If you’re in the market for a new car, you’re probably comparing the retail prices issued by the manufacturer. While this will help you assess the relative expense of each car, you need to remember that the majority of transactions at a dealership will actually be for significantly less than the retail price. If you know how to negotiate the best price on a new car, you might be able to save thousands of dollars. Car dealers want to get the sale done, and they will often compromise to a surprising extent in order to make that happen. If you prepare properly, leverage your position appropriately and pick up on any underhand tricks the dealer might employ, you could end up driving away from the dealership with an irrepressible grin on your face. Our tips on negotiating car price will walk you through each step of the process to help make that happen.
Tips before you go in
Do your research about the car you want
The first thing you’ll want to figure out is the type of car you are after. It's important to take a moment to consider your needs and what you'll be using your vehicle for. If you'll be mostly commuting through busy city centres and inner suburbs, a smaller car may be a more maneuverable (not to mention cost effective) choice than a big Hilux.
Once you've identified the type of car that best suits your lifestyle, it's time to do your due diligence. Take a deep dive into things like safety features, fuel efficiency, and interior comfort to find some of the options that best suit you. If you end up with a shortlist of several options, you’ll give yourself more flexibility than narrowing down early on the exact make and model you want.
You should also research the prices these cars are selling for in Australia. If you browse websites like Carsales or Carsguide, you can get a sense for the actual price the cars you are interested in are selling for. As we mentioned, you will likely find a significant difference from the advertised retail price.
You really can’t overprepare before you go new car hunting. The more information you have about the various features, specifications and performance of the cars you are after, the better your position when you get into the dealership.
Get approved for a car loan beforehand (and be cautious about dealer financing)
A substantial chunk of the cost of buying a car is the interest on your car loan. The rate you secure can play a big part in figuring out whether you can afford the vehicle you want.
That's why we recommend shopping for a car loan before you even step into a dealership. By doing so, you'll have a better idea of your price range and can narrow down your search to cars within your budget. Having a pre-approved loan offer when you walk into a dealer also shows them you've done your homework and gives you a hard price limit as a cap on price negotiations.
Many dealerships offer their own finance arrangements for new cars. They often spruik low-interest rates which seem attractive at the time, given you can sort the finance immediately and it seems you will be securing a good deal with low repayments. However, these loans often come attached with exorbitant upfront and ongoing fees, blowing out the cost of your loan and costing far more than going through a traditional lender.
At loans.com.au, we offer competitive car loan rates and a fast, easy online application process. Apply today and get pre approval for a car loan before you walk through the dealership doors, or chat to one of our friendly car loan specialists to get a better idea of your borrowing power.
Have an idea of insurance and other expenses
It’s important to remember that your loan repayments will not be the only ongoing expense associated with your new ride. It’s a good idea to consider some of the other costs when working out your budget. After you've researched your financing options, it's important to get an idea of what it might cost to insure the vehicle in your area. If you get a quote for the type of car you are interested in beforehand, you can make sure that insurance won’t push you over budget.
Fuel and potential repair costs are other considerations. It’s worth getting a rough idea of how often you’ll need to fill up, at the petrol or charging station, and how much it will set you back each time. You’ll also want to consider how expensive it will be to repair your car if something goes wrong. If you are buying a car made in Europe (a Volkswagen or BMW, for example), it will normally be more expensive to replace parts than it is for vehicles made in Australia or closer countries.
How to negotiate car price at the dealership
So, armed with meticulous research and preparation, it’s time to head out to the dealership. There are several things you’ll need to bear in mind.
Negotiating tips
- Shop around: Like any purchase, buying the first car you see at the first dealership can be an expensive mistake. By visiting a few dealers, you gain a better understanding of what deals are on offer and where there might be more wriggle room to negotiate. Many dealers will have offers like “we’ll beat any price” which you can use as leverage if you arm yourself with the prices on offer at different establishments. You can also use shopping around to see what extras dealers may throw in to sweeten the deal. Not sure if you want to buy from a dealership? Read our guide on private car sales vs dealership: which is best?
- Keep your budget to yourself: If you prepared as we suggested, you should be walking into the dealership with a very good idea of the maximum amount you are willing to spend on your new car. This should not though be information you share with the dealer. If they know your upper limit, it’s likely they will be trying to extract a sale price as close to this figure as possible. By playing your cards close to your chest, you might make the dealer more cautious when pushing the price up.
- Don’t be afraid to walk: If you’ve reached an impasse in negotiations and neither you nor the dealer will budge, try simply walking out the door. Dealers don’t want to sell for lower than they’d like, but they really don’t want you to go somewhere else. By even hinting at leaving, you could find the dealer suddenly much more receptive to making concessions on their position. If you do end up walking out the door and looking for a better deal elsewhere, know that the original offer will almost definitely still be on the table should it turn out to be your best option.
- Timing: There are several periods throughout the year that can mean dealers are much more receptive to a quick sale. Firstly, they will often have monthly sales targets they need to meet. If you delay your purchase until close to the end of the month, the dealer might need to get the transaction through to meet quotas. This could mean they lower prices further to guarantee things go through. The same also applies to the end of the calendar or financial year. Another good time to pursue the car you are after is if there is a new version coming out soon, as dealerships will often have run out specials on the outgoing model.
- Be personable: It’s easy to view the customer/dealer relationship as adversarial (the next section of this article won’t help if that’s how you feel). At the end of the day though, most dealers are just normal people trying to do their job. If you are affable and easy to deal with, you might find dealers are much more willing to compromise and help you out on price.
Be aware of dealer tricks
Unfortunately, there are still car dealers out there that live up to the unscrupulous reputation of the industry. There is a variety of ways they can be manipulative, the below being just a few common examples.
- Negotiate on monthly repayments, not overall price: Dealerships often try to focus on the monthly payment rather than the price of the car. You’ll want to make sure you aren’t suckered in by attractive low monthly repayments and focus on the overall price you will pay over the loan term. Often low repayments just mean that the loan term is longer, and you end up paying more when all is said and done.
- Loading up on extras: Fancy and unnecessary additional features are a very common means dealers use to extract value from a customer. If you weren’t considering a feature before you walked in, it’s unlikely that it will be worth it for you, regardless of how vital you are told it is. Even if you do like the sound of something on offer, you can often get things done for far cheaper after purchasing the car. It’s typically far cheaper for example to use a window tinting service rather than buying a car with tinted windows already.
- Ticking clock: If there’s any suggestion that the offer on the table will soon expire, or that the car you want is likely to sell out if you don’t make an immediate decision, don’t panic. Have a think about how likely it is that what you are being told is true, or whether it’s possible the dealer is trying to put you under pressure to make a less considered decision. If a deal is on the table today, there aren’t many reasons why it wouldn’t still be on the table in a weeks time, and it’s also unlikely that a dealer would be able to predict with any certainty how soon a certain car will sell out. You should be as cynical as you can whenever a dealer tells you something.
- Bait and switch: Bait and switch is a common sales tactic used to lure you in the showroom through advertising an attractive offer, only to switch to less appealing options once you get in the room.
- It typically works like this: a dealership will advertise a car at a very low price or with favorable financing terms in order to get you to come in. Once you arrive though, lo and behold the advertised car has been sold or is no longer available. The dealership has got you where they want you, in the room, and can then pepper you with offers for more expensive or less appealing vehicles.
- “Dealer prep” and other bizarre fees: When you’ve finally reached what you think is an agreement, you will end up pen in hand looking at a sale contract. We really advise that you just skim through this. Read the contract thoroughly and question any fees that don’t make sense. You might find ambiguous charges like admin fees, dealer prep or document fees will quickly disappear after a hint of scrutiny.
Hopefully you’re feeling a bit more confident chasing your dream car now. If you’re ready to get going, check out our range of loans available for new cars.
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