months max on your financing, then negotiate the MSRP. If you just give a monthly payment, the dealer can simply increase the length of the contract to lower the cost every month, but the interest cost will skyrocket.
When you’re negotiating the price of your car, you’re negotiating on profit margins. When you add accessories, you’re adding profit margins. Winter tires give an extra $300, tinted windows add $50, a remote starter adds $125, a trailer hitch gives an extra $400, a roof box adds $75, and so forth and so forth.
If you add winter tires, a remote starter, tinted windows, a trailer hitch, and a roof box to that Toyota RAV4 you want, you’ve added $950 in profit margin to the dealer. Maybe the RAV4 didn’t have enough margin for the dealer to take off $1,000 of the price, but if you add all of those accessories it’s now possible.
Use Tools That Can Help
Try Car Costs Canada or Unhaggle. I remember we used to smile at people who came in with a CCC report when I was selling because often times they would act as if they had figured out our ploy to rob them of their hard-earned money when ultimately, the report only confirmed that we didn’t have too much wiggle room on price. Still, when I bought my car recently I checked the CCC report to get the exact dealer cost.
I saw they had about $3,900 in profit margin. I added the tires and a few kid-friendly accessories which give the dealer an additional $600 in profit (by my calculations, at least). I therefore had about $4,500 to play with. I chose a unit on their lot, and also pointed out that they had a lot of these models on the lot, 23 to be exact. With the 2021 models just a few months away, that’s a lot of inventory to move.
Got them to take off $3,000. Add on the manufacturer incentives which I checked beforehand, and I got a healthy $5,000 off in total.
“Only because it’s you”. Yeah right.