Making a Car Dealership an Offer

[kjamesuvic]

I'm in the process of buying my first car. I've narrowed it down to a few cars in the $10000 range. My question is: What kind of offer should I be making if I'm buying from a dealership? 10% below asking? 15%? 20%? And are there any other specific things I should ask for? I've heard asking for a full tank of gas and new tires are among the biggest.

If it makes any difference, I'm looking to pay for the car in full.

 

[Kai]

Go to Edmonds.com and find out what the dealer invoice is. That's what you should be paying for the car. (The dealer makes money off of the various incentives they get, so paying invoice still gets them a profit.)

 

[upthewazzu]

If he's looking for a car in the $10,000 range it isn't new, so it won't have an invoice price.

 

[Huntsman]

When I was shopping, I autotrader'd every car within a 300mi radius of my home, graphed mileage v. price (noting irregularities that would affect that relationship), and did a linear regression. I added in the NADA and KBB values at several points for kicks. This gave me exceptional insight into the asking price market, which I used when evaluating cars. I eventually bought a car that was like 10% below my curve, and I asked for 12% off asking, got 6% off.

That doesn't directly answer your question, but the insight gained from the excercise really helped me evaluate and negotiate.

~ H

 

[Cary Grant]

A Hunstman's MIT-level data indicated you'll be lucky if you get a small single-digit discount off the sticker. Markups are not very large, especially on used cars. I just bought one and the price was very fair for the mileage etc. They weren't willing to budge at all. But they did improve their offer on my trade a bit.

 

[Douglas]

Not a direct answer to your question, but related to what you're doing:

Remember that buying a car is not a single negotiation over the price - there are typically three or four negotiations as part of the process. Negotiating the price of the car is just the first one. Trade-in value and financing are other areas where the dealership makes money, and will try to get their best deal there too. And once you get into the closing room, and you're sighing a sigh of relief that it's all over, the F&I guy will try to use his tricks to put one over on you somewhere or upsell you various options like tires for life, etc. You have to be prepared for all of them.

Not sure if trade-in is one you need to concern yourself with, but never let them know you'll be paying cash until after you've settled the price of the vehicle. They'll be less willing to deal if they know in advance they won't get a cut of the financing.

 

[Rumpelstiltskin]

A Hunstman's MIT-level data indicated

you'll be lucky if you get a small single-digit discount off the sticker. Markups are not very large, especially on used cars. I just bought one and the price was very fair for the mileage etc. They weren't willing to budge at all. But they did improve their offer on my trade a bit.

Actually dealerships make a huge profit on used cars, much more than they get from new cars. They beat people over the on the trade and then mark up the retail price. Check the difference between the trade value and the retail value of any car on NADA's site.

 

[GreenFrog]

Yup. Dealership offered me 8k for my car and I'm able to sell it for 14k+ on the private market.

 

[Cary Grant]



Actually dealerships make a huge profit on used cars, much more than they get from new cars.  They beat people over the on the trade and then mark up the retail price. Check the difference between the trade value and the retail value of any car on NADA's site.  

Huge? No.

Relatively more? Yes... at least on lower priced new cars... I asked and my sales person showed me the record of what they gave om the trade in I bought. Their profit was not "huge".

 

[SkinnyGoomba]

Last car I bough I went in with a car in mind, found it, drove it and wrote down my offer to them with what I would pay for it. They hemmed and hawed but eventually caved and gave it to me at that price.

I took all of the negotiation out of it by simply saying, I enjoy this car, I want to own it and I will pay this amount of money for it, if you can do than we have a deal. It worked better for me than trying to feel out where the low end price was.

If you do this however you have to aim at a real price, super low ball and they will not take you seriously.

 

[Rumpelstiltskin]

Huge? No.

Relatively more? Yes... at least on lower priced new cars... I asked and my sales person showed me the record of what they gave om the trade in I bought. Their profit was not "huge".

I used to think the same thing until a buddy of mine who sold cars for many years made it clear in no uncertain terms that profits on used cars are much higher than on new cars. WIth the advent of the web and google, consumers can quickly and easily nail down the true numbers that dealers pay for their vehicles and if you take a look the profit margin is rather small. Dealers rely on volume to maintain decent levels of new car sales profits. When it comes to used cars, there are no hard numbers because everything is arbitrary. Vehicle service history, vehicle visual condition, vehicle mechanical condition, vehicle mileage, warranty information, CPO qualified, etc. will all affect the price.

Let's look at Froggy's example

Yup. Dealership offered me 8k for my car and I'm able to sell it for 14k+ on the private market.

Let's say they would spend about $1k detailing and getting the car up to snuff. Then they would have turned around and priced it at $17.5k but under "strong" negotiations would have let it walk off the lot for $15k. That's anywhere from a $7k to a $9.5k profit on a single vehicle. Top salesmen will sell 8/9 cars a week and the average dealership might have 2 strong salesmen. You do the math.

 

[Cary Grant]

I did he math. Just bought a car. Looked at probably 30 and ran across only 2 that were remotely overpriced for a dealer. Private sales will always be much higher, especially for more rare vehicles like an M5.
Double as you cite is atypical. Not "never" but atypical.
And while % markup may be higher, it's net dollars that matter. 10% on a 20k used Audi means far les to them than 10% on a new S8. Yeah, I knw, duh.

 

[kjamesuvic]



Go to Edmonds.com and find out what the dealer invoice is. That's what you should be paying for the car. (The dealer makes money off of the various incentives they get, so paying invoice still gets them a profit.)

Unfortunately I'm in Canada. Edmunds is a US based site.

When I was shopping, I autotrader'd every car within a 300mi radius of my home, graphed mileage v. price (noting irregularities that would affect that relationship), and did a linear regression. I added in the NADA and KBB values at several points for kicks. This gave me exceptional insight into the asking price market, which I used when evaluating cars. I eventually bought a car that was like 10% below my curve, and I asked for 12% off asking, got 6% off.

That doesn't directly answer your question, but the insight gained from the excercise really helped me evaluate and negotiate.


~ H

 

This is an interesting approach. Did you account for previous claims, damage, collisions, etc.?

Not a direct answer to your question, but related to what you're doing:

Remember that buying a car is not a single negotiation over the price - there are typically three or four negotiations as part of the process. Negotiating the price of the car is just the first one. Trade-in value and financing are other areas where the dealership makes money, and will try to get their best deal there too. And once you get into the closing room, and you're sighing a sigh of relief that it's all over, the F&I guy will try to use his tricks to put one over on you somewhere or upsell you various options like tires for life, etc. You have to be prepared for all of them.

Not sure if trade-in is one you need to concern yourself with, but never let them know you'll be paying cash until after you've settled the price of the vehicle. They'll be less willing to deal if they know in advance they won't get a cut of the financing.

Since I am going to pay cash, would you recommend buying privately as opposed to from a dealership?

And a question to all: Say I'm buying a car for $10000. If I'm paying cash to a dealer, what would be the all in price of the car after taxes and everything else? Are there hidden charges or something I should be mindful of?

 

[Rambo]



And a question to all: Say I'm buying a car for $10000. If I'm paying cash to a dealer, what would be the all in price of the car after taxes and everything else? Are there hidden charges or something I should be mindful of?

There shouldn't be. Although, I'm not sure if Canada charges any sort of fees outside of tax and tag.

If you're paying cash, DEFINITELY go private. You'll get way more bang for your buck, and have much more negotiating power. Just make sure to get the car checked out ahead of time.

 

[Piobaire]



Unfortunately I'm in Canada. Edmunds is a US based site.
This is an interesting approach. Did you account for previous claims, damage, collisions, etc.?
Since I am going to pay cash, would you recommend buying privately as opposed to from a dealership?

And a question to all: Say I'm buying a car for $10000. If I'm paying cash to a dealer, what would be the all in price of the car after taxes and everything else? Are there hidden charges or something I should be mindful of?

OJFC.

unhaggle.com and carcostcanada.com. Ten seconds to Google those.

And the cost of paying cash or financing 10k will still have the EXACT SAME taxes, etc. How you pay the sales price does not matter one single bit. As to the all in price that will vary by province at the very least.

A fool and his money.