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When my husband and I sat in a dealer showroom, I had no doubt we would drive away in a brand new Nissan Xterra with all the extras — after paying a ridiculously low price.
“You’re killing me on this,” the sales manager told us as we negotiated to bring the price lower and lower. “I’m not making any money on this deal.”
That was a fib.
I knew from my years as a journalist covering the auto industry that this dealer was banking on a huge bonus from Nissan for selling me this car. See, some automakers offer dealers stair-step incentives. Basically, that’s a payment for each car — for example, $500 a car — paid when a dealer sells a specific number of designated models during a set time period.
As we drove off the lot in our tricked out, low-cost SUV, I was certain our purchase pushed the dealer into the magic zone. I knew we had found a bargain.
Some automakers have discontinued stair-step incentives at the insistence of dealers. But there are plenty of other ways to make sure you snare the best possible deal on a car.
1. Shop at large dealerships
Forget the adage that small dealerships will give you better deals. Large dealers can move hundreds of cars every month, so they can likely afford to sell at least a few cars for less than the invoice price.
Remember, some automakers still offer stair-step awards to dealers. And even if they don’t, they may offer other incentives for meeting sales targets or moving specific models.
2. Allow dealers to compete for your sale
There’s no need to drive all over town and haggle. Once you have made a list of the models you want to consider, simply go to the automakers’ websites. Use the “find a dealer” tool and allow dealers to contact you. I did that when we bought a Mini and had dealers vying for my business. Don’t shy away from letting dealers know you are talking to others. That puts you in a position of power.
One tip: Make sure you get an “out-the-door” price that includes all taxes, fees and extras. You don’t want to bank on an ultra-low price only to discover you also have to pay for multiple extras.
If you need a car loan, don’t forget to shop for the best deal on that as well. You can start by comparing car loans in our Solutions Center.
3. Be pleasant
Do you want to work with someone who is unpleasant or hostile? Neither do car salespeople.
Yes, they want to sell cars for as much money as possible. They know you want to pay as little as possible. But if your salesperson likes you, they may well point you to models that better suit your needs and save you money. They may also sway their sales managers to give you some extras or even a price break.
4. Remember, loyalty pays off
If you or a friend has worked with a specific salesperson in the past, email him or her directly when you are in the market for a new car. Salespeople who have established client bases are valuable to dealerships. They will work hard to win you a good deal because that increases their professional value.
5. Consider a soon-to-be-discontinued model
I wanted a two-seater sports car, but I didn’t want to pay a premium price. So when I went shopping for a Mini, I considered models that I knew dealers were anxious to move. I ended up with a Mini Cooper Roadster. I knew the model would be discontinued soon.
The one I chose was a dealer test car, so it had about 1,000 miles on it. Since it was “used,” that yielded another major price cut for me.
6. Don’t negotiate on dealer holdbacks
Car pricing is more complicated than many buyers realize. Auto manufacturers build in what are known as “dealer holdbacks,” which give dealers pricing leeway. Again, the amount varies, but holdbacks basically give dealers the ability to price some cars below the invoice price and still make a profit.
Holdbacks are something akin to sacred ground for car dealers, though, with most dealers unwilling to share them with buyers, Edmunds says. Don’t even try to negotiate into the holdback.
Do you have secrets for getting a deal on a new car or truck? Share with us in comments below or on our Facebook page.