Personal Finance

Do’s and Don’ts to Negotiate the Best Car Deal During Inflation

Jan 25, 2023

If you’re like most people, you don’t like haggling with a salesperson at the car dealership. Now add inflation, a microchip shortage, and lingering effects from a worldwide pandemic into the mix. The unappealing task of negotiating a car deal just went from bad to worse – at a time when new and used cars are more expensive than ever.

But while the car-buying process may not be a day at the beach, it doesn’t have to be awful, either. Here are some ways to negotiate the best price on your next vehicle during a period of inflation.

Do

Research the car’s value and understand a fair price range

Don’t go into a car negotiation unprepared. That would be like entering a medieval battle without a sword. Sure, you could do it, but it’s not a smart idea. Plenty of good resources are available at your fingertips to give you the knowledge you need.

Car Gurus is a great place to start. When you search for specific vehicles on the site, you’ll get prices along with how they stack up to market value. The car prices are rated in five different categories: great deal, good deal, fair deal, high price, and overpriced. You’ll also see a dollar amount of how much above or below market the price is for that car.

“Think of it like salary negotiation,” says Maximilian Wuhr, co-founder of FINN, a global car subscription provider. “If you know exactly how much the role is worth on the open market, you have the data to back yourself up. You’ll approach the discussions more confidently, which often yields a far better result.”

Determine exactly what you want in a vehicle

You know what you want in a car. You probably know the color, the features, and the specific make and model. When you visit a dealership, however, a salesperson may not be as concerned with what you want. Their primary focus is to sell you a car you are willing to buy. A customer may go to a dealership to purchase a specific vehicle but leave in a completely different one. Decide beforehand about which features you’re willing to be flexible and which are “must haves.”

Instead of being swayed by the sales pitch, stay on course. Don’t drive a car off the lot and immediately regret that it isn’t what you really want.

Decide what you can afford and stick to your “walk away” number

When you make the decision to purchase a new or used vehicle, it should fit within your budget. There is a ceiling to how much you can afford. Let’s call that your “walk away” number.

“The salesperson is likely to be more flexible if you threaten to walk away,” says Kyle MacDonald, director of operations for Force by Mojio, a GPS fleet-tracking company. “They will try to make the deal as sweet as possible for the dealership and their pockets, but they don’t want to lose the sale.”

It is important to understand the sales price and how that relates to an average monthly payment. Do the math ahead of time. Many banks provide auto payment calculators that let you play with different sales prices, which will give you a sense of the monthly payment based on the term you choose.

Don’t forget to add to the sales price your state’s taxes, registration, and any ancillary products you decide to purchase at the dealership.

Test drive the car

Even if you’re convinced that you’ve found the right vehicle, get behind the wheel and take it for a spin.

It may not accelerate, steer, or brake the way you expected. Maybe the car isn’t the right size for you. Perhaps you prefer heated seats. Several factors could convince you to go with a different vehicle. Remember, a test drive is not a commitment. It’s just a test drive, no strings attached.

Do Not

Tell the dealer up front that you have a trade-in vehicle

Think of negotiating a car deal like a game of poker. You don’t want to show your hand. The salesperson can use any information you provide as leverage.

If dealers know you have a trade-in, they might offer to knock $1,000 off the car you purchase. They could then offer $2,000 less for your trade-in than its actual value. Just like that, you’ve lost $1,000.

Shop by monthly payment number

You may end up paying more for a car than you’d planned if you focus only on your monthly payment.

Although costs are printed in black and white, additional products such as warranty, gap, and ancillary products can seem more affordable than they really are when you focus on monthly payment alone.

This is typically achieved by the dealer extending the term of the loan (how long you finance the vehicle) even though your amount financed increased. So a smaller monthly payment with a longer term might end up with a higher interest payment over the life of the loan.

Rush to get just any car – be patient

Be patient and wait for your car, your features, and your price. This will put you in the driver’s seat – and help to ensure that you walk away happy with your purchase.

Looking to save up for your next car purchase? A high-yield savings from Axos Bank can help you get there faster. If you need to refinance or purchase an auto loan, Axos Bank offers competitive rates and terms up to 96 months.