4 Strategies to Save Big on Your Next New Car Purchase

May 23
00:19

2024

Prashant Desai

Prashant Desai

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Purchasing a new car can be a daunting experience, especially when faced with the high-pressure tactics of seasoned salespeople. Many buyers end up paying more than necessary simply to avoid the stress of negotiation. This article reveals the strategies dealers use to maximize their profits and provides you with four essential tips to ensure you get the best deal possible on your next car purchase.

Understanding Dealer Profits

Before diving into the tips,4 Strategies to Save Big on Your Next New Car Purchase Articles it's crucial to understand how car dealers make their money. The Manufacturer's Suggested Retail Price (MSRP) includes the dealer's cost plus an additional 20-25% profit. Beyond this, dealers receive financial incentives from manufacturers, known as holdbacks, which can amount to hundreds of dollars per car. Additionally, dealers often receive bonuses for meeting sales targets by the end of the month or quarter. This means that even if a car is sold at the invoice price, a dealer can still make a significant profit.

1. Beware of the Guilt Trip

Dealerships often display photos of salespeople's families to create a personal connection. During negotiations, a salesperson might mention their financial struggles, such as paying for their child's education or medical expenses, to make you feel guilty about driving the price down. Remember, dealers have multiple revenue streams, including holdbacks and manufacturer incentives. Don't let guilt influence your decision.

2. Prepare for the Long Haul

Dealers are trained to wear you down by prolonging the negotiation process. They might claim they need to consult with their manager, leading to multiple rounds of negotiation. This tactic is designed to exhaust you into accepting their price. To counter this, be prepared to spend several hours at the dealership. If negotiations drag on, demand to speak directly with the manager or threaten to leave. Dealers are more likely to make concessions if they believe you are a serious buyer.

3. Stay Detached During the Test Drive

While test driving a car is essential, avoid showing too much enthusiasm. Salespeople aim to get you emotionally attached to the vehicle, making it harder for you to walk away. To maintain leverage, mention features of competing cars and express interest in multiple models. This keeps the salesperson on their toes and prevents them from taking advantage of your emotional investment.

4. Focus on the Total Price, Not Monthly Payments

Dealers often shift the conversation to monthly payments to obscure the total cost of the car. They might ask how much you can afford per month and how much you can put down upfront. This tactic limits your negotiation power. Always steer the conversation back to the total price of the vehicle. Only discuss financing terms and trade-ins after you have agreed on the car's price.

General Rule: Negotiate the Total Price

Always focus on negotiating the total price of the vehicle. Other aspects, such as financing and trade-ins, can be discussed later. This approach ensures you get the best deal possible.

Online Tools to Simplify the Process

If negotiating in person seems overwhelming, consider using online tools to gather price quotes from multiple dealers. Websites like TrueCar and Edmunds allow you to compare prices for different car models. These platforms can help you avoid face-to-face negotiations while still securing a competitive price.

Interesting Stats

  • According to a 2020 study by Edmunds, the average profit margin for new car dealers is around 2.2%, but this can be significantly higher when factoring in holdbacks and manufacturer incentives.
  • A report from J.D. Power found that 60% of car buyers feel they paid too much for their vehicle, highlighting the importance of effective negotiation.

By understanding dealer tactics and focusing on the total price, you can save thousands on your next car purchase. Use these tips to navigate the negotiation process confidently and secure the best deal possible.