Can You Negotiate New Car Prices?

Can you negotiate new car prices? It's something many car shoppers want to know. Here are some things to think about before you start negotiating.

Liz Froment | 

Mar 9, 2022 | 6 min read

Shutterstock

It's a question many car shoppers want to know: Can you negotiate new car prices? The short answer is yes. However, for many, even the thought of negotiating new car prices can seem intimidating.

Treat this experience like any negotiation and go in with a plan. The more thought you put into it upfront, the more confidence you'll feel about speaking with your dealer about the price of your new car.

Here's what you need to know to start hatching your negotiation plan.

Key Numbers to Know Beforehand

Invoice price? Manufacturer's suggested retail price (MSRP)? Which number is right? When it comes to determining the price of a car, there can be a lot of confusion around the numbers involved. Start with a basic understanding of some of those key terms, so you know what they mean before you start negotiating.

• MSRP: The MSRP is the retail price chosen by the manufacturer. When you go test-drive a car, this is what you'll see on the sticker in the window. You'll often see the "sticker price" referred to in commercials or by dealerships
• Invoice price: The dealer's invoice is what the dealer paid the manufacturer for the vehicle. In most cases, the dealer's invoice is lower than the MSRP. Knowing the difference between these two numbers for the vehicle you want is a good place to start your research. Finding the specific number can be challenging, but several online resources can give you data points to start with
• Local market rates: The final number to research is the local market rates for the car you want to buy. Car prices can fluctuate depending on various factors, and location is one of them. A little bit of time researching vehicles can help you see the ranges your make and model is going for in your area. Having a handle on these numbers can make the negotiation process easier

What else should you consider?

Of course, there are some other things to think about before you start to negotiate new car prices.

• Budget: A good place to start is with your budget. While the MSRP and dealer invoice will highlight the car's total price, you may want to think about it in terms of the maximum total car price you can afford to stay within your budget versus focusing on only looking at monthly payments. Avoid getting stuck on payment amount during a negotiation as well, since stretching out loan terms can target a loan payment amount, while drastically increasing the total amount you pay over the life of the loan
• Financing: If you're planning on using bank or dealer financing to pay for the vehicle, consider those costs, too. Many people shop around with a few lenders to present to the dealer to get a better rate. You may also think about getting pre-qualified to show the dealership you're a serious buyer
• Cash on-hand: Your trade-in, if you have one, or down payment can also be a factor. Having a down payment is one way to help secure a loan. It shows you've got funds on hand, which helps reduce a lender's potential risk. The funds you have available to put toward the vehicle can help your negotiations
• Features: You want to narrow down not only the make and model of the car you'd like but also the features. The car you test-drive off the lot could be fully loaded with all sorts of features you may not want or need. Usually, these features and their costs are in the sticker price, so you can subtract them and get a ballpark figure
• Rebates: Depending on the manufacturer and the dealer, there also may be rebates or other special incentives available. Common ones might be $500 cash off on a new car or incentives for teachers or veterans. Keep an eye out for those as you do your research; it may be something that can come up in negotiation

Keep The Big Picture In Mind

As you prepare to start the negotiation process, take a step back and review your numbers. You've done your homework. You know the vehicle and the features you want. You understand the different pricing structures, and you've put yourself in a good position for financing.

All of this information can help you as you negotiate with your dealer. Knowing that the price is often flexible and feeling confident with your budgeting and financing options can help you work with the dealer to find a price that makes everyone happy.

Remember, negotiating with a dealer over a new car price is fundamentally the same as any negotiation. The dealer still wants to make money, but by approaching the process better informed, you can apply traditional negotiation tactics to a new car purchase as well to get the best deal possible.

How Do You Negotiate a New Car Price?

Test drive a few examples of the vehicle you want, if that's possible, and then head into the dealership when you find the one with all the right options and non-negotiable features. It's best to come into the process of negotiation already having driven the vehicle you want. You want your visit to be about negotiating the price of the one you want.

First, you'll want to focus your discussion with the salesperson on the topic of the vehicle you want, and work initially on the price of the new vehicle. Try to stay focused! Though a dealer may want to steer you into a conversation about monthly payments, redirect to total price and try to agree upon a number.

Once that's done, then you want to let them know if you already secured financing, or if you will be paying with cash. Wait to bring this up until after the price is agreed upon, since some dealers make money off of the financing process, and will be less inclined to offer you a lower price if they already know you've secured financing elsewhere. If you have the time, it might be a good idea to let them present a competing credit offer. Examine it carefully to make sure the terms are the same as what you already secured.

The process can be as simple as that, especially if you don't have another vehicle to trade in. If you do have a trade-in vehicle, it's smart to plan ahead and get several offers from local dealers or online car-valuing services so you have a realistic idea of how much your vehicle is worth.

So, can you negotiate new car prices? Now you know the answer is usually yes. As nerve-wracking as it may feel at the start, going into any negotiation with your research and a game plan can help you feel a lot more confident in your approach.

Liz Froment

I love learning about money — deals, financing, and what to avoid. All that came in handy after my own extensive car search, where I put everything I learned about the financial side of things to use. That's where I can help you too. I want to give you tools to help you find the best vehicle that will fit your practical and financial needs.