How to negotiate with a clever car dealer

A dozen ways to negotiate with a clever car dealer

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So, you’ve decided that you want a new or used car. The rust bucket you’ve been driving since you were 16 is getting too expensive and buying a new or used car is cheaper, or at least that’s what your partner tells you. No matter how much you try and put it off, it’s what you’ve both set out to do this weekend.

However, before you get too excited by the balloons and the flashy “sale” stickers pasted on the windscreens of the cars you’re looking at, here are a few tips that might help you get the best deal for your new vehicle.

The three-dealership rule

The three-dealership rule is something you might not have heard of, but it is a pretty good rule to stick to when shopping for a new car. Do a quick Google search and find the closest three dealerships near your house. Pick a weekend that works best for you and make the time to go to all three of them.

It sounds like a waste of time, but once you’ve gone to all three dealerships, you’ll have a good idea of which one has the best deal on the car you’ve already rigorously researched online.

It’s important to make sure that you go to the dealership that’s farther away from you and work your way closer. That way if there is a better deal down the road, you’re aware of it and can take your hard-earned cash there instead. Whatever discount you can get at the dealerships you go to means more savings for you.

Bait and switch

This old chestnut has become increasingly common in the age of online car sales. It works as follows:

  • The dealer advertises a car at an amazingly low price, which quickly convinces you to pay them a visit.
  • Unfortunately, by the time you make it to the showroom, that amazing deal has miraculously “just” been sold.
  • But that’s no problem – the dealer has a whole lot full of other vehicles that are “much better deals” anyway and you can rest assured he’ll be more than happy to sell them to you.

There’s not much you can do to avoid this trick, but make sure you recognise it when it occurs and don’t fall into the dealer’s trap.

Focusing on monthly payments

Another common tactic for dealers to use is to focus your attention on how much your monthly payment amount will be, rather than how much you will be paying in total over the life of the loan.

This can make a car that is unaffordable and well out of your price range seem much more attainable.

A simple trick used to direct your attention to the monthly payment is the “foursquare sheet”, which combines the new car purchase price, the deposit, the monthly payment amount and the trade-in price on one piece of paper.

While the low monthly repayment amount may sound like a great deal, remember to consider how long you will need to keep making those repayments for. Always keep the total cost in mind before signing up for financing.

Shop in the middle of the month

It turns out that shopping at least 10 to 12 days before the end of the month ensures that the salespeople at the dealership you decide to go to haven’t hit their targets just yet.

You know what that means, right?

They want to hit that target so badly that they’re sometimes willing to play ball and lower the price! Lucky you!

However, if you decide to go later in the month, you run the risk of the salespeople having already hit those targets. If this happens, they may delay your sale until the next month so it counts for that one instead of this one, or you may not be able to negotiate as good a deal

There’s always the option of shopping around for a new car towards the end of the financial year as car dealerships have stock that they need to get rid of and will lower the price of the vehicle to do this.

Get your loan from the bank or car lender instead of the car dealership

You’re willing to admit that you’ve been distracted by the pretty balloons and found the car of your dreams.

The only issue is that it is slightly over the budget that you had planned for your new or used car.

Before you sign on to dealership finance so you can drive away with the car of your dreams right there, take the time to compare your options and see if you can get a better deal from a bank or other car lender.

Dealership finance can be quite competitive but can cause other things to happen in the sale. For example, you may not get as good a price on the car because you got a good deal on the finance. Getting a car loan from a lender before you buy the car also puts you in a better position to negotiate as you know how much you have to spend on the car.

Financing fail

Some unscrupulous dealers will close the deal on the sale of a car before the financing has been approved.

Then, at a later date – you may have even taken the car home and been driving it around for a few days – the dealer will phone you with the bad news that the financing has fallen through.

They will be more than happy to come to the rescue with a new financing arrangement, though, most likely with a much higher interest rate and stricter terms than were in place before.

To avoid this scam, never drive away until all financing for the vehicle has been approved.

Low- or no-interest deals

The interest rate is understandably the first thing most of us look at when considering a car financing deal, but you need to be very wary of low interest rate offers.

You should always compare all low interest rate car loans.

If the rate on offer is much lower than what you’ve found elsewhere, chances are there will be a catch or a clause in the contract to help offset such a low rate. For example, the car’s sale price may be non-negotiable, or the loan term may be longer than expected.

Remember: if a finance deal sounds too good to be true, it probably is.

Trade-in tricks

Trading in your current car when buying a new one gives dodgy dealers another opportunity to swindle unsuspecting customers.

For example, while they might give you a great drive-away price on the new car, they might also offer a price for your current vehicle that is well below what it is worth. Or you’ll be offered a great trade-in price for your current set of wheels, but you’ll need to pay full price for the new vehicle.

The best way to avoid this trick is to simply keep your wits about you. Research how much your current car is worth and decide how much you’re willing to pay for the new model.

'Only for a limited time'

Creating a false sense of urgency is one of the oldest tricks in the book. It’s also fairly easy to spot, for example, if a deal is available for 'today only', or if the salesman keeps referring to a 'very interested' other buyer.

Recognise this tactic for what it is and don’t get sucked into playing the dealer’s game. Take your time and make sure you’re never rushed into a decision.

Awaiting delivery

If you’re buying a popular model, there’s a good chance you’ll need to wait (sometimes months) for the new stock to arrive in Australia. These wait times will be the same across the board, but some dealers will try to lock you in early by claiming that your new car will be here in a few weeks’ time, much sooner than it will be at the other dealerships, provided you put down a deposit.

Of course, when the scheduled delivery date arrives there will be an unexpected delay and you won’t end up getting the car for another couple of months, the same amount of time as quoted by the other dealerships. Unless a dealership already has your particular model in stock, delivery times will be fairly similar no matter where you go.

Don’t be afraid to walk away

It can be tough when the dealership closest to you is offering window tint and a free automatic upgrade on a car that you thought only came in manual. However, it’s important to remember that these people are not your friends and that they just want to make a sale, no matter how friendly or polite they are to you.

If the car is not exactly what you want and you know you can get it cheaper due to the three-dealership rule, feel free to walk away. It’s a total power move and might just make the salesperson lower their offer price.

Walking away from a salesperson can be tough, but if you’re sure that the deal they’re trying to sell you just isn’t right for you, walking away is the best option for you and your wallet. If you think that there’s a better deal out there, there probably is. You’ve just got to walk away and find it.

Be polite to the person who's trying to sell you something

As a general rule, you should be polite to everyone you talk to. When you’re shopping for anything, especially cars, this rule comes into play as well. Although it can be frustrating when people don’t take no for an answer, take the time to think about how emotionally draining their day as a salesperson must be.

It’s not an easy job to talk to strangers and get them to feel at ease, but that’s what salespeople have to do. As with any business transaction, do not threaten the person who's trying to sell you something to “take it or leave it” as this is an aggressive approach that will not work out in your favour.

While it’s important to be strong when negotiating, people are more likely to do something nice for someone who has been nice to them. Keep this in mind while shopping around for your new car and you might just find a salesperson who loves being treated with kindness and will sell you the car for lower than the advertised price.

To summarise:

A little preparation before walking into a car dealership can go a long way to ensuring you don’t get ripped off. Keep these tips in mind when you go shopping for your next set of wheels:

  • Do your research. Spend some time researching car values online. What’s a fair price for the make and model you want to buy? How much can you reasonably expect when you trade in your current car?
  • Shop around. Don’t just rely on what one dealer tells you, shop around and see if you can find a better deal elsewhere. And remember, you don’t have to take out financing through a dealer. There are plenty of other reputable lenders out there that you can approach for a car loan.
  • Keep a cool head. Don’t get caught up in the emotion and excitement of buying a new car. Know what you are willing to pay and what you want from the deal and don’t fall for any questionable sales tactics. If you’re being pressured into a deal, or something just doesn’t feel right, walk away.

Follow these tips for dealing with a car dealership and their salespeople, and you might just find that the next new or used car you buy will be a bargain! Good luck!

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IMB New Car Loan

You'll receive a fixed rate of 4.88% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one up to two years old.

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Beyond Bank Low Rate Car Loan "Special Offer"

You'll receive a fixed rate of 4.69% p.a.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.

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RACV New Car Loans

You'll receive a fixed rate from 4.99% p.a.
A larger loan of $5,000 or more to help you buy a new or used car. 5-hour pre approval available and no ongoing fees.

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NRMA New Car Loan

You'll receive a fixed rate of 4.99% p.a.
Purchase a new or used car up to 2 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.

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