One of the least pleasant aspects of buying a car is navigating your way through the actual purchasing process. Itʼs one of the largest purchases most consumers will make, and sometimes buyers come away feeling as if theyʼve been fleeced.
However, things shouldnʼt be so lopsided. Especially in the age of the internet, negotiating a deal is less art than science. Would-be buyers can research their purchase thoroughly to even up those odds. Hereʼs how to navigate your way through making a deal.
Start the search with research.
Assuming youʼve narrowed things down to the make and model of vehicle that best fits your needs, the keyboard is your starting point to getting it for a decent price. There can be a fair amount of variability in the asking price of a used vehicle, but it should be possible to average them out and get an idea of what an initial starting point should be. Once you know the average asking price for the car youʼre looking at, youʼll know a fair asking price when you spot it. Thatʼs where to begin. An asking price is just the asking price. Itʼs tempting to sort vehicles by price when youʼre on the hunt, but donʼt let a high price deter you from making an offer. Itʼs possible that a dealership might have paid too much on a trade-in, but that doesnʼt mean they donʼt want to sell it.
Nobody likes a low-ball offer, as theyʼre usually not serious. However, if youʼve done your research, you will know what the average starting price should be, so making a fair offer shouldnʼt insult anyone.
How much of a discount should I ask for?
Margins on new cars are surprisingly tight for mainstream brands. Thus, the used lot is where the sales department makes most of its money. Markups can be several thousand dollars over wholesale values.
You probably wonʼt be able to buy a car from a retail source for wholesale prices. However, researching the wholesale price from a source such as Canadian Black Book will give you an idea of what the dealer paid.
Sometimes there are no good deals, only good cars.
Everybody loves a bargain, but you canʼt drive a discounted price. Sometimes, a dealership or private owner is going to be able to stand firm on their price, and you still wonʼt want to walk away.
Examples include very low-mileage vehicles, or ones that are in high demand. The Toyota 4Runner, for instance, tends not to hang around very long on dealer lots and can command very strong resale prices. If youʼre having trouble finding the car youʼre looking for, that might be your first clue that when you see one, youʼre going to have to strike while the iron is hot.
Cash is no longer king.
Youʼve found the car and are prepared to make an offer based on your research. A common misconception is that a buyer capable of cutting a cheque for the whole purchase price has more leverage than someone who is going to be financing their vehicle.
Thatʼs just not true. In fact, a dealershipʼs finance office is one of its largest profit centres (more on that later), so thereʼs little incentive to discount a car thatʼs going to be purchased outright. It doesnʼt matter how you intend to pay for your new-to-you car, you should be able to negotiate the same sharp deal.
Upcoming expenses provide leverage.
Part of any used-car purchase should be a mechanical inspection, ideally by a third-party mechanic. Not only will this tell you if youʼre going to be shelling out even more money soon – if the tires are worn, for instance – but it can also be a way to bargain the price down.
You should also know as much of the history of the car as possible. Previous accident history might not be a big deal to you, but it will affect resale values down the line, so be aware of it. Dealerships arenʼt always required to disclose accidents below a certain value, so always ask for a third-party vehicle-history report as well as a mechanical condition report.
Your trade-in doesnʼt have to be part of the deal.
You might love Bessie, the faithful old car youʼre trading in. However, itʼs only worth what it will fetch at auction or its wholesale value. Dealers sometimes look to soften the blow by giving you more for your trade-in by discounting the car theyʼre selling. It doesnʼt matter how they get to the difference between them, only what the difference is.
Thus, you should try to get a reasonable idea of what your trade-in is worth before you start to negotiate. Again, research equals power here.
Further, since you only pay tax on the price differential between the two, figure out how much tax you stand to save, based on what your trade-in is worth. It may make more sense to sell it privately.
Donʼt be afraid to walk.
A dealership may come back to your initial offer with a counteroffer, or simply ask for more money to close the gap. In recent years, thereʼs less of this back-and-forth dance than there used to be, but it still happens.
Hereʼs where it gets tricky. With a used car, youʼve done the legwork to track down the one you want. Youʼre invested, and the temptation is there to just get the deal done. But be firm. Dealerships hate to watch potential customers walk out of their showrooms, and on a particularly slow day, you might even get a call back.
If the car youʼre set on is a more common model thatʼs unlikely to get snapped up by someone else, thereʼs less of a gamble in letting it go. With rare exceptions, used cars are like buses. Thereʼll be another one along in a minute.
There are deals to be done in the finance office too.
The finance office is where you go to hammer out any financing options as well as where you can purchase extended warranties and so forth. Note that there is usually a markup on warranties and other products, so you can ask for a sharper price here too.
Whether to buy an extended warranty is always a subject of debate, and the decision either way should depend on your own circumstances. If youʼre buying something like a three-year-old Volkswagen GTI, where parts and repairs are expensive, it can be worth it. If itʼs a bare-bones econobox with roll-up windows, youʼre probably fine without the extra coverage.
Know what protections you have.
Most provinces have consumer-protection organizations specifically to deal with the buying and selling of cars by registered dealers. If a dealer fails to disclose major issues such as previous damage (to a threshold value that varies from province to province), or use as a rental or taxi, you have the right to walk away and retain your deposit.
However, it’s a common misconception that large issues are the only leverage to unwind a deal. If the dealer is out-of-pocket because you’ve asked for new tires to be installed, you’re probably on the hook for the cost of that repair. But if it’s the day after agreeing to a deal by signing a dealer worksheet, and you feel like you were unfairly pressured, know who your consumer protection is and what support they can offer you. Until the car is registered in your name, it can be difficult for a dealer to hold on to your deposit. Further, in the age of social media, many reputable dealerships may walk things back as a gesture of goodwill.
Stay on top of all our Drive stories. We have a Drive newsletter covering car reviews, innovative new cars and the ups and downs of everyday driving. Sign up today.