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I worked at a car dealership, and car shopping with a friend made me realize people miss 4 big opportunities to negotiate

Liz Knueven   

I worked at a car dealership, and car shopping with a friend made me realize people miss 4 big opportunities to negotiate
car buying

Kekyalyaynen /

There's more than just the price to negotiate when buying a car.

  • While working at a car dealership, I learned there are a lot of factors up for negotiation when you're buying a car. While car-shopping with a friend recently, I realized most people think their only chance to negotiate is on the price.
  • However, interest rates, warranty and protection services, and even trade-in values are negotiable. And by starting your negotiations based on the invoice price instead of the MSRP, you can save more.
  • By negotiating on the interest rate and the price of the car, and by eliminating unnecessary maintenance plans, my friend and her mom were able to lower their car payment.
  • Read more personal finance coverage.

I used to work at a car dealership, so naturally, I'm that friend that you bring car shopping. This past weekend, my friend and her mom asked me to go to the local Hyundai dealership with them, and I agreed to tag along.

Their car-buying process reminded me that many drivers don't think to negotiate on several parts of their car purchase: everything from the price to the interest rate is up for negotiation.

1. Everyone knows you can negotiate on a new car's price, but they look at the wrong price to start

Most people know that you can negotiate on the price of a new or used car. But, many don't know that they're actually thinking about the wrong price. Most people start their negotiations based on the manufacturer's suggested retail price, or MSRP. But, the figure they should be thinking about isn't listed on the sticker: the dealer invoice price.

This is the price the dealer paid for the car. It's not shown on the window sticker, and it doesn't have to be. But, the typical invoice price can be found online; Kelley Blue Book often publishes and updates this information. Base your negotiations on that figure.

Aim to get as near as possible to the invoice price. Dealers often get incentives that lower the invoice cost for them further. Negotiating based on invoice price leaves you quite a bit of money to save on the MSRP, and still a bit of room for the dealer to make a few dollars.

2. Interest rates

If you're choosing to finance through a dealership, don't take the first interest rate a salesperson offers you. My friend and her mom worked hard to negotiate their interest rate, and it saved them big.

Dealerships make money on financing. The dealer's offer generally includes a little bit extra for them. They sell your loan to a bank, and any markup is their profit, and your loss.

You can negotiate their interest rate. Or, you can get preapproved by online lenders, banks you work with often, or even credit unions. Then, you can walk into a dealership with a number to beat, and have more bargaining power with an offer in hand.

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3. The value of your trade-in

Dealers love getting used cars - they can make more profit on them. Automotive News reports that a dealer's average profit on a new car in 2015 was $2,014, and the average used car profited them $2,396 - a difference of $382 of profit.

Trade-ins are a great source of revenue, especially when a dealership can buy the car from you for less. Whatever their offer, the value of your trade-in is up for negotiation, and you should try to get as much as you can.

Come prepared knowing the Kelley Blue Book value of your car, and try to get as close to that figure as possible to get the most for your trade-in. Or, skip this all together and get the most from your car by selling it yourself.

4. Any of the maintenance packages they're offering are up for negotiation - or elimination

Towards the end of the deal, the dealership offered my friend and her mom maintenance and protection plans, including lifetime oil changes and a five-year warranty extension for a few thousand dollars. These things are completely up for bargaining, can be sold separately, or are optional completely.

This dealer offered lifetime oil changes for $700, and factored that into pricing considerations as they worked out financing. But, that works out to $70 per year for oil changes if they keep the car for 10 years - more than the typical driver would spend. Most newer cars only need oil changes once per year or every 7,00 to 10,000 miles, and oil changes typically cost between $30 and $60.

My friend and her mom saved big by eliminating this $700 (plus interest) charge. Consider how much this coverage is worth to you, and how much you'd take advantage of it. If you think you need maintenance packages, negotiate for them. If they're not worth it, pass.

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