How To Negotiate The Price Of A Car: 9 Tips

Buying a car can be a big-ticket expense and a time-intensive endeavor. You'll need to research the costs and do your homework to find the right type of car for you.

When it comes to costs, playing the haggle game at the car dealership is probably not on your list of favorite things to do. But when it comes to getting the best price possible on a car, you'll likely need to put on your negotiation hat and engage in a bit of back-and -forth with the salesperson. Here are our top tips on how to negotiate a car price.

How To Get The Best Deal On A Car 

Buying a vehicle is one of the largest purchases you'll likely make. So, the lower the price you can snag on the car, the better.

When looking for the best deal, you'll want to keep in mind dealership promotions and specials, the MSRP (manufacturer's suggested retail price) or "sticker price", interest rates, fees, insurance and warranties. If you're considering trading in your current set of wheels for a new car, you'll also need to look into the trade-in value of your car before selling it. 

How Much Will Dealers Come Down On A Car?

For new cars, the average listing price at the end of December 2023 was $48,805. This means that prices for new cars decreased 2.4% year-over-year.

So, exactly how much will a dealer shave off the price tag of a car? While it depends on a handful of factors — inventory, time of the month, if there are any existing promotions or specials offered, and the car dealership — in our current market, you might be able to get a discount of several hundred dollars.

How Do You Know Which Dealerships Are “No-Haggle”?

Unfortunately, there's been a rise in "no-haggle" dealerships. That's because there's been low inventory, higher prices and an increase in online sales in recent years makes haggling on the sticker price less common.

Generally, online car-buying platforms and franchise car dealerships may offer a no-haggle pricing structure. In other words, there's no wiggle room on the sticker price. While you might not be able to negotiate on the price of the car itself, you might be able to ask for a lower interest rate on an auto loan, a lower price on add-ons and negotiate for a higher amount for your trade-in car.

Independent dealerships, on the other hand, may be open to haggling. It depends on their inventory, time of the month or year, and how motivated they are to get the car off the lot.  

9 Tips For Negotiating On A Car

While you can't control some factors such as prevailing interest rates on car loans and current inventory at the car lot, you can empower yourself with a budget and research to help you get the best deal.

1. Decide Your Budget

First, figure out your budget for your car purchase. Start by looking at how much you have saved for your car. Do you plan on paying for it entirely in cash, putting up a down payment and financing the remainder, or taking out a loan for the full cost of the car?

You'll also want to know whether you can afford a new car or a used car. According to recent data from Experian™, the average auto loan on new cars in 2023 was $40,184. With used vehicles, the average loan was $27,167.

While it depends on factors such as the type of car, its condition, and where you live, the average cost to own a car was about $12,000 a year, according to a 2023 AAA Study. Make sure to factor room into your budget for other car costs, like:

• Insurance
• Fuel
• Maintenance and repairs
• Taxes
• Registration and title fees

2. Know What You Want

Before you talk to a salesperson, it can help to be armed with the brand, make and model, year and trim level of your desired car. You've done your research on the going rate for this particular vehicle. Have in your mind the ideal amount you'd like to pay, and the highest you're willing—or can afford—to pay.

Doing your homework ahead of time and knowing what a fair value for a car is, will make you better equipped to negotiate for the lowest price possible.

3. Research The Car’s Value

You're more likely to have greater leverage in negotiating for a better deal on your car if you know the car's value. To start, look at car pricing tools for used and new cars on online automotive research platforms such as Edmunds, Kelley Blue Book and J.D. Power.

Factors that can impact a car's value include the make and model, color, and year. For used cars, the condition, maintenance history, any modifications, and mileage can impact the trade-in value of your vehicle.

4. Call Around First

Before you even step foot into a dealership, reach out to local dealers to get an idea of prices, if they have any current specials on certain make and models, and which vehicles are in stock. This, in combination with doing online research, can help you get a better picture on the cost of the cars on your radar.

5. Shop Around For Car Loans

To get a better idea of your financing options, do a bit of shopping. Banks, credit unions, online lenders, and car dealerships are all places where you can obtain financing.

See if you can get prequalified for a car loan, which tells you the loan amount, interest rates and terms you'd likely get approved for from a given lender. When searching for financing, you'll want to keep in mind interest rate, fees, monthly payments, and the loan amount.

Note that your credit score, along with other financial factors such as your debt-to-income ratio and income, will play a part in the approved loan terms. The credit score needed to buy a car varies. Generally, you'll need a credit score of at least 670 to get approved for a competitive rate.

6. Know What You Can Negotiate

How much you can negotiate depends on factors such as the inventory, time of the month or year, and how eager the car dealership is to sell existing cars on the lot. The costs that you can negotiate on buying a car includes the price of the vehicle, interest rate, fees, and trade-in value of your current car. You might also be able to see if you can lower the cost of insurance and warranties.

Wondering how much can you negotiate on a used car? It depends on the condition of the car, market value, and how much you can reasonably afford or want to pay for it. Check the value of a used car before you step foot into the dealership. Then, look at the sticker price. One approach is to aim for a price that lands somewhere in the middle. For instance, if you've done your research and the used car is valued at $15,000, and the dealer is asking for $20,000, see if you can get it for $17,500.

Note that not every dealership or seller will be open to negotiations – they are not obligated to negotiate with you.

 7. Account For All Other Fees

The fees of a new car purchase aren't just about the cost of the vehicle. You'll want to keep in mind all the other fees involved in the car-buying process:

• Title and registration fee. This is the fee a dealership charges for taking care of the title and registration process on your behalf with the DMV.
  
  
• Sales tax: If your state does charge a state tax, this is tacked onto the final cost of the car. Unfortunately, it's not a negotiable fee. The city or county you buy a car in might also charge their own sales tax.
  
  
• Documentation fee: This is the paperwork to finalize the car sale. This fee can be anywhere from under $100 to several hundred dollars. It's helpful to know your state's laws. That's because several states, such as California and New York, have caps on this fee.
  
  
• Advertising fee: This fee gets tacked on to pay for the cost of listing a sale on different platforms. If you come across this while buying a car, ask them if they can nix it.
  
  
• Dealer preparation fee: This is essentially the cost to clean your car before you drive it off the lot. Ask for it to be taken off the total purchase price.
  
  
• Extended warranties: An extended warranty might be useful if you plan on driving the car for more than about 3 years. Otherwise, you might want to skip this coverage. Consider how much an average repair might be on the vehicle before signing up for an extended warranty.
  
  
• Credit insurance/gap insurance: Gap insurance could come in handy in case you become disabled and aren't able to keep up with your loan payments. It might also be a good idea to have in case your car is involved in an accident.

If the salesperson is lumping all the costs together into a single monthly fee, be careful. It's easy for them to mask the actual cost of the car by grouping together the price of the vehicle, trade-in value, interest fees, and other fees. Ask to see a breakdown of the total cost.

8. Focus On The "Out the Door" Price

It's highly likely that the dealer will focus on the monthly payment. This is a way for them to mask the "out-the-door" price, which is the total cost of the car. This includes the price of the car itself, fees, and additional costs, such as an extended warranty, dealer service fees, advertising fees, and handling fees.

By paying attention to the out the door price instead of the monthly payment, you will have a stronger grasp of the true cost of the car, and not on what you owe each month. That's because if you look at the monthly payments only, you might lose sight of the total cost of the car, and what you'll end up paying.

9. Be Prepared To Walk Away

Sometimes, it's best to walk away and look elsewhere. For instance, if the total price tag of the car is still too high, or the dealer isn't conceding to lowering some of the fees. If you've done your due diligence and homework, you'll have a better chance of knowing what kind of deals are out there and how much you can lower the price of the car.

Remember: You are the customer, and the dealer wants to close on a sale. Don't ever feel pressured to say "yes" to the purchase of a car if the cost isn't within your budget or it's simply more than you want to pay. There are plenty of other options out there.

If you're not in a huge rush, this will give you more time to shop around and try negotiating with different salespeople and dealerships. It doesn't hurt to put on your haggling hat and try to get the best deal possible elsewhere.

The Bottom Line: Negotiating A Car Price Could Save You Money

Negotiating a car price to get the best deal possible goes beyond haggling. You'll want to do your homework on the value of the type of cars you'd like to buy, current interest rates and other market conditions, and what fees dealers are willing to budge on.

To help you plan for this large-ticket purchase or figure out whether you can fit a car payment into your monthly budget, download the Rocket Money^SM app. It can help you stay on top of your spending and find ways to lower bills.