Below I cover the process of buying a car from a dealership at the lowest price and the various tips and tricks you can use to negotiate to save money.
If you have ever bought yourself a new car (or even a used one), then you certainly know that buying a car and getting an ‘excellent’ deal is not easy-peasy!
What happens more often than most people like to admit is that you end up with your new car and a feeling that you have just been sucker-punched financially (especially if you are a frugality-conscious individual).
Sometimes, it may take a few days, maybe weeks, or even months, before you get that bitter taste in your mouth that indicates you may not have gotten the deal you wanted aka buyer’s remorse.
I have chatted with several friends who have gone into the car-buying process with a specific vehicle model and price range in mind, only to drive away from the dealership with a totally different vehicle and way above budget.
“What happened?” I ask.
Well, after coming face-to-face with some of the best negotiators on the planet (car salespeople), pressure-selling, the many dangled fancy discounts and rebates, financing incentives, lots of free chocolate and coffee, meaningless upgrades, and so on, people pretty much just lose their minds.
Maybe it’s the adrenaline rush deriving from the prospects of driving a new car out the door?…or maybe they just get overwhelmed with the numbers.
I don’t know. What is obvious is that they end up paying much more than they planned, and sometimes that’s not the end of it…they also obtain costly and mostly ‘useless’ extended warranties.
Having purchased 3 vehicles in the last six years, I want to believe that I know a thing or two about buying cars – good and bad. The first purchase was a pre-owned that ended up as a DISASTER! I don’t even want to think about it – I owned it for probably a month before s*** hit the fan. 🙁
Strategies for Negotiating When Buying a Car in Canada
Our last two purchases were awesome deals and great cars, and I will detail some of the strategies I used and which you can deploy to ensure you are not “taken to the cleaners” when you go buy your next car.
These strategies generally apply whether you buy a brand-new or a pre-owned vehicle.
1. Identify Your Vehicle Needs
The first step to take when planning to get a new vehicle is to identify what would meet your needs.
- Are you going to be moving kids around a lot?
- Need lots of cargo space?
- Camp a lot? Towing capacity?
- What vehicle model, size…works for you?
- Do you live in an area where all-wheel drive is important? Snow? Ice? Rugged terrain?
- Do you prefer to park indoors – would the vehicle fit in your garage?
- How long do you intend on keeping the car?
- New or preowned?
- Want to go green? Options – electric? hybrid?
There are many more questions you may need answers to to ensure you are getting the vehicle that you need.
2. Investigate – Research 101
By failing to prepare, you are preparing to fail. – Benjamin Franklin
It’s time to get on the internet and do some sleuthing around.
After identifying your vehicle needs, you now have a general idea of what type of car you are getting. Now the question is: Is this indeed the right/best choice for you? What does Dr. Google say?
Specific questions you may need answers to include:
- What’s the fuel economy, and how much would the vehicle cost to drive annually?
- What’s the resale value?
- What’s the safety rating?
- What features/options are important and which are not?
- What warranties are being offered? For how long?
- What are other buyers and expert reviewers saying about the car?
It’s at this point as well that you want to research what the car is worth, i.e. what is the:
- Dealers invoice price (i.e. the price the dealer is paying to the manufacturer)
- S.R.P (Manufacturer’s Suggested Retail Price), i.e. the price the dealership would love you to pay.
- Incentives available, including from the manufacturer and dealer – cash rebates, 0% financing, etc.
- What are other buyers paying in your area?
Print off this information or have them open on your phone, as you will need them later.
Websites that are useful for answering your questions include Auto123.com, Edmunds.com, Unhaggle.com, ConsumerReport.org, MotorTrend.com, and Wheels.ca.
Related: Buying vs. Leasing a New Car
Have a Trade-in?
If yes, this is where you want to look up the true value of your trade-in vehicle.
Having a good idea of how much your trade-in is worth gives you an ace up your sleeve and will come in handy after you have finalized the price on your new buy.
When you go into the dealership without knowing what your old clunker is worth, you are at a disadvantage. Car salespeople know how to play the numbers to make it appear like you are getting a good deal when that’s not the case.
Check local dealerships for similar models, age, mileage, and what they offer. Look at local classifieds/online marketplaces, and see what other owners are selling them for. Kijiji is a good place to start.
Test Drive
Test-driving your potential car purchase is a part of your research. You want to see how the specific vehicle feels in reality and if it will meet your needs.
Options for test-driving include:
- Go into a dealership and ask to test drive. Don’t let them waste your time – drive around a bit and get the heck out of there.
- Ask friends or family who have similar models for a chance to check it out. They may also be able to give you their honest opinion of the car.
- Rent the vehicle model and take it for a drive.
3. Affirm Your Budget and get Pre-approved
Deciding on your budget and researching your car options go hand-in-hand.
Questions to answer include:
- How much money can you afford to spend on a car?
- Are you buying with cash?
- Are you financing? How much can you afford in monthly payments?
If financing, now is the time to get pre-approved. You may be able to get a better financing deal with your bank and give yourself some leverage at negotiation time.
Here are some car loan options in Canada.
Sometimes, manufacturers offer a 0% financing incentive for those with excellent credit scores. So, check out your credit score for free to see if you would qualify.
A 0% financing deal could save you thousands of dollars in interest payments if you are financing your purchase. Always read the fine print!
4. Obtain Multiple Quotes via Email
Car sales prices are posted on the dealer’s website, but of course, you are not planning on paying the posted price…preferably, not anywhere close! 😉
You want a deal that’s way below the sticker price for the car!
Craft an email and send it to multiple dealers, requesting that they email you their best quote for the vehicle. Detail what you are looking for: make, model, options, inventory # if you have it, etc.
Let them know you are good to go, have done a test drive, are pre-approved (if applicable), and have an idea of the incentives available.
On some dealership websites, you cannot submit their contact form without including your phone number. When I try to buy a car, I don’t want salespeople calling me and wasting my time – they won’t give you specific details, will ask you to come in for a test drive (which I have already done…haha), and I will not have whatever they say/offer on record.
If I cannot submit the form without a phone number, I either ignore their calls, enter a dud phone number, or look for an email I can use directly from their website. I don’t want to talk to anyone at this stage, period!
Depending on the quotes you receive, you may want to ask other questions via email to clarify what is being offered further. Clarify what their other ‘compulsory’ fees are.
You can even consider setting up a bidding war by including the dealerships on the same email and letting them duke it out. Sit back and wait for responses to your emails.
Related: How To Get The Best Car Loan Rates in Canada
5. Showtime: Be Prepared to Walk Away
Let us never negotiate out of fear. But let us never fear to negotiate. – John F. Kennedy
Hopefully, you now have a quote that’s not too far removed from the dealers’ invoice price. Choose a dealership and walk in armed with a printout of your best quote. Keep your price point in mind!
The car salesperson will come up with last-minute costs and fees to increase the overall price. Some costs are not negotiable (sales tax, freight fees, air tax, pre-delivery inspection, etc.), and some can be negotiated (admin fees, dealer fees, extended warranties, etc.).
Aim to negotiate all negotiables and, wherever possible, have them waived.
In some cases, the selling price you are offered after arriving at the dealership is very different from what you were quoted via email (higher). Be prepared to walk away if necessary. Your money, your choice!
Financing
The dealership will discuss financing – they may even be able to get you a better deal than your bank. However, having a pre-approval means that you have a rate to compare with.
People get confused when discussing a car’s financing and monthly payments. Don’t let the “low” monthly price fool you. The longer your loan term, the lower your monthly payments and the higher the interest you will have to pay over time.
Use Cars Fast or LoansCanada to source your auto financing loan from over 300 lenders without leaving the comfort of your home.
Trade-in
Don’t bring up your trade-in just yet. Wait until you have reached a final purchase price for the new vehicle. When you are okay with the purchase price, mention your trade-in vehicle and let them make an offer.
If the offer from the dealership is not ‘fair’, let them know you have an idea how much the car is worth…show some proof.
You may be better off selling your old car yourself later.
Ask For More
It never hurts to ask! Believe it or not, the dealer will make some money from the sale anyhow. So, why won’t you see if you can get more “bang for your buck?”
For example, any chance you could get an extra key fob? Free remote starter? Better floor mats?
6. Be Wary of Extended Warranties and Other Costs
Standard warranties are good. Extended warranties… not so much.
I have a friend who obtained what I thought was a good deal on an SUV, only for him to throw all his “savings” away when he purchased a super-expensive extended warranty that was approximately 10% of the vehicle’s purchase price!
Often, what you are paying for is either unlikely to happen, not as costly should it happen, and in some cases, it is already covered by default.
If you feel the need to purchase an extended warranty for your new purchase, consider doing it at a later date when you can negotiate it separately and can think straight.
In addition to extended warranties, for a new(er) car, you may also be offered additional options to pimp up your ride. These include:
- Rust protection
- Fabric protection
- Paint sealant
- VIN etching
- Pinstriping
- Disability insurance, etc.
Be wary of all these additional costs that can easily break your budget.
Hopefully, your car purchase worked out well, and you can feel proud of yourself for a job well done! 🙂
There are a few other tips that may be useful to get the most out of your car purchase:
Check Your Calendar
Car dealers and their salespeople have an incentive to give you a great deal if it works in their favour as well. This could either be due to:
End of Month Targets/bonuses
Car salespeople want to get their numbers in by month-end, and if they beat target, they rake in bonuses.
One year, I once finalized the purchase of a car on the 28th of February, and I could tell that the sales manager and sales guy were a bit eager to get me to close.
Just before 6 P.M. and as they were starting to close shop, I indicated that getting a free remote starter was the only thing holding back a final deal.
They “huffed” and “puffed,” and told me about how they were losing $$$ on the car…blah blah. In the end, it was agreed that I would be getting it installed for FREE!
End of Year Targets/Bonuses
The month of December appears to be a great time for great car deals.
If you are comfortable pushing it to the last few days before the New Year, you may be surprised by what’s possible. End-of-year financials, bonuses, commissions, are all on the table, and car salespeople are eager to deal.
You can also use the free KOHO Prepaid Card to earn 0.50% cash back on all purchases and a $20 welcome bonus.
Do you want to earn cash-back on your online purchases? Use Rakuten when shopping at your favourite retailers (700 + stores) including Amazon, Hudson Bay, Ebay, Sephora, Best Buy, Home Depot … for discounts and real cash-back.
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These are great steps. I think the biggest trap is the extended warranty and all the other extra stuff that the dealership tries to sell to you at end of the sale. Definitely need to watch out for those.
@Tawcan: I agree, and when combined with the fear of the unknown, many a new car owner unwittingly drop big bucks on warranties that are unlikely to ever become useful. Thanks for stopping by!
I think ultimately it comes down to not being afraid to say no or be disagreeable about anything. Don’t be afraid to ask questions, especially about things that they’re trying to charge you for. A lot of people (myself included) are afraid of coming across as abrasive and allow themselves to be taken advantage of in the process. And I suppose if you have a ton of money, it might be easier and less stressful to just let it happen, but when you don’t (again, like most people) you need to put your foot down and stand up for yourself and get the best deal possible, and not agree to paying for dumb “upgrades”/etc you don’t actually want or need.
@Shaun: Good points. I often say: “My money, my choice.” You are right – we tend to avoid situations that bring any form of conflict and that does make us settle for less sometimes.
Nice article mate. One additional point is to start looking early. I am planning on replacing my 2003 Camry in about 6 months. But, I have already started looking / test driving. Get a feel for the market .. see which car is hot and its price etc. I have missed 1-2 good cars. But, that is okay I know deals will keep popping up. Its good look at cars on your schedule.
@Dividend Geek: Good point – like they, the early bird catches the fattest worm! Good luck on your search! Cheers.
Hi Enoch, thanks for your article; it has detailed and most helpful advice for what is often folks’ second most costly purchase. About your point on test driving an intended car model thoroughly, my spouse recalls with regret the time he actually bought a car without having tested it himself! His sister drove it and said it was good, but he found out too late that he didn’t like the heavy feel to the controls!
I particularly like your point about being prepared to walk away from a deal that isn’t that good. Buying a vehicle while still having a reliable old one is an advantage, as there’s no time pressure and urgent need to buy. My spouse was recently in this situation. He placed some online bids on a make and model that he had researched well. He was prepared to be outbid and to walk away. Guess what? He went away with a very nice used car at an even nicer price! Every time he drives his lucky car, he has a broad smile on his face 🙂
You’re right about separating a trade-in from the car purchase till later. Only thing is that car salespersons are quick to ask if you’ve got a trade-in. Perhaps one way to handle this is as you’ve said – be prepared to sell your old car privately. My spouse got a reasonable price when selling his old car – it took just two weeks and he received cold cash for it.
Thanks.
@Jo: Excellent real life examples. Thanks for stopping by!
I needed this blog post before I bought my last car! I like your email idea – I didn’t do that. I did a ton of research and did end up getting a deal on the car as I walked away from it. Two days later the salesman called me back with a better offer. Even though it’s been a great car and I’ve had it for 8 years, I do have slight buyers remorse for buying it new. At the time I was so excited to have a new car but I did need a loan as I didn’t have the cash to buy it outright. Now I wouldn’t care about having a new vehicle. Newish/reliable/smallish and paid off fully are my top priorities now.
@Curious Frugal: I like your idea of – newish, reliable, paid off fully – those are definitely my specs for buying a car!
Perfect words “Let us never negotiate out of fear. But let us never fear to negotiate. – John F. Kennedy”. If someone is not comfortable to negotiate then walking is a good option, rather than just grab the deal because you can’t speak. I totally agree.
Excellent article Enoch, thanks.
Do you have any advice or experience with car brokers? Obviously they charge a fee, but can the savings they negotiate on your behalf make the fee worthwhile?
@Paul: No, I haven’t used a car broker. That said, I do know of people who have used them and speak highly of their services.