There is no way to determine how much money a dealer makes off of you when you buy a car. However, in this video, I will go over the three most important steps to negotiating a car deal so that you may receive the greatest bargain possible. If you take these procedures in the correct order, you’ll be better equipped to bargain a car the next time you need to. Car shopping will always be difficult because you will never know what you are looking for. My name is Jason, and I work for Honest Finance Channel. If you’d like to learn more about other elements of personal finance, please subscribe to my channel or, at the very least, give this video a thumbs up.
Okay, let’s move on to the next topic: negotiating the price of an automobile. The first key step in properly negotiating a car deal is research. I mean that you have to do your homework on the type of car you’re looking for before you even bother going to the dealership. Think of it this way: the dealership’s goal is to make money, and your goal is to save money, so you’ve got to start by doing your research. How can you expect to negotiate a car purchase if you have no idea what the car, you’re looking at is even worth? Don’t be silly; do your homework, and you’ll be fine. so while you’re doing the research for the car that you’re looking for these are the two websites that I recommend using I want you to visit Edmunds.com and truecar.com
Because both of these websites are going to give you really good information on what your car is worth the specs and different reviews and things like that they both do a great job at letting you know how much your car is worth in the particular region that you live in what these websites do is they allow you to plug in all the different specs and information about the cars you’re looking for and then they’ll tell you what’s a fair price that you should be paying now you can use Kelley Blue Book as well but what I’m trying to say here is that if you just go online and do some research you’re going to be in a lot better position to negotiate a car and seriously if you don’t do your research you’re going to end up in a car that you didn’t want in the first place and you’re going to want to sell it in six months because you hate it so just do your research before you go to the dealership and you’ll be just fine now the next key step is to actually negotiate the price of the car that you’re buying
I’m going to tell you exactly how to negotiate car deal so the first thing you want to do is you want to get on the phone and you want to call every single dealer that’s in your area and find out what they want for the specific car that you’re looking for now if they do want their business they’ll just tell you the real numbers over the phone so that you don’t have to play a bunch of games and you can just go into the right dealership that you want to know if they tell you that you have to come into the dealership in order to get the price then don’t even bother doing business with them because they’re not giving you the respect that you deserve right from the beginning now once you’ve made all the phone calls and you’re confident which dealership you want to go with go ahead and head over that now once you’ve gotten to the dealership and you find this specific car that you want you need to lock in that price first thing and I’m talking about the exact price of the car and not the monthly payment because monthly payments can fluctuate just based on changing the terms so let’s say that the car you’re looking for is listed for fourteen nine and that’s a pretty good price based on the research that you’ve already done
Now you’ve already got a good starting point because of the phone calls and the research that you’ve done but you don’t know how much the dealerships paid for it maybe they only paid thirteen five for the car but you have no idea now if that were actually true they could potentially make about fourteen hundred bucks off of that deal and that’s not even including a trade-in or financing different things like that and I know that businesses need to make a profit in order to stay in business but there’s a point where they’re just making too much money off of one deal and seriously 1,400 bucks isn’t even that much compared to some of the really expensive used cars and the margins that
They haven’t knows now that’s the thing that really sucks about buying cars these days is because you have no idea how much money they’re making in the deal there’s no transparency when it comes to buying cars from the consumers point of view so what you can do is you can at least try your best to negotiate the best deal possible so that you don’t have to think about it now this is how you negotiate the car’s price but you’ve got to be confident in order to make this happen now if you’ve got a timid type personality then you’ve got to understand that you are always going to get screwed on these kind of deals unless you fake your confidence so I don’t really care if you’re not naturally the confident type you’ve just got to fake it in order to make this happen so this is what you’ve got to do you’ve got to start with an asking price that’s fair and realistic for the amount of money that you actually want to pay for the car so for instance
let’s say that you lowball and you ask for $9,000 for the car well the salesman is just going to politely walk you out of the dealership and say have a good day because that’s not fair and that’s not a realistic price the dealership does have bills to pay and the salesman probably wants to keep his job so just make a realistic and a fair offer here if it were me personally I would offer $13,900 for the car and I would stand by that price and the only thing that sucks here is that you have no idea how much money they’re making on that car but just be confident in your offer and you’ll be just fine and you won’t have buyer’s remorse and you can be confident here because you at least know based on your research that the car is worth a little bit more than that you just don’t know how much the dealership is going to make off the deal so just be ok with the number that you got from the research and the offer that you’re making on the car so that you can be confident so right after you make the offer the salesman will say something like well let me go talk to my manager that’s a really low offer we’ll see what we can do now he’s going to come back with a pen and paper
He’s going to write down a bunch of financing and a bunch of numbers and all sorts of stuff like that but the only thing you need to pay attention to is the actual price of the car and my bet is that the number on the car is going to be $14,500 which is not the $13,900 that you asked for he’ll still make you feel bad that the company’s not making any money and that that’s about the maximum amount of money that they can sell the car to you for and if it were actually true that they weren’t making any money on the car and at this point they would just walk you out of the dealership and they’d say have a nice day because they really do need to make a profit on the car so just keep in mind that if they’re not kicking you out of the dealership then you’re still worth their time to them so from my personal experience I was in sales for five years .
I can tell you that there is always a time in a negotiation where getting the sale is still worthwhile. There will always be a point where the salesman can either make it happen or have you leave, so even if your offer has completely slaughtered the salesman’s Commission, it may still be worth it to them because of the monthly and yearly sales that they are trying to keep track of, so at this point ignore all the numbers on the paper and focus on the conversation he will tell you straight out that there is no money to be made on that car, so now be coy But the $13,900 that you offered and that you’ll go if they can’t do that for you now, he’ll go back to the manager and then he’ll come back with a new offer. The unfortunate aspect of this situation is that if they had offered fourteen thousand dollars from the start, you would have been perfectly content and would not have had to waste any time, but that’s part of the negotiation process because if you don’t go back and forth a few times, they’re likely to make more money off of the deal. On the other hand, you will be spending more money on the car. Going back and forth about three times is about going through the dealership trade, so let’s say you have a car worth $5,000. The dealership only offers you $3,000 for the car well,
even with the tax advantage it’s not going to be worth that extra $2,000 so you’d be better off just selling it on your own and whether or not you want to sell your car on your own or do trade through the dealership that’s entirely up to you. I’ve discovered that a lot of the larger dealerships are pretty honest when it comes to competitive rates, so what you see at a bank will be the same as what they’re offering you do a little bit of homework here so that you can get an idea of whether or not they’re getting a commission on the interest rates. Many dealers will receive a little drop in interest rates. As a result, it could be in your best interest to verify with your banks first. When it comes to purchasing a vehicle, paying taxes and fees is a pain, but I’ll teach you how to discern if it’s a tax or a gimmick cost designed to make the dealership extra money. If you do not pay sales tax on the fee, you will not have to pay sales tax on a state registration or licensing fee. I’m not going to go into much detail here, but don’t pay full price for an extended warranty if you want something like that, and don’t pay full price for some carpet cleaning thing either. Finally, after all of this is done, you can sign the paperwork and drive away knowing that you negotiated the car the best that you possibly could, and now you don’t have to have buyer’s remorse like most of us do after we buy a car.