Buying a new car is a significant decision with many factors to consider. To secure the best deal, you should be prepared to negotiate the car’s price. If negotiating is unfamiliar to you, you might feel unsure about how to approach the process effectively.

Before diving into car price negotiations, it’s important to understand how dealerships price their vehicles. The term “MSRP” stands for “manufacturer’s suggested retail price,” also known as the “sticker price.” This is the price prominently displayed on vehicles at the dealership.

While manufacturers can suggest an MSRP, they don’t control the actual retail prices set by dealerships. Instead, the MSRP serves as a guideline that dealerships can follow, raise, or lower based on their discretion. Since the MSRP isn’t necessarily the final price, it provides a good starting point for negotiations. Dealerships aim to sell vehicles for more than the invoice price they originally paid, creating a margin for profit. This invoice price is lower than the MSRP, leaving room for negotiation.

Buyers should research the market value of the vehicle they are interested in before negotiating. The market value usually falls between the MSRP and the invoice price. A successful negotiation involves leveraging this information to lower the price from the MSRP or securing additional discounts or cash rebates.

Now that you understand dealership pricing, it’s time to learn how to negotiate a new car price to your advantage. While the goal is to lower the price of the vehicle you’re interested in, some negotiation tactics are more effective than others. Before you begin, consider the following tips for negotiating a car deal:

1. Do your research

To best prepare for a car negotiation, it’s crucial to do your research beforehand. Start by looking into the market value of the car you’re interested in. The market value depends on factors such as supply, demand, options, and incentives, providing an idea of what other buyers are paying for similar vehicles. This knowledge will better position you to set and secure your target price.

Next, investigate various dealerships that offer the vehicle you want. It’s beneficial to know how much a dealership paid for the vehicle. While the invoice price can provide some insight, many established dealerships obtain vehicles from manufacturers at a discount. If this is the case for the vehicle you’re interested in, you may have even more leverage in your negotiations.

No two dealerships are the same, and the price of the new car you’re looking for can vary from lot to lot. It’s wise to shop around and ask different dealers for quotes. This not only helps you identify who is offering the best deal initially but also gives you leverage with other dealers. Presenting a better offer from a competitor can prompt dealers to attempt to beat their rivals’ prices.

Dealers who are willing to negotiate the final selling price of a vehicle may try to recoup some of that money in other ways. For instance, they might suggest that because you’re getting such a great deal on the car, you can afford to purchase an extended warranty. Despite the savings on the car’s price, it’s essential to carefully consider your options and continue negotiating to ensure you truly get the best overall deal.

Successfully negotiating a car price involves avoiding confusion about the final selling price. Many factors contribute to a good deal on a vehicle, making it easy to get lost in the details and be surprised by new fees, taxes, and other costs added at the end. To ensure a deal isn’t too good to be true, ask the dealer for an “out-the-door” price that includes all expenses upfront. Additionally, request a detailed breakdown of these costs so you can ensure nothing unexpected slips into your deal.

Shopping around has many benefits, but keeping your offers organized is key to securing the best deal. Getting your offers and their details in writing helps you stay organized as you work with multiple dealers. Having these notes handy during negotiations can significantly aid in getting the right vehicle at the right price.

When you’re ready to negotiate, follow these tips to ensure you get the lowest price possible.