How to Negotiate Car Prices

While in some cultures, negotiating is simply a way of life, in the United States it often leaves people feeling anxious, overwhelmed, and generally icky, even in the best of circumstances—and the current car market is the furthest thing from the best of circumstances. With a car shortage that seems to be getting worse, and prices on both used and new cars skyrocketing, it takes some special skills to find the car that best suits your needs, while still ultimately saving a buck on it, too.

The Consumer Price Index finds that used car prices increased by a whopping 21 percent from April 2020 to April 2021, with much of that increase in the last few months. New cars are in high demand as well, with cars like the popular Kia Telluride selling for $5,000 to $10,000 or more above Manufacturer Suggested Retail Price (MSRP) across much of the country. But hope is not lost! There are proven negotiation strategies to help you whittle down that car price before buying.

When I purchased a new car—a 2021 Subaru Forester—in early May, these strategies saved me over $2,000 off MSRP, increased the value of my trade-in by $1,000 and scored me a free synthetic oil change. By implementing a few, simple tactics, you can get rid of any anxiety you may have about negotiating your car purchase—and save some money in the process.

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Your trade-in

The upside to a vehicle shortage is the increased valuation of your current car if you are going to sell or trade that in. While you should always negotiate when trading in a car, it's even more vital now. National car dealerships such as Carvana and Carmax are making online offers of $2,000-plus above value on many cars, and that's even higher for cars that are 1 to 5 years old. If you don't want to deal with the hassle of selling your car to a dealership you aren't buying from, don't let this stop you from getting an offer—and use that to get the traditional dealership to bump the price up on your trade.

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Negotiate for repairs or perks

During the purchase of my Subaru, I negotiated the cost of the trade-in, but they couldn't fully match the offer I got from CarMax. So, I asked for a free synthetic oil change in addition to the higher price point on my trade. That oil change is worth $80, which I would have been spending anyway. If there is something you want, whether it's a remote start, an oil change, or needed repairs, remember that these cost the dealer less to offer than reducing the cost of your purchase.

If you are buying used, remember to take the car to a mechanic prior to signing on the dotted line. Use your mechanic's inspection report and detailed pricing for needed repairs as part of your negotiating tool kit. You can save thousands of dollars using this strategy—and save yourself the financial and logistical hassle of fixing a car you just bought.

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Truecar

If you are buying (or leasing) a new car, you absolutely must know about, and use, TrueCar. This is especially important if negotiating is something you struggle with. TrueCar negotiates rates with local, and non-local dealership "partners" on your behalf, and then representatives email you an offer that you can bring into the dealership with you. If you are a member of AAA, Consumer Reports, or even American Express, you've probably seen an advertised benefit of saving you money on your car purchase. Anyone can have access to the same service using TrueCar's website.

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Shop further out for new cars

If you are buying a new car that isn't a rare commodity like the Telluride, it's likely available for sale in a multitude of dealerships within a 50- to 100-mile radius of your home. Reach out to a few different dealerships to see what price they can offer you, either by calling to speak to an internet sales manager, or finding the email of one on the website. This cuts out the middleman, allowing you to talk to someone who can actually offer you a discount on the price. Once you've gotten a few price points, you can go back to your preferred dealership and ask them to match it.

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Negotiate the price

I'm a firm believer in making a fair offer, and not kicking tires in the hopes of saving a few dollars. Now, more than ever, insultingly low offers aren't likely to get you anywhere. Using Kelly Blue Book, and the National Automobile Dealers Association—which are used by many banks and insurance companies—you can assess the value of the vehicle. Make sure you input the car accurately, because if you leave out options like a sunroof, blind spot monitoring, or even leather seats, you'll get a valuation that may be significantly lower than it should be.

Once you've decided on a fair price, you can approach negotiating in two distinct ways. You can "haggle" or you can state your price, stick to your guns, and walk away if they say no. Unfortunately, right now is definitely a seller's market, so the walk-away strategy has a smaller chance of working, even if you offer a fair price.

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Compromise on options

If you must buy a car right now, and the price point is still too high for your budget, consider compromising on the car, or the options you choose. Features like navigation, cold weather packages or specialty paint options add to the price of the car, which you can reduce by being flexible. If you decide you want to buy a very specific car, consider trying out comparable options made by other brands at price points that are closer to what you can afford.

The car market right now is a tough one, but armed with these tools, you're sure to find a car you love, and settle on a price point you can stomach.

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