The Negotiator Magazine

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How can you determine the true dealer cost for the vehicles you are contemplating? The Internet provides prospective vehicle buyers with relatively accurate dealer cost information. If you go to www.edmunds.com or www.kbb.com, you can get a good approximation of actual dealer cost including the hold-back, rebates, and incentives. These sites also indicate the cost you should expect to pay for the vehicles you are considering. For a fee of $12, the Consumer Reports New Car Price Service [(800) 933-5555] will provide similar information.

II. VEHICLE NEGOTIATION: ROUND ONE

Once you have determined the true dealer cost for the vehicle you are considering, you must prepare to negotiate. The salesperson will almost always point to the MSRP and try to induce you to try to talk him/her down from that inflated figure. This practice is known as "anchoring" as the dealer tries to imprint this price in your mind. They emphasize how much you will "save" when they give you the vehicle for a lower price. Ignore that number, and begin with an offer near the true dealer cost you have already ascertained. Although the salesperson will look pained by your "unconscionably low" offer, you should appreciate the fact that dealers will usually sell high-volume vehicles for $250-$350 over cost and lower volume specialty vehicles for slightly higher margins.

A good way to determine the lowest price dealers are likely to accept is to review the come-on vehicle ads in your local newspaper which list only one or two vehicles for sale at this rock-bottom price. When you begin your negotiations, point to these advertised prices and offer to pay somewhere between actual dealer cost and the list price for added options you wish to obtain. This information is also available from www.edmunds.com and www.kbb.com. Don't hesitate to show salespeople ads from other area dealers and suggest your willingness to buy elsewhere if they don't match these advertised prices. Remember that option prices are negotiable, and don't hesitate to haggle over the price of each add-on.

III. VEHICLE NEGOTIATING: ROUND TWO

As soon as the salesperson gets your commitment to a specific price, the real bargaining games begin. He/she will begin to write up a sales contract, then disappear to talk with the "sales manager." After a few minutes, the salesperson will reappear with a long face. He/she will indicate that the "sales manager" found a significant error which resulted in a price below their actual cost. You begin to feel sorry for the embarrassed salesperson, and quickly agree to pay several hundred dollars more so the salesperson will not lose his/her job. Don't allow this use of Limited Authority combined with the Nibble Technique (where a seller demands post-agreement price increases from a person already psychologically committed to the deal) to fleece you. Simply indicate your willingness to pay the previously agreed upon price and nothing further. If you are lucky, the salesperson may accept your position. If not, he/she will negotiate a price somewhere between that figure and the extra price he/she is demanding.

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July 2005