Negotiating a car price

In short

A friend of mine once bought a car in a single afternoon and spent three years wishing he had waited a day. You can do better, and you do not need to be a tough talker to do it. Start by getting a price in writing from two or three dealers before you ever set foot on a lot. Ask for the out the door price, which is the full total with every tax and fee included. Keep the talk about the car, the trade in, and the loan in three separate pieces. Arrive with a loan offer from your own bank or credit union in your pocket. And know that you may always stand up, say thank you, and go home.

The whole of it

What it is

I once watched an old farmer haggle over a single mule for the better part of a morning, and both men shook hands smiling when it was done. That is the spirit worth aiming for. Negotiating a car price is simply a friendly conversation about what a fair total should be for a vehicle you want and a seller who wants to sell it.

You have probably noticed that a car has more than one price. There is the sticker price, which the maker suggests. There is the invoice price, which is roughly what the dealer paid the maker, though it can hide some extra payments the dealer gets back later. And there is the price you actually pay, which is what matters to your wallet.

The out the door price is the one to keep your eye on. It adds the agreed price of the car to sales tax, title and registration fees, and the dealer's paperwork fee, often called a doc fee. It also includes any add ons you accept, such as an extended warranty or paint protection. When you compare offers, compare that one number. It is the honest measure.

Good. Now you know the field.

How it works

If you are holding a list of cars you like, the first move is a quiet one. Look up what similar cars are selling for near you. Free tools from Kelley Blue Book and Edmunds show market prices. The Federal Trade Commission has a plain guide called Buying a Used Car that explains your rights on a used lot. These give you a sense of the ground before you visit.

A friend of mine once said that the best phone call he ever made was a polite one. You can make it too. Email or call the internet sales desk at two or three dealers. Ask each one for a written out the door price on the exact car you want. You are not being rude by asking. You are being careful, and many sellers respect a careful buyer. Seeing a lower quote from another dealer can make a seller more willing to work with you.

Then comes the part many folks miss. Treat the purchase as three separate deals. The first is the price of the car. The second is what the dealer will pay for your old one, if you have one to trade. The third is the loan. When a salesperson blends them together, it becomes hard to tell where the money is coming or going. Settle the car price first. Then talk about your trade in. Then talk about financing, if you still want theirs.

That is why a loan offer of your own is worth its weight. Before you shop, ask your bank or a credit union what rate they would give you. The Consumer Financial Protection Bureau offers a guide on auto loans that walks through what to look for. With your own offer in hand, you can say, kindly, that you already have financing and would gladly see if the dealer can beat it. If they can, you gain. If they cannot, you still have your own loan.

One more habit helps. When you sit down to talk numbers, be pleasant and be patient. Say thank you often. A person who feels respected is often more willing to help. There is no need to hurry your signature. Time is the one thing the seller hopes you will not spend.

The numbers, and where to find yours

Some of the figures in a car deal are set by law or by your state, and they change over time, so I will not guess at them for you. Your sales tax rate on a vehicle is one of them. Look up the current rate for your state and county at your state's revenue or motor vehicle office. For the federal tax credit on certain electric and plug in cars, the rules can change, so check the Internal Revenue Service at IRS.gov for the current details. The Department of Energy also posts information about these vehicles at fueleconomy.gov, which is mainly a guide to fuel economy. For anything tied to a yearly limit, the site will show the verified figure here: the current figure, which the official source publishes each year and the current figure, which the official source publishes each year.

Your own numbers are easier to find. Your credit score comes from the credit bureaus, and you can get your credit reports free at annualcreditreport.com, which is the site the federal government points to. Your loan rate depends a good deal on that score. Your monthly budget is something only you know, so sit down and write it out honestly before you shop. Decide the most you can pay each month and the most you can pay in total. Then hold to it.

A worked example

A neighbor of mine named Denise wanted a used sedan, and she was nervous about the whole business. She did her homework first. She found that similar cars near her sold for around 18,500 dollars on the market tools she checked.

She asked two dealers for an out the door price on the same car. The first dealer wrote back with 19,900 dollars. The second wrote back with 19,200 dollars. She thanked them both and asked if either could do better.

Then she visited her credit union and got an offer for a loan of 17,000 dollars at 6 percent for 48 months. She also had 2,000 dollars saved for a down payment.

She went back to the second dealer and said, kindly, that she liked the car but had seen a lower total elsewhere. The dealer came down to 18,800 dollars out the door. Here is how the math worked for her. The out the door price was 18,800 dollars. She paid 2,000 dollars down. So she needed to borrow 18,800 minus 2,000, which is 16,800 dollars. That was under the 17,000 dollars her credit union had approved.

Her first quote was 19,900 dollars. Her final price was 18,800 dollars. The difference is 19,900 minus 18,800, which is 1,100 dollars saved. She did not raise her voice once. She simply asked, waited, and said thank you.

Where it goes wrong

I have seen good people trip over the same few stones. The biggest one is talking only about the monthly payment. A salesperson can make almost any car fit a monthly number by stretching the loan longer. A longer loan means more interest paid in total. So always ask for the full price first, then the payment.

Another stone is the add on. Once you agree on a price, you may be offered extras like a service contract, gap coverage, or fabric protection. Some of these may be worth it for you, and some are not. You do not have to decide in the finance office with a pen in your hand. Ask for the cost in writing, take it home, and think it over. The Federal Trade Commission has plain guidance on these products on its consumer site.

A third stone is skipping the trade in check. Before you visit, find out what your old car is worth by getting offers from a few buyers. Then you will know a fair number when the dealer names theirs.

The last one is feeling pushed. If you feel rushed, that is your cue to slow down. Walk away. Truly.

Questions to answer before you leave this page

What is the most you can comfortably pay each month, and what is the most you can pay in total? Have you looked up what similar cars sell for near you, and do you have that number written down? Have you asked your bank or credit union what loan rate they would offer, and do you know your credit score? Do you have written out the door prices from at least two dealers on the same car? Do you know what your current car is worth before you talk about a trade in? And are you ready to say thank you and walk away if the deal does not feel right?