How to Negotiate a Car Deal – Explained

Tips for Negotiating a Used Car Purchase

car deal negotiationBuying and negotiating a car deal is one of those things in life that most people don’t look forward to — because it’s often stressful and, at best, unpleasant.

Car buyers know that they should always negotiate and haggle for the best price but nobody (except car dealers) do it every day and it’s not a skill that we all possess or get to practice very often.

Besides, the rules change from time to time.

First, let’s understand what we’re up against when buying a used car, either from a dealer or from an individual seller.

Buying from a used car dealer

A car dealer gets his used cars from trade-ins, from other dealers, or from used-car auctions. He pays “wholesale” prices, so that he can sell for “retail” price and make a profit. It’s the way most businesses work.

A dealer knows what he paid for each of his cars, and he knows how much profit he wants to make. Therefore he knows the “selling” price he wants to set for those cars.

New-car dealers who also sell used cars typically make more per-car profit on used car sales than on new-car sales.

He’ll probably add a little additional “markup” and set an “asking” price, or sticker price, to allow for customers to negotiate and  “talk him down” on the price,  and still make his desired selling price. The additional markup could be 10%-20% of the sticker price and is completely determined by each dealer. It is not a  standard amount or percentage.

Dealers often use car value guides or “black book” values to know how much cars are worth, both wholesale and retail. These are similar, but not the same, as guides such as Kelley Blue Book (KBB.com) and NADA Guides (nadaguides.com) that are available to the public. Values can vary depending on region of the country, time of year, and the laws of supply-and-demand.

So, how do we negotiate a used car’s price when we don’t know how much a dealer has paid, how much he wants to make in profit, or how much additional markup he’s added to account for customer negotiation? What’s the best we should expect?

Your objective should be to pay a fair price for the car you’re considering buying. A fair price will depend on a number of factors:

  • make, model, year, style and equipment
  • mileage
  • condition
  • title status

You can get a good idea of a car’s value from the previously referenced value guides from Kelley Blue Book, NADA Guides, Edmunds.com and others. These are educated valuations and can vary from guide to guide.

And remember that dealers’ values won’t necessarily agree with the guides you use. But it’s the best tool you have for determining an approximate fair price.

If a dealer is asking more than the price you determine to be fair, then use the information you’ve found to try for a better price, remembering that he most likely has a 10%-20% markup that he’s willing to give away, if asked.

Another way to get a better price is to look for problems with the car that the dealer hasn’t taken into consideration. For example, if you have a professional mechanic inspect the car and give you a written report of problems, use those problems as justification for asking for a lower price — assuming you still want the car after learning of its problems.

Also get a Carfax or Autocheck vehicle history report, which the dealer might give your for free. Look for any history of accidents or poor maintenance that might give you additional leverage in your negotiations.

Generally speaking, if you make a dealer an offer and he doesn’t appear to accept it, and you use your most powerful negotiation tool — getting up and walking out — the dealer will call you back if he has a better deal. If he doesn’t come running after you as you walk out the door, you can probably assume his last offer is the best offer you’ll get from him.

Buying from an individual private seller

Negotiating a car deal from an individual seller is very much the same as negotiating with a dealer, as we have described above. However, there are some important differences.

Often, private-party sellers often don’t know the “book” value of the car they’re selling. In that case, their “asking” price may be significantly higher or lower than the values you might find in a value guide such as those from Kelley Blue Book or NADA Guides. If higher, a seller can unrealistically believe his car is worth more than current market values.

Sometimes, even when a seller knows his car’s value, he may be desperate and be willing to sell for a much lower price, with little or no negotiation.

All the recommendations we’ve made previously apply when buying from a private seller:

  • use a car value guide to get current market prices
  • get a Carfax or AutoCheck vehicle history report
  • have a professional mechanic inspect the car and give you a problem report
  • use all the above information to negotiate a fair price

If the seller is not willing to negotiate and sell for a fair price, you can always use your most powerful negotiating tool — you can walk away and find a better deal elsewhere. Always leave your contact information with the seller so that he can call you if he changes his mind.