JavaScript must be turned on in order for this site to display properly.

Personal and Business Banking

Auto Buying Step by Step

Chapter 6: The Negotiations

  • Summary
  • Article

Chapter 6: The Negotiations


  • What you may hear
  • How to respond
  • How to make sure you get a fair deal

Negotiating with the Dealer the Right Way

Stay in control, keep things simple, and never be pushed. The following steps will help you.

  1. Make an appointment with your salesperson.

    These men and women work hard and work on commission. If you liked the person who waited on you on your first visit, go back.

  2. Put these pieces of information on a summary sheet.

    • The wholesale value of your trade-in if you're trading

    • Your Available Cash figure

    • Your maximum offer on the one car you like

    • Your maximum difference figure, if you're trading

  3. When you arrive at the dealership, ask to go to the salesperson's office.

    You take the initiative; you take control of the situation. Tell the salesperson you are definitely going to buy a car, but not necessarily from that dealership. Say there are other cars you like as well as this one. Why say this? To increase your bargaining power.

  4. If you have a trade, ask to have it appraised.

    You want the dealer to commit to a wholesale value on the car before you negotiate other parts of the purchase. Do this before you discuss the new car at all. Keep the transactions separate at this point.

  5. Agree on the wholesale value of your trade.

    If the dealership offers you as much or more than your car's true wholesale value, proceed to the next step. If they won't give you true wholesale, sell the car to the used car source that put a price on it, sell it yourself (the best idea if you have the time), or go to another dealership.

  6. Make an offer and be prepared to negotiate on the new car.

    You've finished talking about trades. You've agreed what they will pay to buy your car. Now it's time to see what you must pay to buy their car. Two separate transactions. Your goal now, using the cost of the car you like, is to set the scale of bargaining in your favor.

    How do you do that? Whatever your first offer, expect the dealership to counter offer. And don't be afraid to counter offer yourself – just offer a very small amount of money. The conversation might go like this:

    Salesperson: "What if I could give you a ten percent discount?"
    You, the smart shopper: "No, let's do it my way. I'll offer you $15,000. Invoice cost on that car."
    Salesperson: "But, my boss will never accept that!"
    You: "Well, why don't we offer it and see? I'll even sign a buyer's order saying I'll buy at that figure."
    Salesperson: "Okay. Let me fill out this sheet. And I'll need a deposit before I can take this offer to my boss. To show him you're serious, you understand."
    You, very firmly: "I'm sorry, I won't give you any deposit until my offer is approved in writing."
    Salesperson: "But we're not allowed to do it like that."
    You: "If you can't, I've got an appointment at a dealership that will."

    The salesperson leaves, then returns and agrees to do it your way. You've offered $15,000. They now ask $20,000.

    You: "I'm sorry, no. How about $15,025."
    Salesperson: "What?"
    You: "Okay, make that $15,030."

    Do you get the idea? Set the scale of bargaining in your favor. Be raised a time or two, that's part of the game. But don't be raised much. And don't give a deposit until your offer is approved in writing. Dealerships use deposits simply to make it harder for you to escape. Some dealerships, rather than taking money, will ask for your driver's license or credit cards as a deposit. We advise against that.

  7. When you reach agreement and you are looking at a completely filled out buyer's order, compare the amount due line to our difference figure.

    If you don't see this figure, ask the salesperson. Make sure it includes tax, tag, title, and any other dealer charges. Are you on budget? If this figure is below your difference figure, you're home free. If it's above it, stop the transaction. You've just gone over budget.

  8. If the difference figure is okay, give a small deposit.

    Dealers will ask for hundreds or thousands, but, unless you're asking them to order a Cadillac without air conditioning or to paint your car pink and green, don't do it. Any amount of money makes a contract legally binding. $50 should be enough.

  9. Now be prepared to deal with one or two or even three other salespeople.

    Even if you're paying cash or you have a credit union check in your pocket, many dealerships will insist you to talk with finance managers (also known as financial counselors or business managers). They'll also have you talk with their after-the-sale manager. This might be a separate person or the finance manager. As we noted earlier, this person will try to sell you warranties, "protection" packages such as rust proofing and undercoating, and add-ons such as alarm systems. Do not buy them on impulse.

  10. What about dealer insurance, protection packages, warranties, and other add-ons?

    At times, it might be sensible to buy extra rust proofing and undercoating protection – though many consumer groups doubt the need for extra protection, and it will void manufacturer warranties in many cases. Do your homework up front.

    And at times an extended warranty might make sense – though manufacturers' warranties are good these days. But it never makes sense to spend hundreds and thousands more than you need to for these products. Unfortunately, some dealerships are now trying to charge $1,200 and more for rust protection they used to sell for $200; they're trying to sell $300 warranties for $1,900 or more. We don't think you should spend that type of money without very carefully comparing products. Who wants to throw away an extra $2,000?

    • How to handle the pressure.

      If you're buying, StreetWise recommends a simple approach for evaluating the value of dealership financing, insurance, protection packages, warranties, and other add-ons. After the sales pitch, which invariably presents dealership products and services as the cheapest and best, simply say something like this.

      "That sounds fine. And if your loan and products are cheaper, I'll certainly finance with you. Now, would you mind giving me a copy, completely filled out, of the contract you want me to sign so that I can compare it to other sources?"

      Banks will be happy to give you exact figures. DCU will be glad to do that, too – to tell you exactly what we will charge for the loan itself, life insurance, disability insurance, and warranties. If the dealership is cheaper, shouldn't they be willing to give you these figures, too? To the penny?

      If the dealership does that, the credit union will be happy to help you compare costs, and will send you to another source if they're cheaper. But if a dealership won't give you the details, what does that say?

    • Be Prepared For The Leasing Switch

      And don't forget, this is the time a dealership may try to switch you to leasing. Don't automatically assume it is a good deal for you. Read our StreetWise Online Leasing Guide.

  11. After you're finished with the finance salesperson.

    Don't celebrate quite yet. If you're financing at the dealership, many will insist that you take the car home that minute. Remember that's called spot delivery. But don't do it. Go home and diffuse a little. Check the dealer's figures again. Check the car over carefully and give the dealership time to fix the little things wrong with any new car. Make a list of the squeaks, rattles, sticking knobs, and scratches, and have them fixed before you agree to take the car.

    If you're financing with DCU and you've come to us first, you'll most likely already have an Auto Loan Check to give the dealer. If you didn't come to us first, applying is easy online, by phone, or in person. You'll get an answer on your application quickly and we'll have you ready to roll in 24 hours or less.

  12. When you finally pick up your new car.

    Check it over carefully. Don't look at it in the rain. But if everything is okay, smile. You did it the right way and saved a lot more than change!

Is it worth all this work?

If you care about your money, safety, and sanity, it's more than worth it. And during this whole process, we hope you'll notice that in a business filled with pressure, hype, and confusion StreetWise is an oasis from it all. Thanks for joining us!

Here a few other things you can do while you're here:

Used-Car Buyers: Head to our used-car section for a buyer's guide.

Thinking About Shopping Right Now? You can see if you're already approved for a DCU auto loan by logging onto DCU Online Banking. The answer is in Account Manager (click the button at the top of the Account Summary screen. If you're not yet approved, don't be concerned. Applying is fast and easy at any branch or, 24 hours a day, you can apply online or by phone at 800.328.8797 (select 3).