As a customer, you need to negotiate each of the five items (purchase price, trade-in allowance, add- ons, warranty, and financing) in order to get a “better deal”. Ignoring any one of these items is likely to cost you money.
Sound complex? It is! You have to negotiate all five items!
It is this complexity that allows Dealerships to make a profit, sometimes a large profit, despite fierce competition.
All of us negotiate items without consciously thinking about it being a “negotiation”. Most of us have a high success rate! We often get what we want! We are natural negotiators!
Have you ever negotiated with a 2-year old? Have you ever negotiated with a teenager? Have you ever negotiated with a parent? Have you ever negotiated at work? Have you ever negotiated at play?
We usually don’t think about the fundamentals of negotiation that we apply in day to day situations. The way that we negotiate is as individual as each of us. However, there are common principles involved. The following is a selection of some of the most relevant to negotiating a better deal.
PRINCIPLES OF NEGOTIATION
Set Goals – Know exactly what you want, what you expect to achieve. Set a target price for your vehicle purchase, set a target price for your trade-in. You may wish to write your targets down and refer to them as you proceed throughout the negotiation process. Monitor your progress. Have you met or exceeded your goal? How close are you? Make your goal specific such as “$400 over dealer invoice”, not “the lowest price possible”.
Prepare – Do your homework, be knowledgeable, read the car reviews, and make a list of comparable vehicles (and be familiar with them). Know Your Credit Score, Know Your APR, Know Your Trade-In Value, Know the benefits and the cost of add-ons, and Know the benefits and the costs of Warranties.
Identify Alternatives – Your first alternative: Buy, Don’t Buy. Second, what alternative vehicles would you consider if you can’t get your first choice at the price you are willing to pay? What alternative dealerships would you consider? If you don’t like the trade-in allowance, are you willing to sell your old car yourself? Think these alternatives over prior to visiting a dealership.
Be Professional – Present yourself in a professional manner. Dress for success. Maintain a positive attitude. Be aware of body language.
Maintain Focus – Keep your goals in mind. Be friendly, be cordial, but don’t let the negotiation move off course.
Listen – This is probably the most powerful principle. The more others talk, the more information they reveal. Some of this information could be very valuable to you. What do others want? How can you meet their needs, while meeting yours? They want a sale and you want a good price.
When you get what you want, time to stop talking – Time to move on to the next topic, discuss next steps, discuss delivery. Don’t risk undoing what you have already accomplished. Example: You negotiated the trade-in allowance that you targeted, stop talking about your trade-in.
NEGOTIATING SITUATIONS TO AVOID
The following situations should be recognized as less than optimal. It is difficult, if not impossible to meet your goals on a timely basis under these conditions. Are these negotiating ploys? You will need to evaluate your alternatives and think about your strategies.
Negotiating with someone who lacks authority to negotiate – This occurs when the Salesperson must get approval from the Sales Manager on all points. You can have no more than a discussion with the Salesperson, it is not a negotiation. However, the Salesperson should be able to provide you with important information as to what the Dealership wants. This is a great time to listen! Ask questions and gather information, but don’t make any concessions. Don’t negotiate. When you are ready, ask to speak with the decision maker.
Negotiating with a terrorist – This occurs when someone (Salesperson, Sales Manager, or Finance Manager) crosses the line. If someone is abusive, speaks to you in an inappropriate manner, invades your personal space or is attempting to otherwise intimidate you into seeing things their way, they are not in a negotiating mode. No need to try to negotiate. People employed by a dealership work with customers everyday and know how to behave. They should know when their behavior crosses the line. Don’t negotiate. Either, speak up and point out the behavior or choose to continue your discussions maybe at another time.
Negotiating with a dishonest person – When an offer is made and that offer is accepted, you have a deal! If it is subsequently not honored, you have a problem. If the Salesperson is knowingly making false or even misleading statements about the vehicle or the financing, you have a problem. Was it a mistake? Was it a negotiating ploy? You decide. You have alternatives: Buy, Don’t Buy.
Negotiating with an irrational person – If someone has made a ridiculous initial offer, should you make a counteroffer? Do you counter with a ridiculous counteroffer? Usually this is a waste of time.
A strategy to consider for each of the items above involves time. Your time, not theirs. Let the dealership know that you are running out of time. If any of the above is a negotiating ploy, you put the dealership in the position of either changing their behavior in order to get the deal done or risk losing a sale. If you leave, you may not return. You might tell them: “Look, I only have another 30 minutes to get this done, this is what I can do, do we have a deal?”
SOME ADDITIONAL NEGOTIATING STRATEGIES
Whoever speaks a number first, loses – This appears to be true more often than not. Always try to get the dealership to “give you their best price so you can think it over”. Avoid speaking a number first (their target price could be lower than your expectation and you would never know). This can often result if there is a factory to dealer incentive that you are unaware of. This strategy is also very important in negotiating your trade-in allowance. If the first number is completely unacceptable, tell them. Was the first number a way of getting you to give “a real” number first? Sometimes it is. Try to get a better number without giving them a number you thought was fair. You might tell them: “If this is the best number you can do, I need to continue shopping, I am disappointed, I expected better from your dealership. Can you take another look?”
You won’t get what you don’t ask for – Don’t be afraid of going too low. You could be surprised. This is especially true with used cars at franchised new car dealerships. Often the asking price is very high. Based on your research, a 4 year old car with 70,000 miles should sell for $8,000, but the dealership is asking $9,999. You might tell them: “the most I can pay for this car is $7,000, can we get it done” All they can say is no, but the answer may surprise you.
Avoid splitting the difference – unless it is insignificant. How many times in the past did you split the difference and feel you did the right thing? How many times did you feel you did the wrong thing? Trust your instincts. Splitting the difference is more about saving time than meeting your more important goals. If a “splitting the difference” offer is made to you, you may decide it is reasonable to counter with a number that meets 25% of the way.
All of us have experienced success at negotiating. We each have a negotiating style that fits our personality and works for us. When it comes to negotiating, one size does not fit all.
Also, don’t get discouraged if you are not getting what you want. Take some time to think about it. Were your goals realistic? Were you taking full advantage of a highly competitive market place? Be patient. Be knowledgeable. Be StreetSmart!