4 Key Steps to Negotiating Your Car Deal

Be prepared and you can save on price, financing, trade-in and warranty.

Rick Press | 

Jul 26, 2021 | 8 min read

Capital One

Originally published May 4, 2018

How to negotiate a car deal remains one of the most pressure-packed and dreaded aspects of buying a vehicle for a majority of consumers. In fact, most would “rather do anything else” than engage in a tug of war over price at a dealership, according to a 2016 Harris poll.

But once you understand the nesting-doll dynamics of most car negotiations – it’s actually multiple bargaining sessions living inside a larger one – you can reduce the stress and maximize the savings.

Start by researching and preparing for not one but four key steps in negotiating a car deal at the dealership.

1. Getting the vehicle you want, at the price you want 
2. Finding the right financing
3. Getting top value for your trade-in
4. Deciding on extras and an extended warranty

Consider it the divide and conquer approach to car negotiating. By breaking down each aspect of the deal, you should be ready to negotiate calmly and with confidence.

Negotiation No. 1: Getting the best price (for the right car)

At a garage sale on a sunny Saturday morning recently, I overheard a customer haggling with the homeowner. “Will you take 75 cents?” she asked, holding up a pair of slacks marked $1.

“Sure,” he nodded. Then she moved on to a set of used golf clubs, whittling the price down from $10 to $5. Later, she scored a $5 Crockpot for $3.50.

If only things were that easy at the car dealership.

It’s only natural that we focus most of our negotiating brainpower on getting a fair price, as the garage sale lady. But because the majority of car research and price comparison shopping can be conducted on the internet these days, that research is both easier and more sophisticated than in the past. You’ll probably save way more than she did on that Crockpot, too!

BEFORE THE DEALERSHIP

• Determine your budget, keeping in mind the total cost of ownership over five years.
• Research vehicles online in your price range, narrowing it to one or two favorites. Consider test-driving them at this point, but not engaging in price negotiations yet.
• Car shopping sites like Edmunds, Kelley Blue Book, TrueCar, Car Gurus and Capital One’s Auto Navigator can help you see available vehicles in your area and current market values for new and used cars. Also, check for any manufacturer incentives or rebates and any dealer discount programs.
• Make initial calls and online inquiries and request several dealerships’ best out-the-door price. That includes sales tax and other non-negotiable fees. After crunching the numbers, set your target price. Focus only on the price of the car at this point, not monthly payments.
• Ask dealers to e-mail you their proposals so you’ll have a record if/when you choose to schedule a longer test drive and negotiate car price in person.  

AT THE DEALERSHIP

• Plan your trip to dealerships toward the end of a month, or one of the other best times to buy. It could speed up the process and increase the chance of big discounts.
• If a dealer meets your price (or gets very close), let them know you’re ready to buy “right now.” That also lets them know you’re not interested in a lot more haggling. You’ve done your research, checked with several dealerships and determined a fair price for the vehicle.
• If they’re not getting close to your numbers, or the salesperson continues to go back and forth to their manager’s office, it may be time to leave. Be polite, but always remember it’s your money and you have options.
  

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Negotiation No. 2: Finessing the financing

As average vehicle prices rise and loan lengths grow, it’s more important than ever to shop for the best interest rate if you plan to finance.

BEFORE THE DEALERSHIP

• First, check your credit score and fix any errors on your report before applying for financing.
• Pre-qualify with a bank or credit union, or on sites like Carvana or Auto Navigator, where you’ll be quoted an interest rate for a specific vehicle without any impact to your credit score.
• Check manufacturer and dealer financing incentives. (They are usually reserved for top-tier credit scores, but if you qualify they can provide significant savings.)

AT THE DEALERSHIP

• Let the dealer know you are pre-qualified, but will consider their financing options. Many dealers will try to find you a lower rate, because dealers work with a network of lenders and make a profit on financing. Some may even discount the car more to earn your financing.
• Be prepared to fill out a credit application. If you acquired a credit report earlier, bring it just in case there are any major discrepancies between your report and the dealer’s.
• Once you decide on the best financing option, consider putting more money down or shortening the loan length. Both will lower the total interest you pay over time.

Negotiation No. 3: Getting top dollar for your trade-in

More than half of all car buyers have a vehicle to trade in, according to Edmunds, and it can be a valuable piece of the car deal negotiation puzzle. But it’s important to keep negotiations for the new vehicle and trade-in separate. When they all get fused together, it’s easy to lose sight of what you’re paying for the car and what you’re getting for your trade-in.

BEFORE THE DEALERSHIP

• Assess the value of your trade-in at online appraisal sites such as Kelley Blue Book and Edmunds.
• Take it to a used-car manager at a nearby dealership to get a written quote. National used-car chains such as Carmax or AutoNation will also provide free written quotes.
• Develop a range of what you’ll accept for your trade-in, based on your research.

AT THE DEALERSHIP

• After you’ve agreed on the price of the new car, discuss the trade-in. Keep in mind that the dealer may start low because they are likely to resell the car at a profit.
• If you’re far apart on price, share the written estimates to show you’ve researched its value.
• Trading in your vehicle at the dealership is convenient, and in most states it reduces your sales tax because it’ll be subtracted from the cost of the new car. So you’ll have to factor that into your negotiations. How much is the convenience and that savings worth to you?
• If the trade-in offer remains unacceptable, you could always sell your car privately. Or you could walk away from the deal, which remains an option throughout the negotiation.
  

Negotiation No. 4: Deciding on extras and an extended warranty

Buying a car is more of a marathon than a sprint, so even if it feels as if you’re entering the homestretch when you get to the F&I (financing and insurance) office, remember your car price negotiations are still ongoing. Don’t think of the finance manager as a glorified accountant; he or she is a skilled salesperson who will offer you protection plans, insurance and extended warranty options that could increase your overall cost by thousands of dollars.

BEFORE THE DEALERSHIP

• Research the cost of extended warranties. Most new cars are covered by fairly generous factory warranties, and some used cars will still have several years of warranty left. If you think you’ll want additional protection against the cost of certain repairs, it’s best to know market value for these plans. Also, remember that you don’t have to buy an extended warranty the same day you buy the car. You can always shop around and buy it later.
• Check prices on products such as GAP (guaranteed asset protection) and credit insurance, which are not required coverages. The finance manager may offer these protections, which help cover costs of the vehicle in the event of a layoff, illness, injury, death or total loss. Your insurer may be able to provide coverage at a lower rate.

AT THE DEALERSHIP

• If you are considering an extended warranty from the dealership, negotiate on the total price of the warranty (which can cost thousands, depending on the vehicle), not how much it will cost you per month. Lumping it into the loan can make it appear less expensive, while also adding more to your interest payments. And don’t forget to read the warranty closely; there may be deductibles for repairs and other exclusions and conditions.
• Rustproofing, paint sealant, fabric and tire protection packages and additional VIN etching are just a few of the other extras you’ll likely be offered. Almost all can be purchased aftermarket, so check prices and be ready to negotiate if you want any of them.
• Now is also the time to inquire about fees you don’t recognize or understand as the finance manager reviews the final invoice. Typically, the destination (cost of shipping the car from the manufacturer) and doc fees (title preparation and DMV paperwork) aren’t negotiable, but they should have been included in your out-the-door price. Advertising fees and dealer prep charges, among others, are negotiable, so this is the time to get them reduced or removed.
• The F&I office is also where you should double check all of the figures you’ve worked so hard negotiating, such as the financing rate, the amount for your trade-in, and the total price you’re paying for the car, including sales tax and fees.

Enjoy the dance

How to negotiate a car deal may never be as simple as asking for a friendly discount at a garage sale. That’s why haggle-free car buying options such as AutoNation, CarMax and Carvana continue to grow. Some individual dealerships have shifted to a one-price model as well.

But when you are prepared for each phase of a car negotiation, the entire process can feel less like a tug of war and more like a tango, with you leading.

Rick Press

After a long career as an editor for a major metropolitan newspaper and website, in 2017 I joined Capital One as its Managing Editor for Auto Content. I’ve been fortunate to cover everything from breaking news and Super Bowls to CEOs and celebrities, and now I am excited to explore the connection we all have to our cars and help consumers navigate the car-buying journey. Let’s ride!