How Much Can You Negotiate When Buying a New Car: Strategies and Expectations
Buying a new car is a significant investment, and understanding how much you can realistically negotiate the asking price can significantly impact your purchasing experience. While the asking price may differ from the Manufacturer's Suggested Retail Price (MSRP), there are strategic steps you can take to negotiate effectively.
Understanding MSRP and Dealer Ask
The term MSRP refers to the Manufacturer's Suggested Retail Price, which is set by the vehicle manufacturer. The dealer's ask price, on the other hand, may include additional fees such as third-party extras like lifting upholstery and audio systems, which can be quite negotiable.
Typically, the MSRP includes a markup of 30% due to the car losing value in the first year. This markup is significantly reduced over time. For a used car, you might expect to negotiate around 5% of the MSRP, but if the car is a "lot king" or has been sitting for over 100 days, you might push for a larger discount, say 15% to 20%.
Research and Preparation
Do your research before heading to the dealership. Find the approximate invoice price for the exact car you want with all the desired options. Getting a feel for what the invoice price is will help you determine a reasonable asking price.
Approach your negotiation with a solid asking price. Aim to pay about 500 dollars above the invoice price, which might be a good compromise. Stick to your position, and you should be able to secure the car for your desired price. If the dealer is unwilling to budge, it may be time to walk out and try another dealership. Always get at least three quotes to compare.
Strategies and Tips
One effective strategy is to offer a fixed amount over what the dealer paid for the car. You can find this information through sources like Consumer Reports. Over the years, I have successfully purchased five cars using this method, and in many cases, I had to chase down the salesman in the parking lot to secure the deal. Be prepared for such occurrences. Additionally, ensure your accompanying party is ready to support you and not undermine your negotiation efforts.
Walking into the dealership without your wife might be strategic, as she may inadvertently pressure you or cause you to cave. According to my experiences, she has sandbagged me on two occasions, so it might be wise to avoid involving her in the negotiation process.
Market Conditions and Future Outlook
It is also important to consider current market conditions. Before the Covid-19 pandemic, negotiations were more straightforward, but with ongoing supply chain issues, the market has shifted. The unprecedented situation led to higher prices and limited inventory, making negotiations more challenging.
It is unclear how long the current market will remain abnormal, but as supply chain issues resolve, car buying habits are expected to return to more normal patterns. Until then, be prepared for higher prices and less flexibility in negotiations.
Conclusion: Negotiating the price of a new car is not an exact science, but with proper preparation and understanding of the market, you can achieve a good deal. Always do your homework, be prepared to walk away if necessary, and stay informed about market conditions.