The game of Haggling: How to Get a Great Deal on a Used Car
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halbergman / iStockphoto My husband and I bought a car over the weekend — a 2008 Mazda5. At the car dealership, I told my kids that we were playing an exciting game called "Haggle" with the car dealers. In this game, the car dealers want us to pay a lot of money for a car, and we want to get a very good car for a little money. All afternoon, the girls would whisper, "Are we winning?" I think we won. We bought our car for less than 75% of the asking price, and got an extended warranty at half price. They gave us a good value for our trade-in and a very low interest rate on our loan.
Here's how we did it.
1. We had a plan.
My husband is from Argentina, where they haggle over the price of a cup of coffee every morning. He's much more used to talking down a price than I am. We agreed in advance that he would do all the direct negotiation with the car dealers. I'm a journalist by trade, and good at research. My job was to find the right car, research our options and give him all the information he needed to get a great deal.
2. We knew what we wanted.
Our household keeps very detailed financial records, so it was easy to look back and see exactly how much driving we'd done in the past year. Since we have three kids, we knew we'd need a car with three rows of seating, which limited our options a lot. Beyond that, our priorities were safety, affordability, reliability and fuel efficiency, in pretty much that order. We wanted to buy a used car, but a gently used one.
3. We did our shopping and market research online, not at the dealership.
We used edmunds and Consumer Reports to research all the available six- or seven-passenger vehicles. After narrowing our choices to the Toyota Sienna, the Honda Odyssey and the Mazda5, we checked out local dealerships. Most of the dealers in our area have some of their used stock advertised online, so we were able to choose a few specific cars to look at.
4. We played our cards close.
Things we did not share with the salespeople included: how many kids we have, the fact that we had no working vehicle, where we live, how much driving we do, what we liked or did not like about the cars we drove, what our budget was. This was possible because we knew exactly what we wanted. Walking onto the lot and asking for a specific vehicle from their inventory made it clear that we were serious buyers, but also left little room for exploratory questions. Because we were not browsing at the dealership, we didn't have to enlist the salesperson's help in finding what we wanted, and when it came time to negotiate, he didn't know how much we wanted the car.
5. We were not afraid to walk away.
Even though this was the right car for us, it wasn't the only one. All that research before going shopping paid off here. No matter how intense negotiations got, we knew we could get a good car for the money we wanted to spend from someone, so we didn't stress if it wasn't this car at this dealer. Staying focused and calm made us more effective bargainers.
6. We stayed neutral.
This "we" really means my husband, who as I mentioned above did all the talking during the business dealing. He refused to get caught up praising or criticizing the car they were negotiating over. He just stayed focused on the money, and the deal. He made it clear that he wanted to buy a car, and that this car was a perfectly acceptable one to buy, but only for the right price.
7. We had competing offers.
This was the trump card. We negotiated a deal on an older Sienna before going to see the Mazda. As my husband talked price with the Mazda dealer, he said, "Look, I can buy a Sienna down the street for $5K less than you want me to pay for this car. It's an older car with more miles, but it's bigger and more luxurious. Your car is not worth more to me than that one." The salesman knew we were willing to walk away, so he matched the price.
8. We let the little things go.
After a price had been settled, we were treated to a classic used car sales trick where the price magically crept up $1,000 because of some technical detail with our trade-in. We could have gotten angry and demanded the lower price we'd originally agreed on. Instead, my husband let it go. As soon as he was done with the sales office, he complained to the business office about the switch, and they apologized and gave him a $3000 extended warranty at half price. We came out ahead, and skipped a bunch of unproductive fighting with the salesguy.
9. We were not afraid to be rude.
When the finance folks said 6% was the best rate they could possibly give us on a car loan, my husband took out his cell phone and called AAA for a competing offer from the lobby of the dealership. Suddenly the dealers offered us a 4.6% loan.
Ultimately, we got a great deal on exactly the car we wanted. A better car than we thought we could afford when we started shopping, and one that we hope will be with our family for the long haul. Good luck with your own car shopping adventure. Please share your car buying tips and tricks in the comments.
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Great Info in this article! My wife and I just bought a car using some of these tactics and paid about 80% of the asking price. We were able to do this by not being afraid to be rude or walk away. In the end, the salesman seemed very unhappy with the price he gave us which, of course, meant we were ecstatic!
This post made my day. Good for you! :)
You definitely did a lot of things the right way. Did you homework on the vehicle you wanted, found competing offers, weren't afraid to walk away, etc. However, I'm curious to know some more information about your purchase.
Did you have any financing lined up before you went to the dealership? Was the AAA call planned in order to make them lower their rate or did you really not have any other rates before then? And how much did you put down?
While it doesn't sound like you got ripped off, it doesn't exactly sound like you got a great deal either. You're certainly way better off than if you had just walked onto the lot, but it seems like there are areas for improvement.
For example, I wouldn't exactly call $1,000 a little thing. Extended warranties are usually not a great deal (factory covers most things) for the money. As a matter of fact, it sounds like they got even more money off of you when you complained. You paid $1,000 more on a technicality plus $1,500 for the warranty for a total of $2,500 more than you expected!
Car salesman want you to leave the dealership thinking you got a great deal. They want you to think you saved a ton of money but in the end they always find a way to make some of it back.
I'm not here to argue, just to show others how even more money can be saved. I look forward to your response.
I did not pay a penny more than I budgeted. I expected to pay $13,000 for a five-year-old car with about 70K miles on it and a five-year-warranty. Instead, I paid that amount for a 1-year-old car with $30K miles on it. The sale price for our car was over $5,000 less than the Kelly Blue Book value - even less than KBB estimated we'd get for it in trade value from a dealer. I think I got a pretty great deal.
The dealer warranty expires after 30,000 miles, which is just about where our new car is at. We had decided we wanted a 5-year warranty on the car before we went to the dealership, and were factoring the cost of it into our car-buying budget. I'm hard on my stuff, and have used every extended warranty I've ever bought, on everything from cars to cell phones. I really don't want to be on the hook for big car repair bills while I'm paying off a car loan. So we would have spent that money one way or the other, and spent less than we expected to.
As for the financing, we did have an offer from AAA for 5% financing on the loan before we went shopping. The call was just to confirm that we were going ahead with that offer; we didn't end up taking it because the dealer suddenly dropped their rate even lower. Since car loans do seem to be averaging around 6-7%, I think we got a pretty good deal there.
The $1,000 technicality is, as you say, not really that little a thing. Maybe it deserves its own post to get more reader tips about how to handle sudden changes mid-deal. At the time, and now, letting it go seemed like the thing to do. I was happy to get the money value taken off the warranty, which as I said we were going to buy anyway.
Sierra Black - embracing the wild heart of parenting at www.childwild.com
It doesn't sound like you got a good deal to me. $1000.00 for the 'technical' issue and 1/2 price off a $3000.00 extended warranty which no one should ever buy. I'm disappointed with this article.
Bingo - extended warranties, all of them for any product, are a complete waste of money. So the author got swindled on the increase in the deal for the car, and then got swindled again by paying $1500 for a warranty that isn't worth $30, much less $3000. Sucker.
For all your research you managed to overlooked the number one mantra of frugality and common sense everywhere "extended warranties are a waste of money." I agree with the guy above, you were ripped by $2,500. You may have came away thinking you pulled one over the dealership, and then write about it on a frugality site no less, but I'm pretty sure they were laughing once you hit the road.
Dealer made $2500.00, you not even you realizing.
Extended warranties are never a good deal. If you had researched carefully, you never would have agreed to it.
Absolutely... the price went up by $1000 and then you got ripped off on the extended warranty to the tune of $1500. Yikes.
Your prep was excellent, but you caved at the end. You probably did better than many people might have, but this doesn't seem like a "great deal" at all.
For me, buying a car (new or old) is up there with getting a root canal.
You can't find an industry that plays with the price more then cars. I hate the fact that you have to fight for every inch you get. The soul-deficient idiots at most dealerships have no problem ripping you off with that same stupid smile they all have. You don't go down to the grocery store and get asked "what kind of monthly payment are you looking for?". Or would you like this or that useless coverage plan for that milk and bread. The last two times I bought new I went with the AAA or Costco buying programs. I know I may have done better after hours of fighting, but it was not worth it to me.
I hate them all. Them and telemarketers. And people driving slow in the passing lane.
Everyone else is okay, I guess.
I understand your frustration with buying a car Stacey. However, the salesmen are anything but idiots. An idiot is easily outsmarted and manipulated; salesmen are clever, conniving, and sly. They are the ones doing the manipulating and they are masters at it. While I generally find their work detestable I do appreciate the skill and expertise that is required to pull it off.
I'm curious as to your thoughts on real estate agents. Do you despise them just as much?
JT,
The idiot comment was meant in a purely demeaning and spiteful manner. Perhaps malefactor or reprobate would be more applicable. Yes I acknowledge their skill but I can in no way honor their proficiency. I am no more impressed by their abilities then I am by a burglar being able to break into someones home undetected. The system of car sales is at fault, they are merely pawns of the game. As for real estate agents, you are more likely to get a fair shake when properly represented by an agent you trust. If you could bring in your own car buying agent (like AAA or costco) you have a better chance at the dealership. That was my route, and I have little remorse taking it.
It seemed to me while reading your post that during the process of buying you made a conscious decision to remain emotionally disconnected with any car that you were trying to buy. This of course would have made it much easier to walk away and achieve your goal. What happens if buying a car is the realisation of a dream for someone rather than simply another game in the process of life. Do you think they would be able to follow the process as closely as you have?
Andee,
I think the thing to bear in mind is that even if buying a car is the realization of a long-term dream, odds are good that there's more than one dream car out there. You can rest easy knowing you will get the car you want, even if it's not this exact car.
Sierra Black - embracing the wild heart of parenting at www.childwild.com
You claim that since you didn't share a lot of information with the salesperson that they didn't know how much you wanted the car. Considering that you walked into the dealership and asked to be shown that car and only that car I think that it was kind of obvious that it was one that you really wanted. Sure, if you were browsing and then asked for a test drive they might not have known, but to walk in and ask to see only one car on their used car lot they had to have known that you really wanted that one car.
I agree with the other posters too - you got ripped off by $1000 to start with and then they suckered you into paying $1500 more for a warranty that you will most likely never use.
It's all about being willing to walk away. Having a max spending limit with goals is also key.
You guys ever read Financial Samurai's perspective? "8 Cars In 10 Years. I Have A Problem, But You Won't!" Pretty good tips for buying second hand, and a funny perspective.
"If you have a car addiction, I highly recommend you face the addiction straight on and go to the car dealership!"
J
Being willing and able to walk away is the key, regardless of whether you are buying used or new.
If you need a car to get to work on Monday you are almost certainly going to get screwed. If you can go home in the car you drove there in and buy something next week or next month, you can simply wait until you get the deal you want.
Once you have asked for a discount the use of silence is paramount.
It will feel strange, you'll probably feel awkward and uneasy - but once you have asked for that discount close your mouth and keep it closed - first to talk loses.
It works - please try it for yourselves!
Simon
I had to purchase a car a couple of months ago and had an interesting experience. I found the type of car I wanted, which was a gently used low mileage import that was was reliable and got decent gas mileage (basically a Honda or Toyota). After doing hours of shopping at a lot of different websites that dealers list their vehicles on, I went to test drive several and get a feel for what I wanted. Throughout the whole time, I suggest NOT letting yourself get emotionally attached to a vehicle, or at least not letting the dealer know how badly you want the vehicle -- seeming indifferent helps a lot because emotion buyers are seen as easy sales.
After picking out which vehicle I wanted, I spent a considerable amount of time trying to figure out how much the dealer paid when the previous owner traded the vehicle I wanted in. After coming up with a price that I felt was close to the trade-in value, I did considerable research to figure out what the fair market value was. The vehicle, of course, was marked up way past fair market value -- they expect you to negotiate.
So here's how it went down:
Car was priced at: $15,995
Fair Market Value: $14,750 (max of what I was actually willing to pay)
What I wanted to pay: $14,350 (minus $100 that I'll get to in a minute)
Trade-in: $12,750
Never never never start negotiating at the price that you want to buy...Prices can only go up. I low-balled the dealer with an offer of $12,750. The guy laughed and asked how I came up with that number. I laughed back and asked how he came up with $15,995. He didn't care much for the jab back, but I don't care much for people trying to rip me off from the get-go, so we were even.
After that, we respected each other. Now, the key is to get whomever you're working with on YOUR SIDE. I knew what I wanted to pay for the vehicle and I wanted to seem like this was a limited time offer (which is a tactic many marketers use to prompt consumers to buy). So here's what I said -- My boyfriend went shopping with me and he had to be in class in about an hour. I told the dealer this and I said that if he can have me walking out of the dealership with the keys in my hand and my butt in the seat in an hour of less, I'll give him the crisp $100 bill that I pulled out of my billfold and sat it on the table...That was my first deal.
I knew that based on $15,995, I was willing to increase my price to whatever they came off. So for example, if they came down $500, I would increase my offer to $13,250 and we could go back and forth until we met in the middle with a price of ~14,250
He took the price of $12,750 to his boss -- about 10 minutes later, he returned and told me that if I wanted the car for that price, that he didn't know if we could make a deal. I politely said I understand and that I'll head on over to the dealership just down the street and as I gathered my stuff, he quickly jotted down $14,200 on the paper. I could not believe that that they came down so quickly -- I was certain that they were going to try and waste my time...I honestly was speechless for just a moment. He said "If I can put you in this car for this price, will you buy?" Damnit...What was I supposed to do from here! This wasn't part of the plan. I told him that if he could make it $14,100 and throw in a free oil change, the deal is made.
My boyfriend was so amazed/embarrassed/proud about how I haggle -- I am, by far, the deal maker between the two of us.
He took it to his boss -- a couple of minutes later, came back and shook my hand and said we have a deal. When I first started car shopping, he asked how I planned on paying and I told him using a credit union loan. So instead of wasting my time in the finance office, he asked for the information for my credit union. He asked if I was interested in a warranty, and I declined. 35 minutes later, my butt was in my new-to-me car, driving away.
Hopefully this can help somebody :)
Let me know if you have any questions!
I sell used cars for a living. I treat my customers with respect. I don't resort to rude tactics and don't understand why it would acceptable for a customer to be rude to a me.
The irony of this is that the vast majority of people don't have a clue when buying a pre-owned vehicle. Lets face it, all new cars of the same make and model are the same quality. When they are used it is a completely different matter. Condition is everything when buying used and the vast majority of buyers get caught up by a cheap detail with plenty of armor all on the tires and a clean engine compartment. I get a kick out of people sticking their heads under the hood thinking that they really know what they are looking for. LOL!
If you can get 20% off of the asking price then I GUARANTEE that you got your head ripped off and didn't realize it. If there was that kind of mark up, then the car was a lump and you deserved it because the author is the kind of egghead that thinks that he knows the value of a used car by reading about it online or what the KBB is.
These are the kind of people I enjoy high grossing on. They really think that they hold the cards when in fact they lack any idea of what a good value is.
Feel free to email me back!
See, I told you so.
Thanks for the post. Very interesting read.
Guest No 19 Comment - Wow! Sounds like no one ever gets a "deal."
Correct on comment #21! A good deal is a good car at a fair price. If it is too good then there is surely something wrong with the car. Pay a few bucks more for a nice vehicle and you will surely be happy in the long run.
The best way to save money: pay cash. It also gives you more bargaining power in my opinion.
I really enjoyed this article, and will be sure to keep these tips in mind for the future.
For a great deal on a used car, there are other options than going to the dealer. Everyone knows about going to private individuals (checking the cars in the want ads or online), but many forget about public auto auctions. They aren't everywhere, but if you want a great deal, they can really be the place to go.
Another tip: Don't buy between January and April -- that's "Tax Season" and prices go up because demand goes up. So many people getting "Tax Refunds" and looking to spend mean great profits for used car dealers.
Once you buy your "new" used car, here's what you can do with your "old" used car.
http://www.goodwillsv.org/Donateacar.html
Just wanted to add another vote for buying a used car from an individual!! For example, our last car was a van (added baby #3 and three car seats don't fit in the back of a sedan, as you know). First, I researched Consumer Reports at the library and chose the year/models based on those (particular years of the Odyssey and Sienna). We ended up finding an Odyssey that was newer than we expected with decent miles (for the price) on Craigslist. We paid for the van with our tax refund, we've had it for about 2 years now (purchased it when it was 8 years old), and never had any problems.
I've only every purchased vehicles from individuals. Talk to the person to learn about the car, how it 'behaves' and how it's been treated. The key in the discussion is to not be shy. Of course it also helps to live in a decent-sized city, so that you have options available.
Just another two-cents. Oh, and I would buy Hondas over just about anything (we also had a Civic which was awesome awesome).
Also I wanted to add, I think you and your hubby did a great job bargaining down that car's price! Woo hoo!
Interesting article and even more interesting comments. The internet is full of 'car salesmen are idiots'/'we car salesmen are people too' arguments.
I want the bargaining skills of commenter Kaleb, though.
Many more luxury cars are leased each year compared with non luxury cars. This means that there is a lot of high quality inventory from which buyers of used luxury vehicles can choose. Because those who lease vehicles are required to pay dearly for any damage or extra miles they put on the car during the lease period, used luxury vehicles that were previously leased are a more likely to be in better condition than just any non-leased vehicle on a car lot.
Gotta agree. The $1000 should have been fought for. I have bought a couple cars new and 3 used. The warranty has been useful to me for both my Ford f250 and Ford Explorer. However, with all my cars the guy you always see after the salesman tried to sell me all the extras including an extended warranty. I always act like I dont want it and they always slash it by 50 to 60%. Hence the $3000 would have been at least $1500 anyway.
So, the dealer reduced your trade in value by $1000 and they reward you with a half price extended warranty? You're now out an additional $2500. I consider myself an intense haggler (my wife refuses to car buy with me). I would've insisted on keeping the original trade in value and told the dealer to keep his extended warranty.
Getting up to leave works. As the salesman and I were appeared to be at an impasse over a small difference on a price on a new Toyota Avalon, I calmly stood up, thanked him for his time and turned to leave. He asked, "Are you willing to walk away over $150?"
I answered, "Yes, I am. Are you?"
I got my price.