Long (and stolen from another forum but edited for my additions/content) post, but this was the process I recently followed purchasing a 2019 Honda Accord Hybrid Touring, ended up getting it at about $400 under invoice price. It worked very well, and I'll do it each time moving forward. Very happy with the new Accord.
1. ***DO NOT GO TO THE DEALER, EXCEPT TO TEST DRIVE OR TO BUY*** You’ll understand why by watching a few YouTube videos posted by Steve Richards. He’s a car sales consultant who goes around training dealers on how to manipulate customers to get the best deal (for the dealer). It’s fascinating work and represents the tactics that dealer salespeople will use against you.
2. DO YOUR HOMEWORK. Resources such as Consumer Reports provide reviews and reliability reports that can help shape your decision making. Beware of misleading awards/achievements that dealers advertise. They’re dubious at best. “SUV of the year” doesn’t mean anything if reliability of the brand is below average. “Ranked #1 in Initial Quality by JD Power” only means that it was really nice when measured during the initial 30 days of ownership. How useful is that?
3. PICK 2-3 VEHICLES. Narrow down your choices. It will give you more flexibility in the negotiating process. Plus, the vehicle that looks great on paper might not be that great when you test drive it... Test drive each and determine which you like best.
4. DETERMINE TRADE-IN VALUE. If you have a trade-in, look up the estimated value on KBB. You’re going to get less selling it to a dealer than if you sell privately. However, the times savings and decreased risk of liability that come with selling it to a dealer are worth it for most people. Take your trade-in to CarMax for a free appraisal. While waiting, you can test drive used versions of whatever models you’re interested in. Once you have an appraisal in hand, it’s good for 7 days. Use this later in the negotiating process once you’ve reached a final price on the car you want. If the dealer can’t at least match the CarMax price, no problem, sell it directly to CarMax. *Note: CarMax appraises low and sells high. Dealers know this. You can use this to your advantage to get the dealer to buy your car. They can still mark up the price and make money from it, just like CarMax does.
-Again, do not discuss a trade-in with the dealer until you’ve reached a final price on your new car. There’s a good chance that they’ll ask. You can respond with a simple, “I want to focus on the out the price on this new car.”
6. GET PREAPPROVED FINANCING AHEAD OF TIME, but BE OPEN TO FINANCING THROUGH THE DEALER. In my last three car purchases, I've financed through the dealership for an additional incentive, and then I pay the car off immediately. Verify no pre-payment penalty. Either way, walk in the door knowing how you can best pay for the car, but keep options open. Don't pay cash just to pay cash... you can probably save another $500 in financing incentives.
7. DETERMINE PRICING. Once you’ve settled on the car, figure out the invoice pricing. This is the price that the dealer paid for the car. KBB provides this for free based on the make, model and trim that you select. They will also show you the average sales price for your area, BEFORE rebates/incentives/taxes/etc. This is important info to know. Dealers will always work off of MSRP. This is an arbitrary number… hence the S = “suggested.” By going off of this inflated price, the dealer will manipulate the numbers to show that you’re getting a good deal based on percentage off of MSRP. It’s bullshit, don’t listen to it. Focus on the invoice price. Odds are that you can negotiate below invoice, but you have to be patient and not seem desperate (note: there’s less flexibility if it’s a first model year or redesign). The dealer still makes money through hidden manufacturer incentives such as holdback (ironically, it’s tied to MSRP… usually 2%) and bonuses from meeting sales quotas. Also pay attention to rebates and incentives. Most manufacturers offer a military rebate. It’s important to know that rebates come from the manufacturer and not the dealer’s bottom line, because dealers try to use the additional savings from the rebate to justify that they can’t go any lower in price. I deliberately did not request the military rebate until after I had come to terms on a fair out the door price. This really pissed off the dealer, but again, it’s not their money. The $500-1,000 rebate comes from the manufacturer.
8. NEGOTIATE ONLINE. Lookup the internet sales folks at each dealer in your area and send them an email along the lines of: “I’m ready to purchase a 2018 MAKE/MODEL/TRIM/COLOR/ACCESSORIES this week. Send an itemized invoice that clearly annotates the total out the door price. Whichever dealer gives me the lowest price will earn the sale. Look forward to hearing back from you today.” The more dealers in your area, the bigger your negotiating power. This varies by brand. You’re going to have a lot better luck with Toyota, than a smaller brand like Subaru or Land Rover.
9. MAKE THE DEALERS COMPETE FOR YOUR BUSINESS. You’re going to need to negotiate via email to ensure that the price is closer to what you’ve determined in step #4. Once you have a fair price from one of the dealers, send it to the others and challenge them to beat it. Emphasize that you’re ready to buy, so they know that you’re serious and not wasting their time. If none of them are willing to go down, you’ve still got a quote for a fair price. Best case, you save a little more money in the process. *Note: This takes some time. Anticipate about a week, and up to 20 emails per dealer. If you can time it right, the last week of the month works best. Dealers want to end the month with the maximum number of sales, as that’s how they receive additional compensation from the manufacturer.
10. CONFIRM THE DEAL. Once you’ve received the best quote. Review all of the line items carefully and get the dealer to confirm that there’s nothing hidden. They may offer you a car that has unwanted accessories and try to charge you for them. Within reason, it’s perfectly acceptable to refuse to pay for them. This is another opportunity for the dealer to squeeze profits. A good dealer isn’t going to miss a sale over this.
Next, get the offer in writing, via email. Check the numbers carefully and make sure that they’re correct. Once complete, call the dealer to let them know that they’ve earned your sale, request that they hold the vehicle and schedule an appointment to sign the sales contract. Set expectations… emphasize that you don’t want to waste the salesperson’s time or your own. When you come in, you expect the vehicle to be available and for the paperwork to be ready, as discussed. If anything is out of the ordinary when you arrive, you’re going to walk out and do business with dealer X who gave you the next best price.
*Note: You do have to pay the document fee required by each state. It’s $300 in MD and $699 in VA. Use those differences to drive down the price in Step #5. The dealer that I ended up buying from was in VA. I got them to match a lower quote from a dealer in MD and they lowered the price of the car by $399 to account for the difference in doc fees.
-Taxes and registration are based on your state of residency.
11. SIGN THE SALES CONTRACT. Based on timing, you want to take delivery of the vehicle during daylight hours. This is the time to do a final inspection of the vehicle. Any scratches, stains, etc. should be annotated and corrected before you take ownership. Yes, we’re talking about a new vehicle, but you never know what can happen in a lot crowded with inventory.
12. BE PATIENT & HAVE FUN. Dealer salespeople are experts in psychology when you’re in the showroom. This is your opportunity to have some fun and turn the tables on them. There’s hard work involved to make this happen, but it shouldn’t be stressful. Remember the solo test drive advice? Every dealer made an issue with this. The first one said that it’s against their policy. I abruptly ended the conversation and started walking to my car. The salesman ran after me and apologized. 10 minutes later I test driving the car by myself. Every dealer that I negotiated with claimed that they couldn’t come down in price. Guess what? They all did… many by quite a lot.
WHAT NOT TO DO
1. DON’T USE A CAR BUYING SERVICE: TrueCar, Costco, American Express, etc. all use the same underlying system that charges dealers money for your contact information as a serious lead. The pre-negotiated “great price” that they offer is often much higher than what you’d pay negotiating via email.
2. DON’T GO INTO A DEALER TO NEGOTIATE: You’re putting yourself in enemy territory. It’s a waste of your time and the dealer will use psychological tactics to obscure the price or value of what you’re getting.
3. DON’T PROVIDE YOUR PHONE NUMBER: Unless you want to be called incessantly, don’t give your phone number until you’ve setting on a deal and are ready to move forward. I used a free Google Voice phone number that sends text transcripts of VM to my phone.
4. DON’T FOCUS ON MONTHLY PAYMENTS: Classic dealer tactic. “How much are you looking to pay each month?” What matters more is the total price of the car. If the dealer asks you this, redirect it as such: “I’m only interested in the total price of the car.”
5. DON’T DISCUSS TRADE-IN VALUE. This is another leverage point for the dealer. If they know that you’re planning to trade in a vehicle, they’ll lower the price of the new car and make up for it by giving you less for your old car. Go to CarMax and get a free appraisal (good for seven days). These tend to be fair, but on the lower end of what you can get. Ask the dealer to beat CarMax’s offer and show them the appraisal paperwork. CarMax buys low and sells high, so there is plenty of room for the dealer to still make money from your trade-in.
6. DON’T BUY THE EXTENDED WARRANTY, PREPAID MAINTENANCE PLAN OR SPECIAL INTERIOR/EXTERIOR PROTECTIVE COATINGS. These are all straight profit for the dealer. Remember, new cars come with at least a 3yr/36k mile warranty that covers everything. If you determine that an extended warranty is worth it after that initial period, you can purchase one from the dealer at a sizeable discount. Toyota, for example, attempts to sell extended warranties on new vehicles that range in price from $2,500 - $3,000. If you wait three years, you can often buy that same extended warranty for $800 - $1,200. You can shop dealers for the lowest price, just like buying a car.
7. DON’T BE IN A HURRY. Even if you need to purchase a new car quickly, don’t share that with the dealer until you’re ready to request quotes. They will use desperation against you.
8. DON’T PAY FULL RETAIL FOR OEM PARTS/ACCESSORIES. There’s going to be something extra that you want for your new vehicle. Maybe it’s a cargo cover or all weather floor mats. The parts department is one of the biggest profit centers for a dealer. You can often buy these items for 25-50% off retail price through Amazon. Many car dealers sell parts directly this way. I wanted an all-weather liner for my cargo area. The OEM Toyota version is high quality, better than WeatherTech. Toyota dealers sell this at their stores for $100. When I looked up the part number on Amazon, it showed dealers in TX, CT and PA selling the exact same item for $76 with free shipping. I don’t mind waiting a week for delivery in order to save $24. Same applies to all of the other accessories that are available for new vehicles.
