This is a guest post writing by Jon.  Jon has a great ebook titled “Outfox the Car Dealer“, a great book showing you how to negotiate for a  new/used car.

Car negotiating might be viewed as a cross between chess (cold, hard strategy) and poker (the subtle cues of body language, the ability to bluff).  Whether you get a good deal – or get taken to the cleaners – depends entirely upon your own skills as a negotiator.  Let’s get started on your adventure, shall we?

Hit the lots.  Do your test drives.  Kick the tires.  Determine which car you want to buy.  Now go do your homework and calculate the TRUE VEHICLE VALUE (“TVV”):

For a NEW car: Determine the dealer’s true investment in the vehicle you wish to buy.  For new cars, this is best calculated by determining the dealer’s cost.  Then adjust for (subtract) any rebates, holdbacks, or other programs that will ultimately reduce the cost liability to the dealer.  A good source for this data is Consumer Reports vehicle pricing service.  Now add any costs the dealer incurred in placing that vehicle on the lot (so you can buy it).  This includes things such as delivery costs, added options, and yes (to be fair), the value of the gas in the tank – especially if it has a full tank.

For a USED car: If you are buying a used car, the process is a little different.  There will not be any rebates, holdbacks, or other programs.  So this simplifies the process a bit.  But – the car’s condition comes into play.  Refer to sources such as Kelley Blue Book, Edmunds Use Car Guide, or (my favorite) the official NADA Used Car Guide.  Adjusting for mileage, condition, options, etc., estimate the trade-in value of the car.

With that number in hand, begin some legwork:

#1. Contact third-party lenders to get an idea what type of financing package you will qualify for.  Contact local banks and credit unions.  Also check sources of online auto loans.  These sources are becoming very competitive.  You will now have an excellent estimation of required down-payment, monthly payments, etc.

#2. Determine the maximum amount you are willing to pay for the car.  You can base this on TVV (above) if you wish.  But, before you sit down to negotiate, before your emotions get involved, and before the salesperson begins his pitch, calmly arrive at your maximum price.  Burn this into your head.  Golden Rule: If you are unable to negotiate to this price (or a better one), you WILL walk.

#3. Return to the dealership and begin negotiating.  Open with an offer just $100 over the TVV (above).   The point here is that you are going to negotiate UP from TVV, not DOWN from the dealer’s asking price.  This forces the salesperson to do most of the work.  Golden Rule: DO NOT, under any circumstances, allow the salesperson to switch your focus to monthly payments.  You already have an idea what your payments will be – don’t you? – as a result of  step #1.  You can (and should), however, tell the salesperson you will be financing through them.  (This is a secret strategy explained in “Outfox the Car Dealer”)

#4. Now the game begins.  The salesperson might respond “I can’t sell it for that!”  Keep in mind that the salesperson is a highly-trained persuader, negotiator, and manipulator.  He has a whole bag full of psychological tactics to use against you to manipulate you into raising your offer.  The Golden Rule: don’t ever concede a position (aka: raise your offer) without requiring the dealer to also give up something (decrease his price).

View the procedure as a sort of “dance” toward the middle.   Think of it as a game.  And try to keep your emotions at idle.  Don’t get angry with the salesperson.  Don’t let on that you “love” the car.   There are a variety of tactics and strategies either party can employ – including bluffing, misdirection, rhythm interruption, and exploitation of several different facets of human psychology.  Learn How to Negotiate with Car Dealers – and Win! in the 140-page eBook, “Outfox the Car Dealer”, available at http://www.OutfoxTheCarDealer.com.

The sweet taste of SUCCESS!

Assuming you have arrived at a mutually-acceptable price, you agree to buy the car.  Now don’t think you are out of the woods yet!  You have only completed the first half of negotiations.   Next you will be sent off to the finance manager to close the deal and write it up.  This is the step where the dealer can, and often does, tack on hundreds (or even thousands) of dollars in add-ons/up-sells.

#5. Off you go to the finance manager’s desk to seal the deal.  The dealer counts on the fact that you have already been “softened up” during the initial sales process.  After all, you have already agreed to pay thousands of dollars for a car.  The finance manager is now going to try to nickel-and-dime you into paying a lot more.  The Golden Rule here: as the finance manager recommends an extended warranty (just $45 per month!), gap insurance (just $20 per month), and every other thing under the sun, the answer is “NO.”  There is nothing the dealer has to offer at this stage that you cannot find later – and at a better price.

#6. Now you enter into the final lap.  Interest rates.  And monthly payments.  The secret strategy here is to accept whatever the finance manager proposes – as long as it does not increase the cash price of the car.  Does this sound insane?  The strategy is solid, very secret, and will save you hundreds of dollars.  Learn how to do it -  read “Outfox the Car Dealer – How to Negotiate with Car Dealers and Win!”.

DONE!

#7 Drive home in your new ride, knowing you negotiated the best possible price!