How are you feeling? Nervous? That’s okay and normal. Car dealers are expert negotiators. You could send your average dealership salesperson into a genuine hostage negotiation and they would de-escalate that situation in minutes. And land their monthly bonus. If you think you’re not cut-out for this, I’m here to help. It’s actually easier than you think.
Having a budget set in adamantium (it’s an X-Men/Wolverine reference) is the cornerstone of your strategy when it comes to getting a good price for the vehicle you’ve ultimately decided on.
It is critical to set a figure you are prepared to pay for that vehicle which cannot be changed or wrinkled or stretched or warped. Not a single dollar can be spent over your budget - and I’m going to explain why.
That money is yours. It has value. You earned it. You are its master, you own it and you make the ultimate decision on how you spend it. Think of all the overtime, all the hard work, all the mental and physical exertion you’ve sacrificed to create that wealth for yourself, however great or small.
Remember, the dealer needs your cash. The dealership wants that money. You are what stands in their way. That vehicle is not special, it is simply a device. It’s as much a hammer from Bunnings or a couch from IKEA, or a laptop from JB HiFi.
So when it comes to giving up your loot I want you to protect it. But you’re also going to use it to your advantage when it comes to getting the price you want.
You’re going to pre-plan by figuring out what 10 percent off the dealer’s price is, because that’s where you’re going to start negotiations.
Having that rock-solid non-negotiable budget is immeasurably important. Think of it as a defence against being manipulated by the dealer to spend-up, and also your weapon to make him or her come down on the price.
It’s important to remember that you don’t actually need that specific car in that dealership; you can survive without it or find another one elsewhere. There were other vehicles on your shortlist. You could be buying second hand, too, but no. You’re in that dealership prepared to buy that particular vehicle. This is the dealer’s chance to make you part with your money. Time to use that position of power to leverage the best price.
The next tool you’re going to have on board is negotiating below your actual budget. Knowing the retail price and what you’re prepared to pay, we’re now going to start your negotiating slightly below what your absolute price is. So, on a $45K vehicle, you’re going to start at about $38,000. See, 10 percent is a bit generous, but it’s not totally insane - you’re setting yourself up to be negotiated with.
You might think there’s zero chance a dealer would accept about $7000 off the retail price, but you need to remember it’s their job to do a deal on this car with you.
This is where you’re going to put a carrot in front of the dealer and apply pressure on them to make the deal.
After they politely decline your first low-ball offer, you’re then going to ask for their next best price from that figure, which will be more than you’re prepared to pay. Or, they’ll give you something ridiculous like $44K.
Now, you’re then going to hit them with your big gun. Ready? Tell them you’re only going to accept $40K for that vehicle. If they don’t like that offer, you simply thank them for their time, and tell them you’ll try another dealership - and tell them to call you if they change their mind.
Next step, simply walk out. There’s a good chance they’ll either stop you before you leave, or call you later that day.
I want you to at least get your mindset right for this whole negotiating thing, because it’s important to have a sense of self-worth and confidence when entering a dealership to negotiate on a price for your next new car.
It’s no good just allowing the salesperson to swindle you out of thousands of dollars you earned simply because they could ask you all the right questions during the politest of conversation, while quietly gouging you, financially, by coercion.
It’s time to play hardball. Except, that’s kinda hard to do in 2022, thanks largely to the global new car stock shortage - caused by a shortage in semiconductor computer chips. If you don’t know what it’s all about, check out this computer chip supply report from the ABC.
In the conventional dealership, before the world got all inverted, there was a secret reserve of vehicles in stock in a holding yard which you could leverage against the dealer because they were costing the business money the longer they sat there.
Today, take a casual glance at how many new cars are sitting in the front or back of the dealership. Most new cars are being sold almost immediately, which means it’s increasingly difficult for you to pressure the dealer by walking out the door and taking your money elsewhere.
The best way you can stay on the front foot here is to not capitulate or buckle if the salesperson seems unaffected by your bargaining. You still have the advantage of being able to choose another vehicle on your shortlist, which is why it’s important to remain patient and flexible about which vehicle you ultimately buy.
They’re desperate to sell cars because the market is so fragile right now, a consumer can pull their sale or simply walk out the door.
It is absolutely vital that you do not sign a contract you haven’t read entirely and understand fully. Get a second person to read through it with you, highlight anything you don’t understand and - even better, get legal advice before you sign anything. Dealers and car brands will try to slip anything into that contract, especially termination clauses and refund terms and conditions.
You simply may not be able to get your first preference new car this year or possibly next year. This is a fact. The global car market is all messed up.
It’s going to be a slow recovery.
You’re going to have to expect a lengthy wait for it to be delivered, anywhere from 6-12 months.
It doesn’t mean you can’t still negotiate for a price you want. Just because dealers are selling the vehicles they have in stock or are placing orders for new ones, doesn’t mean you can’t use the veiled threat of visiting a different brand against them, to get the price you want.
In fact, it’s all the more reason you should persevere with this strategy because your money can either land with them, or across the road. And every dealer business is desperate for sales, they just don’t want it to seem that way.
The advantage you have right now is that new cars have never been better. They’re crammed full of clever safety features, and typically the best ones like auto emergency braking and reversing camera with sensors are on base or mid-spec models. Sometimes you can even get adaptive cruise control on mid-spec models, which is great. So even if you cannot get the dealer to budge on one make and model, you’ll potentially find the rival brand across the road with a competing model might be willing to go lower on the price because you crossed the road.
As long as you’re shopping with a similar brand on quality, reliability, customer support and reputation, then you’re going to find things work more in your favour if you can remain objective and compromise in the event a dealer won’t budge to meet your budget.
The best way to answer this question is to understand how urgently you need a car. If you need one immediately, buying used is going to be the most practical option - but you should expect to pay a premium for it, it’ll have kilometres on the odometer, and you’ll have to jump through the regular hoops of buying a used car.
Or, if you don’t need wheels immediately, but you do eventually need a change of vehicle, then buying new will require patience and flexibility in what vehicle you buy, the features it comes with, how much you can negotiate off the price and how long until it’s in your driveway.
We’ll discuss this in greater detail in my next report: Should you buy a new or used car?
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