The single most powerful negotiating tool possible

By Kevin M

The single best tactic we could possibly use in negotiating a deal for a car is painfully simple and at our disposal any time we choose to use it. Here it is: If you don’t like the deal they’re offering, just get up and leave!

Call it your nuclear option, but it’s the one action that’s guaranteed to stack the negotiations in your favor no matter what else is happening.

When is the right time to pack up and leave?

• When you feel pressured
• When you feel confused
• When you’re certain you’re paying more than you can afford, even though the dealer says otherwise
• When you sense based on your research that you’re being given something less than the best deal available
• When you feel like the sales staff is ganging up on you in the classic car dealership ambush
• When that little voice inside is screaming “something isn’t right” (the little voice is never wrong)

Exactly when should you do it? Optimally, it would be best to do it anytime after you’ve established your intent as a serious customer, but before signing the final contract and turning over your trade-in or check.

The reasons you might not use your best negotiating tool

If walking out is so simple and easy, why don’t more people do it? I’m no psychologist, but I’m guessing the reasons for this are rooted deep in the recesses of our emotions.

For example…

1. You feel like a victim (you’ve always been a victim, and buying this car will be just another example)
2. You want the car more than the salesman wants to sell it to you
3. You know nothing about cars, you don’t think you know anyone who knows any thing about cars who might help you, so you’re prepared to throw yourself on the mercy of the salesman
4. You hate negotiating
5. You didn’t bother to (or don’t think you can) line up your financing and/or to sell your old car and bring your down payment in cash before going to the dealer, so you’ll have to rely on them for that too; you hope they’ll give you a good deal on those but you’re worried and don’t want to push them too hard
6. Though you you’ve only known the salesman for 30 minutes, you’ve convinced yourself in that time that he really is a nice guy (has your best interests at heart, would never cheat you, knows your third’s cousin’s second wife’s former mother-in-law, etc)
7. You hate making major purchases and you just want to get it over with
8. You need to get a car today (a.k.a., the car dealer’s nuclear weapon)

None of these, or any others we could come up with, are legitimate reasons for not walking if the deal doesn’t look right.

Why you MUST be prepared to walk at any point in the negotiations…

For a variety of reasons, it’s absolutely critical that you be prepared to leave the store even before you get there!

1. You can’t out-deal a good salesman. A good salesman has, shall we say, a killer instinct. It may be this quality more than any other that drives the most successful people in sales. They can sense when and where you’re weak and they know how to exploit it. They’re keyed into certain words, facial expressions and even your body language (there are sales courses devoted exclusively to this one!).

   Your only defense is your will to resist, best demonstrated by your willingness to walk.

2. You’re on the dealerships home turf. To put the situation into sports parlance, you’ll be the visiting team in this game, and all the “officials” on the field will be pulling not for you, but for your opponent, the salesman. Your best defense in this hornets nest is to be prepared to remove yourself from unfriendly territory at any time.
    

3. To keep you from paying too much. It’s a reality that you and the dealership are on opposite sides of the fence when you’re buying a car. You need to establish this early on as a counter to the salesman’s attempts to convince you that he’s your friend. He’s not.

   Absent recognizable resistance from you, he will charge you the highest price he thinks you will tolerate, and then pack the deal with extra’s that will raise the price even more. A bankable idea on when to walk: set a price in advance that you won’t exceed; when it does, you’ll know it’s time to make your dramatic exit.

4. To keep you from closing the sale before you’re ready. To the masses, a car dealership is where people go to buy cars. To the dealership staff, it’s a place where sales are made. Do you see the difference? They’re on commission—the more cars they sell, the more money they make. They need to sell. There are quotas—they need to sell a lot. They need to sell now. Like tonight. Before closing.

   Every effort by the salesman and his management buddies will be geared toward making a deal happen before closing. That’s they’re problem—not yours. Be prepared to walk when it starts looking as if you might be caught in that trap. If fact, if they really need to make a deal (they usually do), threatening to walk increases your bargaining power considerably.

5. It tells the dealer you can’t be pushed around. Every advantage the dealer and his salesman have in the negotiations collapse in the face of a customer who can’t be forced to do anything against his will. Unless you’re a skilled (and fully prepared) negotiator yourself, the best way to let the dealer staff know this is by making it clear from the start that you get what you want or you walk out the door. You can do this simply by dropping hints that you’ve either spoken with his competitors, or fully intend to do so.

Walking out isn’t a substitute for smart negotiating, but it can cover a multitude of sins if things aren’t going the way you want. Use it wisely, use it sparingly…but use it when you must.

Have you ever left a car dealership in the middle or even at the end of negotiations? Do you think it’s something you have the nerve to do it?

By Kevin M

Buying a new car has never been one of my favorite things to do. It’s not that I don’t absolutely love the idea of having a new car, I sure do! But the flaming hoops you have to jump through at the dealership to buy a car takes some of the fun out of what should be one of the most exciting events of your life

Car dealerships offer an attractive and convenient package of services that make the car buying experience much easier:

• They have the new cars we want (aaahhh, the new car smell!)
• They’ll buy our old cars from us, sparing us the trouble of selling them ourselves
• They provide financing, saving us from having to shop at banks

One stop shopping at its best—but with this ease and convenience comes a high price. Because dealers have all the car buying bases covered, they also have the upper hand at the bargaining table. The minute we walk into a car dealership, we’re at a built in disadvantage. We want a certain car, and the dealer has it—along with everything else necessary to help us get it. How could THEY ever lose?

They can’t, unless we take steps to remove the power from the dealer and stack the deck solidly in our favor.

1 ) Make sure you aren’t “upside down” on your current car

Get the payoff balance on your car loan; get the approximate book value of your car (see #4 below). Compare the two; is the loan balance higher than the car value? If it is, you shouldn’t be buying a new car. In the car business, that’s called being “upside down”, and no small number of late model car owners are in that boat. Rapidly depreciating car values combine with low- and no-down payment financing to make it happen.

Car dealers will tell you that you CAN buy a new car even if you’re upside down. What they aren’t as quick to say is that the deficiency—the amount by which your loan balance exceeds the value of the car—will be rolled into the new loan, putting you in an even deeper hole.

2 ) Line up your financing in advance

Many people like the relative convenience of dealer financing, but this can work against us on two fronts. First, dealer financing is a major revenue source and they will pad it, raising the cost over the term of the loan. Second, relying on the dealer for the loan as well as the car transfers all of the bargaining power from us to the dealer.

Apply at your bank or another non-dealer source, and get a pre-approval letter. That letter will improve your bargaining power, and force the dealer to offer better loan terms than the bank if they want your business. That’s a win-win for you.

3 ) Have your down payment ready before you go to the dealer

Sell your old car, rather than trading it in. Carmax buys cars even if you don’t buy from them, and will provide a window during which their offer is good. At a minimum, get an offer before going to your dealer so you’ll know if the dealer offer on your trade-in is a good one.

4 ) Get the real value on the car you’re considering

Kelly Blue Book is a widely recognized car valuation service, and you can check values on their site for free. Get the value of the car you wish to buy so you’ll know what a good deal looks like. You should pay no more than the value indicated.

Get the value of the car you already own as well. They’ll provide a range of values, and the one that’s lowest will be most relevant. That’s the minimum value you should get from a dealer. Anything less, and you’ll know the dealer is cutting you a bad deal.

5 ) Don’t get locked into working with a single dealership

There are more than 20,000 car dealerships in the United States—that’s an average of 400 in a typical state. Take advantage of those numbers, and shop between dealers—and let the ones you’re working with know that you’re doing it. You have options—make sure the dealer knows it as well.

6 ) Refuse add on’s

Credit life insurance, extended warranties and undercoating—you don’t need any of these but the dealer will tell you that you do. Practice saying “no” before you get to the store!

7 ) Bring a negotiator in case the going gets tough

It’s sometimes said that “The man who represents himself in court has a fool for a client”; so it is when buying a car. Unless you’re a hard-nosed, seasoned negotiator, never go into a dealership alone. Bring along a trusted friend or family member who is, then step back and let them handle the give and take. Car dealerships are set up to weaken our bargaining power; never underestimate what you’re walking into when you enter one.

8 ) Be ready to use your “Nuclear Option”—get up and leave!

If the final deal isn’t to your liking get up and leave! Never forget that the salesman, his manager and the finance guy all need your business, more than you need their car. You can go down the road to the next dealer if the one you’re talking to doesn’t cooperate. The dealership staff know this, but will do a very credible job of convincing you that it isn’t true. Don’t fall for it! You have the power, and walking is the greatest demonstration of it – especially with a cash down payment and pre-approved financing in your hand.

9 ) Don’t lease a new car

Lease transactions are more complicated than straight purchases, and for that reason alone, they should be avoided. There’s too much room for fine print and gotcha provisions, none of which will work in your favor. With leases all of the good news—the money saving provisions—are on the front end. And you know what that means—all the bad news is on the back end when you’ll be trying to get out.

10 ) Keep your emotions in check!

You’re buying a car and the heartstrings are tugging; after all, in America, you are what you drive. But more important, you’re entering a business deal.–never forget this! Your emotions have enormous potential to put more money in the dealer’s bank account. Put your business hat on and stow your heart until the purchase is done.

So now you’re armed and ready to deal from a position of strength—now go cut your best deal on a car!

Can you think of any other strategies that will improve your bargaining position in buying a new car? Do you have a car buying experience you’d like to share—good or bad?