Getting the Best Deal on a New Car or Truck

Determine a target price for the vehicle you want to buy
Negotiate upwards from your target, not downwards from retail price
Refuse to buy high-profit add-ons and pay for bogus tacked-on charges

Car Buying AdviceThe Internet has made researching and shopping for a car or truck easier than it’s ever been. Web sites like place pertinent information about a vehicle, reviews and even new-car price quotes from local dealerships literally a few clicks away.

But when it comes down to actually making a purchase, automotive transactions are still conducted face to face. And while an Internet shopper may walk onto a showroom floor with a bona fide price bid in hand, rarely is a new-car dealership’s first offer its lowest one. This might be a good enough deal for some buyers, and accepting it will certainly make for a quick sale. However, those seeking the absolute best deal will still have to haggle with a salesperson to obtain it.

The goal here is not to “beat the dealer,” rather it’s to determine through careful negotiations the lowest price at which the dealership is willing to sell a specific vehicle on that particular day. This is a peculiarly and almost constantly moving target that’s subject to a wide range of economic, internal and external factors, none the least of which is sheer supply and demand.

Staying On Target

Before setting a foot on a showroom floor, smart shoppers will first want to establish “how much” vehicle they can realistically afford; the best way to do this is to get pre-approved for a new-car loan at a local bank or credit union. The next step is to determine a “target” price for any model under consideration. Typically, this will be the so-called invoice price for that specific vehicle and trim level, plus any desired options or equipment packages, along with the manufacturer’s delivery charge. This information can easily be found for all makes and models elsewhere on this site and on the Internet at large. If a manufacturer’s cash rebate is being offered, be sure to deduct it from the target price.

Be aware that a dealer’s true cost is actually less than a vehicle’s invoice price thanks to something called a holdback allowance. Typically, this is a percentage–usually two or three percent–of either the MSRP (manufacturer’s suggested retail price) or invoice price of a car or truck that a manufacturer pays to a dealer when a vehicle is sold to help assist with the cost of financing his or her inventory. If the dealer is receiving an additional cash marketing incentive from the manufacturer for selling a particular model (these are also called “secret” rebates, as they’re rarely publicized and are not always passed on to car buyers), his or her actual cost can be far lower than the invoice price. As with consumer rebates, information on dealer incentives is readily available on the Internet; if one is in effect, deduct that amount from your target price.

Also, if you’re looking to trade in your present vehicle you’ll want to determine its fair-market value (its so-called “wholesale” price) ahead of time by checking with an Internet used-car value guide, or—better yet—by shopping the trade-in ahead of time to the dealer’s own used car manager.

Getting Down to Business

When it’s finally time to head for a dealership and begin the buying process in earnest, resolve to remain emotionally detached and in complete control of yourself and the situation throughout the process at hand. It’s a good idea to leave the kids at home to avoid distractions, but you may want to bring your spouse or a friend along for moral support.

Soon after you walk through the door a salesperson will introduce him or herself and will immediately begin to “qualify” you to determine whether or not you’re a serious buyer. Don’t discuss a vehicle’s price just yet, and avoid answering questions like, “Are you willing to buy from us today if the price is right?” or especially, “How much are you willing to pay per month?”

Ask if the dealer has the vehicle you want in stock that’s as or very close to how you want it equipped; if not, determine whether the salesperson can obtain one for you from another dealership.

If you have one, don’t discuss your trade-in as yet—this should always be treated as a separate deal altogether. This way the salesperson won’t be able to “inflate” both the trade-in value–and your ego—at the expense of a higher selling price on the new vehicle. If you do happen to mention your trade-in early on never give the salesperson the keys to your current vehicle—he or she might try and hold your current vehicle hostage as a negotiating ploy.

Once you’re ready to sit down and start discussing a vehicle’s transaction price, the salesperson will lead to you what’s known as a “closing room.” Bring a calculator, pad and pencil and any pricing printouts into the closing room for reference and to show you are serious.

Start by making the first offer, which should be your target price, as discussed above. Tell the salesperson how you arrived at this figure, and that if he or she can meet it, then you’ll close the deal on the spot. Typically, the salesperson will typically come back with a counteroffer. You should now raise your initial offer by incremental amounts, say, one or two hundred dollars at a time if you’re a thousand dollars or more apart; the salesperson will likely lower his or her price in the same manner.

At some point the salesperson may leave to “present your offer to the sales manager” (though sometimes this may be just to grab a quick cup of coffee or a drink of water). He or she will likely come back with a slightly lower offer, though this is not always the case. If you’re close, say within a few hundred dollars, try standing firm; if not, continue the negotiating process. If the salesperson won’t budge at that point, just stand as though you are preparing to leave and say, “That’s it, thanks for your time.” The salesperson will then be facing the prospect of losing a sale, so it’s likely he or she will make another (or a first) trip to see the sales manager. Either the salesperson or someone else, perhaps even the manager, will return with another offer and try to close the deal. By now you should be looking at the dealer’s lowest price, and it will be up to you whether to accept it or seek a better bargain elsewhere.

Assuming you’ve reached an agreeable offer, bring up the subject of your trade-in and negotiate that price in a similar manner, based upon your research. If you’ve gotten a bid on your trade-in ahead of time from the dealer’s used-car manager as recommended above, there should be little room for discussion.

Watch Your “Back End”

Once you’ve settled on a transaction price you’ll be handed off to the dealership’s finance and insurance manager’s office where you will be asked to sign the necessary paperwork and otherwise participate in the potentially costly “back end” of the deal. Here you’ll almost certainly be offered—perhaps pressured—to purchase a plethora of high-profit services and products, including extended warranties, rust-proofing, fabric protection, paint sealant and undercoating. Refuse all of them, as they are of little value relative to their cost. Ditto with dealer-installed accessories like alarm systems, roof racks and the like—you’ll almost always be able to find the same gear elsewhere for less money.

If you’ll be financing the vehicle through the dealership, likewise reject the offer to buy “credit life” insurance, which is designed to pay off your loan balance in case you die or become disabled. You’re better off with actual term-life insurance that will probably offer a larger death benefit for the same amount of money.

As with any transaction, be sure to read carefully any document presented for your signature, verify all entries and check the math in any column of figures for accuracy. Refuse to pay any tacked-on charges, such as for “dealer prep” or “floor plan allowance.” Few dealers will allow you to walk out over these kinds of charges at this stage of the transaction.

Published on Thursday, March 12, 2009 - Copyright 2014, INC. All rights reserved. This material may not be published, rewritten, or redistributed.


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