How to negotiate a car online in five easy steps.
Buying a new car can be a stressful experience. Of all the steps involved in the process, the negotiation with the dealer is likely to be the least pleasing. I myself had cases where I would have rather spent the time at my dentist having a root canal than spend that hour negotiating with the car dealer. The last two times I did this though, I decided to use the Internet for the negotiation process. The whole experience was much more enjoyable and the icing on the cake is that I got a pretty good deal to boot. I'll be sharing with you what I learned though this experience next. Here are five steps for a better car purchasing experience:
Note: this article is for buyers in the USA market. I realize that the buying process in other countries is very different, and most of this will therefore no apply.
1) Prepare, Prepare, Prepare
Luck favours the prepared in most things in life, and buying a car is no exception. Knowing what car you want (this includes model *and* trim level) and what that car is worth should be first on your list. There are plenty of excellent resources online (kbb.com, cars.com, edmunds.com; just to name a few) so there's really no excuse not to know what a car is worth. Invoice prices are not the end-all they used to be. If you get a price below invoice you are no doing too badly, but I prefer to also look at the "True Market Value" from edmunds.com. This supposedly shows what other buyers paid for a similar vehicle in your area and is a good target to keep in mind when negotiating. If you can buy below TMV, you are probably getting a good deal.
2) Drive the cars you are interested in
This is something you should do *before* starting your online negotiation. You want to be sure that the vehicle that looked so good on paper, also lives-up to the expectations in a real-world test-drive. This also gives you a chance to get a feel for the dealers in your area before you start negotiating with them. Don't feel like you have to make a decision right after you drove the car. It's better to go back home and think about it. Don't let the dealers pressure you into an impulse buy (and you bet they will try; that's their job).
3) Sell any used cars in advance
Do not trade-in your used car. Unless money is no object to you (and if that's the case, you probably don't need to read this article), then you will do much better selling the used car on your own. With free services like Craigslist available today, this is really quite easy to do (see my article on photographing a used car for sale). The dealer has to make a profit on your used car, so they will offer you *much* less than you can get on your own. My experience is that, in some cases, you can sell your used car on your own for more than twice the price the dealer will give you as trade-in.
Another reason for not trading-in your used car is to make your new car negotiation clearer. You may think you are getting a good price on your new car, but if you got a low ball offer on your trade-in, is it really a good deal? Having the used car out of the way will make your new car negotiation more focused and chances are will save you money at the end.
4) Negotiate by email
Now the fun begins. Assuming you followed steps 1 and 2, you should have a very precise idea of what you want to buy. Prepare a "template" email and send it to all the dealers in you area. Use a email account you don't mind getting "spam" on because you'll be hearing from them sometimes even years later... The email should be precise in what you want so the dealers know you are serious about buying a car. Perhaps just as important, state clearly also what you *don't want*. Here's an example:
I'm looking to buy a new [Enter Car Make, Model *and* trim level]. I'm considering the following colors in order of preference: White, Red or Blue [Replace with colors of your preference]. The car must have automatic transmission, power seats and a moon roof. I am not interested in navigation units and I'm not considering used cars at the moment.
I'm planning to buy within two weeks so I would appreciate if you could send me a quote for a car in your lot that meets the requirements above as soon as possible. Please indicate the stock number for the car you are quoting so I can see it online.
Thanks in advance,
Joe Car Buyer
Notice that I indicated a time-frame for when I want to buy the car. The time frame is short enough that they will likely not ignore your request, but long enough to give you some reasonable negotiation time. Remember that time is on your side. One of the advantages of negotiating online versus the show-room is that you can manage time and avoid the pressure. This is very important as any experienced negotiator will tell you. You are negotiating on your terms, in your "territory"; not theirs.
You can use a service like edmunds.com to send a "blast" email to all dealers in your area at once. However, as of this writing, edmunds also requires you to provide a phone number. I prefer to email the dealers directly through their websites so I don't have to give my phone number to them right away. Towards the end of the process I might give my cell number to the dealer with the best offer, but at the start you don't want to be pressured with numerous calls. After all, the whole point of negotiating by email is to avoid the pressure.
You will normally get a quote from most dealers within 24 hours. In some older online articles, some bloggers advise you to take the lowest offer, print it and then take it to the dealer (or a competing one as most of them will match it). While this was fairly good advice a couple of years back, I am convinced most dealers have caught-on to this technique and will not make a very good offer on their first "round". This is also in keeping with a key principle in smart negotiation: "never take the first offer". What I'll do is I'll email other dealers and tell them that I've received a better offer from one of their competitors. Then I'll ask "can you beat this offer"? Normally they will. Repeat this process for a couple of "rounds" until you are at or below the "True Market Value" for your car. Towards the end most offers will "converge" around a similar number. After all, they do have to make some profit on the deal as well, so don't stretch the process too long. I've found that in most cases a week is plenty of time to reach a good price with email negotiation.
Make sure the dealer provides you with a stock number for the car they are quoting. A common "trick" some less scrupulous dealers will use is to quote you on an "unspecified" car that will strangely no longer be available once you get to their premises... While there is no guarantee this won't happen to you, you increase your odds by making them quote you on a specific vehicle with a specific stock number.
5) Seal the deal
You are almost done. Make sure you print your best offer and other relevant email exchanges with your dealer of choice and head over to the show-room. Test drive the car you are buying to make sure it is what you want, and seal the deal. Very little to no negotiation should be needed by now if you are dealing with an ethical vendor.
Warning: at this stage of the game, when a price was already agreed upon, buyers cross a "threshold" of resistance that sales people sometimes try to take advantage of. Any good salesman knows that, once you settled on a price, your brain is no longer in "fighting mode" and thus is more receptive to be sold little extras like that "extended warranty" or the "clear coat protection". Most of the times these are high-profit items for the dealers but with very low value to the purchaser. Avoid these "post-sale" deals and just say no. One technique I've used is to go to the dealer near closing time when they are already tired and wanting to go home for the day. This usually minimizes the time they will spend pressuring you on this type of "deals".
Now you are done! Hopefully, by following these five steps, your car buying experience was more pleasurable and you got a fair deal in the process. Enjoy your new vehicle!