Wednesday, September 30, 2015

Purchasing a Used Car - The Art of Negotiating

Buying a used car from a car dealer can feel like you're going battle with them.
Here is my experience, and how I got roughly 17% off a used car from a dealership here in Louisville, KY.

The dealership that I went to (whose name I'll leave anonymous, but anyone in Louisville can tell by the picture) get's a 4/5. They are your classic dealership because they will get you if you're not careful, but if you are on your toes, you can make a good deal. In the end they earned my business.

First of all, let's examine the salesman.
Ours was was friendly enough. He was a younger fellow, and said that he had been working there for about 5 months. He was a little bit on the quiet side, but was honest and overall pleasant. However, he could have tried and connect more with customers. Apart from this, the importance of the salesman is to basically play messenger between you and the manager. Once you start negotiating, he will take your offers to the dealer IF HE THINGS THEY ARE REASONABLE. Now, here is the trick. Lets say you offer 20% less than the starting price. He's going to laugh at you at first and say there is no way his manager will consider that.  So start of with the following rules:

Rule #1: Do not let the salesman take charge of the negotiations. If he says no way, push your starting price and tell the salesman that there is no harm in asking your manager. In the end, he will reluctantly go to his manager, and probably come back with a price that is closer to your target.

Rule #2: KNOWLEDGE IS POWER. In order to get them to come down off of their price, you have to give them good reasons why. Start off with knowing the KBB retail value of the car. Then, know the trade-in value as well. This is important, because if they say "We can't go that low because we need to make a profit", you can say, "My asking price is still $2000 higher than what the trade-in value is, so you are still making a profit".
Also, if there is ANYTHING wrong with the car, push that until you're blue in the face. Any dents, scratches, malfunctioning windows, broken buttons, stains, smells, rust, leaks, old tires, missing spare tires, broken lights...the list is endless. My point, is to nitpick it to death. Because if you don't discover these flaws on your own, they certainly will not be telling you.

Rule #3: Ask to see the CarFax. Some dealers, like this one, only print off the AutoCheck form for you to see. This may seem like a CarFax, but under closer inspection, it will not show you ANY maintenance records. All AutoCheck shows is when the car's title was renewed or when it was sold. CarFax shows this, PLUS when it had any work done on it. This is important, because you want a car that was well maintained (look at the frequency of the oil/filter change) and free of any major red flags (rebuilt, replaced transmission, crappy brake jobs).

Rule #4: Ask for an inspection record. This is important to get in addition to a CarFax, because the mechanics at the dealership are required by law to report any flaws in the vehicle that they see upon inspection. If they don't have one, ask to take it to a mechanic and have it looked at. A dealership should have no issues with this. If they do, that's a HUGE red flag.

Rule #5: How long has it been on the market? When you ask "How long has this car been on your lot?" many dealers will say something like "We just got it in, or not too long", and be overly vague about it. Because if the car has been sitting in their lot for a while, then that gives you wiggle room. They don't want that car much more than 30 days, and some dealers will sell at auction if its there for more than 60 days. Also, if the car has really only been there for a few days, that can work in your favor too. You can say "I will take this car off of your hands now, and save you the time and expense of keeping it here on your lot, and it allows you to bring in another car that might be better for you to sell". Cargurus is a good site that shows how long a car has been on the market. You can also tell by looking at the CarFax and seeing when it was put up for sale or sold at auction.

Rule #6: Know how they acquired the car. If a car was bought at auction, then that means they bought it for probably far less than the KBB trade-in value. That gives you a good bargaining chip because you can use that knowledge to bring them farther down on their price.

Rule #7: Make it personal to them. If you bring up a negative point about the car, such as bad tires, they may say, "Well its still got a good 10,000 miles left on them", you turn around and say, "I'm concerned for my safety, or my family's safety. Would you really put your own family at risk because of a car that needs new tires?" That's hard for them to dispute.

Rule #8: Make your presence known. If they give your grief saying things like "Well another person will come in and buy this car for a higher price", you can say, "I'm here RIGHT NOW and will buy this car if we can settle on a deal that makes me, the customer, happy, and in the end, gives you a profit".

Rule #9: Take control and give them the option: If you see something wrong with the car, give them the option of either fixing it themselves, or lowering their price so you can pay to have it fixed. Probably more times than not, they will opt to come down on their price because they don't want to fool around with it any more than they have to.

Rule #10: Let them know this is not your first rodeo. Tell them that you're still looking at other cars and have other options that are appealing to you. You can add that you're in no hurry to buy and have been doing a lot of research into different vehicles. This defuses their ability to try and exploit your eagerness to drive home with a car today. It also makes them aware that you mean business and won't be scammed out of your money.

Rule #11: Know at what price to start negotiations. Your first offer will be ridiculed. That's a good thing. I always like to start at least 20% less than what the asking price is. Also, make sure that their asking price is within the KBB range. If it's not then, go off of 20% less than the suggested retail price of KBB. Then only increase your offers in small increments. Don't jump 400 or 500 dollars. Only increase 100 or 200 at most. When they say, "Our prices are based off of the local market value", you can say, "I don't care about local prices. I care about the price I pay right here, on this car, right now." You can also add, "Those figures that you're stating are higher than than the KBB, and I want to stick around that range".

Rule #12: Don't fall into the "Low Payments" Trap: Many dealers will try and shift your attention away from the overall price of the vehicle and have you focus solely on the monthly payments and how "amazingly low they can make it for you". Ignore this completely! The lower they make your payments, the longer they have you, and the more interest you'll end up paying. So in the long run, they will make much more money off of you. Make the focus on the price of the car only. Then, after you're happy with a price you can discuss monthly payments (if you end up financing through them).

Rule #13: Be polite and pleasant, but firm. Even if they come across as an an asshole, don't become one yourself. If you are friendly to the salesman and the manager, they are more likely to work with you. Also, don't be afraid to sound pushy. If the dealer doesn't like what you're saying, that's because he wants all the money he can squeeze out of you. You have to realize that these people do this same thing daily; they say the same things to every customer and use the same tactic all of the time. They have it down to an art. They are 100% business. So you have to know how to beat them at their own game, but also remain professional about it. Finally, even though they are car salesmen, they are people as well. While you want to be respected as a person, you should extend them that same courtesy as well. You may be surprised by how far professionalism and respect can get you.

In the end, it really comes down to a power-struggle. As soon as you drive into their lot, they have you. But, you can turn the tables on them if you've done your homework and are not afraid to stick to your guns.

In my own personal experience, my wife and I just bought a 2008 Nissan Sentra that was listed at $8800 for $7300. That's a 17% decrease.
Good luck!

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