Car price negotiation tips: How to reduce car price?

Car price negotiation tips

When you enter a car dealership, the first question that comes to your mind is, how to negotiate car prices? Remember that there is always room for negotiation when the dealer quotes a price for a particular vehicle. You have to be ready and make up your mind to approach them smartly to bring the price down.

• The critical aspects of the price negotiation are to know the car's market value and the discount offers that the dealer and the car manufacturer provide. 

• There are different types of discounts available for a vehicle, which we will elaborate on in this article. At first, the discounts may seem insignificant, but it may be a good chunk of money you save when you add them up. Hence, do ask about the discounts when shopping for a new vehicle.

• Negotiation is a skill, and you have to be very smart while bargaining with a car dealer. Do your homework and know the exact market value of the car. That way, you can be sure about the price you are bargaining. 

• Also, educate yourself about the types of discounts even before visiting a car dealer. It will bolster your negotiation discussion with the dealership.

Things to know to get the best price for your new car

Before you walk into a dealership and negotiate car prices, you must know the price breakup and the dealership margins on a new car. Dealer margin is nothing but the profit a car showroom makes by selling a new car. To understand it even better, let’s look at the different components that make up the on-road price of a new vehicle.

• Ex-showroom price: It is the factory cost of the new car. The price also includes transportation charges, taxes (GST, cess, etc.) and dealer margin. Typically, a dealer earns a margin of around 3-6% of the ex-showroom price, depending on the make/model and variant.

• RTO charges: It is nothing but the sum of road tax and the vehicle registration fees paid at the Regional Transport Office (RTO). A dealer cannot overcharge for registration. Make sure that you ask for relevant receipts when making the final payment.

• Car insurance: It is compulsory to purchase a 3-year Third-party Insurance and 1-year Own Damage cover while purchasing a new car. The dealer margin for insurance stands around 1%. Generally, a dealer may quote a high premium. So, you can always negotiate when it comes to car insurance premiums or can buy insurance by yourself.

• Accessories and services: If you purchase any additional accessories or opt for dealer-provided services (extended warranty), the charges will be added to the final invoice. It is the component where the dealer maximises the profit margins. Typically, the dealer margin for accessories or services stands at 25-30%.

• Finance charges: This only applies if you are opting for a car loan. A dealer earns a payout from the bank for selling a car loan, and the margin is around 1% of the loan amount. Generally, a dealer may quote a higher interest rate to maximise the profits. But you can always negotiate for the best rate of interest.

• On-road price: It is the sum of all the components mentioned above. On-road price is the final amount you pay to the dealer before you drive away your new car from the showroom.

To give you a better idea about the dealer margin, let’s look at the price break up for the Maruti Wagon R LXI Petrol base variant.

*Note: The above numbers are just for information purposes only. The dealer margin varies depending on the make/model, variant and the dealership. 

Passenger vehicles dealer margin (%) range in different price brackets on ex-showroom price

How to get the best price for a new car?

Good negotiation skills can save you money while buying a car. If you are a first-time car buyer, you may become naive and agree to whatever the dealer/salesperson suggests. But that’s not the way to go about purchasing a new car. 

Here are some points that you should keep in mind if you wonder how to get the best price for a new car.

• Be confident: Don’t be afraid to bargain while discussing the price of the new car. Be sure and make your point clear to the dealer/salesperson. If you are scared and not confident enough, the dealer may not even consider your negotiation.

• Do not hesitate to speak: Negotiation is all about speaking confidently. Do not hesitate to talk to the dealer to make your point clear. Your communication skills play a significant role in a successful negotiation with the car dealer. Speak confidently to present the facts, such as the actual market value of the vehicle.

• Don’t be in a hurry: Never be in a hurry while negotiating the car price. Do not close the deal hastily as you may miss out on some crucial things such as car maintenance offers, free extended warranty, free accessories, etc. Always be calm while discussing the price and other details of the new car.

• Speak wisely and listen more: Avoid speaking unnecessarily with the salesperson. The majority of the salespeople are not interested in what you are saying; they mainly focus on closing the deal. So, they keep analysing your behaviour to pick any points that may weaken your negotiation. Hence, speak only if necessary and think of points that you can use to strengthen your negotiation.

• Quote low and get the best price: It’s probably one of the oldest tricks in the bag when negotiating. If you want the dealer to settle for a price you are expecting, start with an offer that is lower than the price of the car. The dealer will refuse your offer. Next, you can offer a higher price you are willing to pay. The chances are high that the dealer may agree to the higher price than the previous one.

• Determine the market value: Determine the exact market value of the car you will buy even before you initiate a negotiation. The base value of the vehicle will serve as the backbone of your strategy. It also acts as a reference point when the dealer starts quoting the price. To sum it up, ensure that you are aware of the vehicle's current market value before negotiating the price.

• Research on dealerships: Before visiting the dealerships, perform thorough research on dealerships. Figure out which car showroom offers the best discounts on the car you are looking to buy. The chances of you getting the best deal in town is high if you opt for a dealership that offers a maximum discount on the particular model.

• Ask for a lower price: When the salesperson quotes the price, present yourself as an informed buyer. For instance, respond by saying that you have done enough research and already know the car's market value. Also, say that you have shopped around a bit for a particular model. Lastly, present a lower price quote (if you have one) issued by another dealer and ask them if they can beat that price.

• Stay firm with your numbers: Initially, you may get a dismissive response from the salesperson. They may flatly say that there's no way the vehicle can be sold at a price that you are demanding. They may even tell you that your calculation is completely wrong. That’s when a price quote from another dealer comes in handy. You can produce the lower price quote and put an end to the discussion.

• Discuss exchange value: Once you have agreed on a price for your new car, initiate the conversation about exchanging your old car. If you have shopped around, you already know the current value of your used car. Back it up with documents from other sources about the value of your vehicle. This way, the dealer should offer the best value for your second-hand car. If the discussions are not fruitful but willing to buy the new car, think about selling your car elsewhere.

Also, read: How to not get ripped off by a car dealer?

Types of car price discounts

As mentioned earlier, there are several types of discounts you can avail of when purchasing a new car. But for that, you have to be aware of the available discounts. Below are the discount offers you can ask for while buying a new car.

• Manufacturer/dealer discount: It is a discount provided by the OEM (Original Equipment Manufacturer) or the dealer. Typically, OEM/dealers offer this discount during most times of the year. However, do not expect such discounts on a newly launched car or a vehicle in high demand. The dealer may provide you with this discount without you asking. But there is still room for negotiation to maximise the offer.

• Corporate discount: The car manufacturers offer a discount to attract the employees of a highly reputed corporate firm or MNC. Always ask for such discounts when buying a new car. If you are unsure about the eligibility, do ask the dealer, as OEMs provide a vast list of companies for the dealer for applicable discounts.

• Loyalty bonus: Some car manufacturers offer this discount to their existing customers. If you own a car of the same brand and purchase another vehicle, you are eligible for a loyalty discount/bonus. However, not every manufacturer provides this type of discount, but there is no harm in asking the dealer for such offers.

• Exchange bonus: This discount applies if you are exchanging your old car when purchasing a new vehicle. Generally, dealers offer an exchange bonus since they will be getting a good margin on your used car. Do ask for such offers if you are exchanging your used car via a dealer.

• Finance discount: Finance companies usually pay out the dealers for selling car loans. Hence, the dealer also makes a tidy amount of profit if you opt for a car loan to purchase your new car. So, always ask for the maximum discount the dealer can offer for opting for a loan.

• Car insurance discount: You check with the dealer for a discount on the car insurance premium except for Third-party Liability Insurance and taxes while purchasing a new car. If the dealer is refraining from offering a discount, you can get the insurance on your own. You can buy car insurance online at ACKO to save on the premium by eliminating the middleman commission and other charges.

• Discount on additional charges: The dealer levies several other charges on you while purchasing a car. Sometimes a dealer can even overcharge you in the name of handling charges. Hence, always ask for a discount on additional costs such as vehicle registration charges, service charges, handling charges, etc..

Factors to consider while deciding car price

Here are some factors that you should consider before setting a price for your next new car.

• Cost of ownership: Before deciding on the car's price, calculate the cost of ownership and determine whether it fits your financial situation. Account for the factors such as fuel economy, service interval, cost of spare parts, etc. If you purchase the car on loan, you should also account for EMI (Equated Monthly Installment) and the loan interest rate.

• Financing options: Determine how you are going to pay for your new car. If it’s an entry-level model, you may want to consider making the full payment. If not, you may have to apply for a car loan. If you are purchasing on loan, ensure that you pay at least 20% of the car’s price as a downpayment. That way, your EMI will be lower.

• The variant of the car: Decide which variant you are buying, whether the base model, mid-spec or top-spec. It all depends on what features you are looking for in your new car. Don’t opt for all the features blindly. Ideally, mid-spec variants will be ideal and give preference to safety features. Remember that the higher the variant, the higher the price.

• Car insurance: You cannot expect massive discounts on car insurance. But what you can do is reduce the premium by transferring the NCB (No Claim Bonus) from your old car to the new vehicle. You can also buy car insurance online from ACKO and save on agent commission and other processing charges.

Takeaway

Purchasing a new car is not all about choosing the right make and model. End of the day, you have to approach a car dealer to buy your dream car and strike a good deal. For that, you need good negotiation skills. Or else you may be overcharged for the vehicle and other services, making you stretch your budget. 

If you feel that bargaining is not your cup of tea and want to avoid all this hassle, there’s a straightforward alternative—buying the car online—through ACKO Drive. There’s no need to bargain or visit multiple dealerships to find the right deal because ACKO Drive does it for you. On top of that, you get attractive discount offers and delivery on a priority basis. All you have to do is log on to www.ackodrive.com and book your desired car from the comfort of your couch!

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