I have recently bought a new car and would like to share the details about the process that may help other people to get the best deal. This text describes the process of buying a new car from the US dealership of a non-luxury brand in the state of Washington. The process will most likely work in other states that are similar to Washington, like California It also includes the details about getting the best value trade-in from the dealership (if you decide to trade you car in).
Buying a car from the US car dealership is in some way similar a buying something on the Istanbul's Grand Bazaar. If you buy a car for the window sticker price you will be overpaying a lot. If you trade your car in with the dealership for the first price that dealer names - you will be losing a lot. (Well, "a lot" is a subjective term. If you do not care if you pay $30k or $33k out of pocket for the new SUV, this post may be not that interesting for you) Both you and the seller know about the sticker price being inflated and that the first trade-in offer is lowball - so you are supposed to negotiate unless you are rich enough to follow the Seymours' Cray algorithm for buying cars. And if you are not, you will negotiate. A lot.
Salespeople in US are experts in in-person verbal negotiations, just like the sellers on a Istanbul's Grand Bazaar. If you let them, they can and will employ all the dirty persuasion and negotiation tactics that you may or may not be aware of. Anything that is not illegal can and likely will be done to you. For example, not providing the complete information about the car is not illegal, lying is (sometimes) not illegal. Stressing you out is not illegal. Adding overpriced optional features to the car and not mentioning that they can be removed at no cost is not illegal. Making you wait a lot for no reason to make you tired is not illegal. You get the idea. It is very important to have a verbal communication for using full power of negotiation skills salespeople have. In-person conversation is the best - it is possible to read body language, easier to build rapport, but phone works well for some scenarios, too.
Before Internet, car sales looked similar to what you can see in movies like Glengarry Glen Ross - https://www.youtube.com/watch?v=r6Lf8GtMe4M https://www.youtube.com/watch?v=AO_t7GtXO6w (even though it is about real estate sellers, not car dealers): you have to walk in and negotiate the price with the expert in negotiation who is motivated to make you pay as much as you can - he will receive a commission based on the value of the deal. Salespeople are trained to determine what you can pay by the way you are dressed, the way you look, talk or sit. There are books about it, courses you can take to be better at it.
Nowadays, dealerships have to support email communications. Whoever does it poorly or still only employs sales tactics from 1980s, gets out of business if enough dealerships around start to support email. This situation offers a huge benefit for the tech-savvy buyer as it is much harder to employ negotiation/persuasion tactics over the email and it is much easier to make dealerships compete with each other for your deal by using email and the algorithm described here.
In the market economy fair competition between suppliers drives the prices down when demand is lower than the supply. To be able to leverage that when buying a new car, you should make market economy work for your benefit. You want to start a bidding war. Dealerships do not like this because it reduces their profits, so try not to mention this term explicitly.
This is only possible if
- the supply is big (many dealerships are selling the car you want),
- demand is small (no flocks of rich people buying cars without looking at the price tag),
- there is a competition (you are not sitting inside one of the dealerships brainwashed by a salesperson and instead you write emails making dealerships aware of each other's offers. It is you who is controlling what information salespeople receive, it is now you who can do manipulation and negotiation as you have a leverage and play dirty tricks on dealers that only dealers previously enjoyed).
- there is no price fixing: dealers act independently of each other.
The above restrictions are important. The ideas shared in this post do not always work (and sometimes never work) when you try to buy a car of a luxury brand which has ~3 dealerships in your state (hello, fellow eastside Washingtonians, you probably know what brand I am talking about). Think about that as of a monopoly or cartel agreement - you will not be able to negotiate and monopoly is not interested, they have enough people who will pay the inflated price because the price does not matter that much for them.
The proposed algorithm also does not work for buying a used car. To be able to have a competition, there should be a supply of cars that are not different from each other. New cars of the same year, make and model and the same color and trim/options are identical. Each used car is unique.
The person who you will be working with the most is a "salesperson". This would be the one who will initially respond to you and do most of the communication first. Their title is "sales consultant" or "sales specialist" etc. You will see that in email signature
As you will progress through negotiations, the person with "manager" in title will be included in the conversation - you will either be emailing a different person (whom your first contact will forward the emails) or salesperson will repeatedly mention his manager as an excuse for the delay in reply. This is a good sign - as it resembles what happens in dealerships when you visit in person. For example, the OTD price breakdowns usually involve "going to the manager to print it out"
Salespeople are motivated by greed and fear - you should use both for your own benefit.
Greed - they want to get as much money from you as possible and receive their commission - always hint them that they will get the best deal from you if they play by your rules (of course, do not tell this explicitly), mention that you want to work with them to get the best deal. Always be polite, do not be rude or condescending. you do not have to behave like their friend (they are not your friends), just be nice.
Fear - they are afraid to lose the deal to other dealership who is faster, responds better or brainwashes / fools you better - always mention that you are reviewing offers from other dealers, mention that other dealers are doing something this particular dealership refuses to do and this may be the reason for them to not have a deal with you. Never quote other email texts, only share the written proposals or just numbers. This works wonders. Remember: dealerships can and do call each other - they can catch you lying. You should be absolutely honest, but you also should not say more than needed - some information is important for getting the best price from dealers and they have no reason to have it from you.
You do not have to lie to get the best price from dealers. Dealerships, on the other hand, have to do it to get the best deal for them when you are sitting inside in-person. They also lie over email. Remember that when talking to them and always mention that you are 100% honest and expect honesty from them. There will be no honesty, but the fact that you mention it, will also trigger guilt (in addition to greed and fear) which may work for your benefit.
It is very hard for salespeople to lie in emails as the written offers can be shared and they can be caught lying by other dealerships. They will try to refuse to have written offers and invent million reasons to not do it (starting from "the computer system only works when you come in person", "I cannot see your attachment") etc. Politely mention that you are able to get quotes from other dealerships and ask if they can provide the same - if they refuse, it means that you will not be able to work with them. Most of dealerships want your deal, they will stop playing these games once they see that their competitors don't play them.
Most salespeople are not good in handling emails: for example they love to include the full text of the previous email in their replies and they usually have huge pictures in their email signatures - if you do the text of each email becomes enormous and it causes problems for email software. To avoid this, each time you reply, delete all the email text and start from the blank page. Treat that as an in-person talk with searchable history, it will save you from lots of problems.
Dealers also usually do not change the subject of email, so if you change it to the one that will be easier to for you to use it will stay - suggested subject name is
"{Dealer name} {car description}"
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No matter what happens, be polite and calm. Never say things like "I got better offer, why are you so cheap, you can do better" etc - this puts people down. You should have couple of phrases ready like "Can you do better than that?" "I will not be able to do business with you if you will not provide the OTD price breakdown" etc etc. They should be neutral, calm and assertive. It is quite easy to do over the email.
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Each email thread with a dealer should always be in 2 possible states:
a) You are waiting for reply from the other party. If the reply does not happen for too long, you can ping them. Sometimes they are getting distracted by a client who came in-person and may take long time to reply - it is ok.
b) waiting for something to happen (e.g. waiting for replies from other dealers, going to bed, comparing offers etc) before you can reply back - in this case you reply back with the explanation to the other party what are you doing now ASAP. This will make it easy to email to you for the dealer and will minimize the time you spend emailing (you will be able to work during that time).
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It is ok for you to not answer questions that you do not need to answer (e.g. what are your certain plans, your budget etc), ignore them completely.
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Dealers will also try to ignore direct questions for which you need clear answers and instead ask you different questions. In this case politely remind them that you really need the answer to the concrete questions an not move conversation forward until getting it on the right track. If there is enough dealers it is ok to lose 2-3 ones that do not follow the email conversation track that you need them to follow. It is important that it is you who is driving the conversation with them (think of that as of a dance, leading and following in tango, for example), not the other way around.
"The algorithm" proposed is nothing new: it has been published on the Internet and discussed many times already google something like "how to buy a new car online to make dealerships compete with each other". You will get links like this - you may want to read it, it contains lots of useful information that may not be mentioned here. This text focuses on the implementation details - concrete steps you need to take and details you want to know about.
You must define what is the
- make and model
- year (we are only talking about new cars, so it is usually always N or N+1 with N being the current calendar year)
- trim and options
- color (exterior and interior)
of the car you want. It must be popular so that the supply of cars that exactly match the requirements with different dealers will be big enough to trigger a competition. If it is nor broad enough you may relax some requirement (e.g. go for the different set of colors or options)
Making that choice and committing to it is hard. If you do not do it in the beginning and will change your mind (salespeople may try to make you change your mind on this) in the middle of the process, the described algorithm may not work.
Useful resource for making up your mind is consumerreports.com web site (some libraries offer a free membership, but it is well worth the price if you just buy an online membership) - IMO their car research is unbiased and is some data is coming from the real customer feedback.
Find the closest dealership that has the car you need and walk in for a test drive, do not bother scheduling an appointment. Say that you are still deciding on the brand, make and model and need to test drive this one to see if it is right for you. Say that you will be buying car tomorrow, not today. After the test drive and having all your questions answered, leave the dealership. You may be asked to give your phone number before a test drive ("to get you into the system"). Do not answer any calls from the dealership (they will call you multiple times afterwards).
If you plan to do a trade-in ask the dealer to do the trade-in appraisal - have a written offer with it from them and walk away
Dealerships work to make profit. To make it overly simplified, they buy a car from manufacturer for price1 and sell it to you at price2. They provide the additional service of showing you the car, setting up a safe environment to store cars and doing the paperwork for you. Their profit on each car is price2 - price1. They will not sell a car for loss unless keeping the car on their parking lot costs them more than they can potentially earn selling it (we will get to that later)
Your goal is to get as accurate information about what price1 ("dealer cost") is as possible. This is a little tricky, but Internet is your friend.
the two important numbers you want to find is "dealer invoice price" and "holdback". Google details about what they are if you are interested.
googling "{brand} dealer invoice price" is usually enough - this information is not hidden or secret (many different dealerships buy cars from the manufacturer), though it may be tricky to find online.
At this moment of March 2021, this place has this data for most brands and current year models.
dealer cost = price1 = Dealer Invoice Price - Holdback - Rebates & Incentives (If any).
Save the dealer cost number for your car somewhere, you will need it later.
You do not want to use financing products that dealerships offer - they are worse than the ones you can shop around for. Get preapproved with your bank or and other bank and get the preapproval letter ready before step 5.
Use web site like google maps to search for "{brand} dealer" and look how long will it take to drive to each of the dealerships. Your perfect deal may be in any of the ones you find, choose the ones that you can realistically drive to if they will offer the best deal. Do not self-limit, include all dealerships that you can potentially get to. Consider how much is one hour of your time worth to determine if it is worth spending 6 hours to drive somewhere and back for saving a thousand dollars, you can use this information later when comparing offers. If you are in Seattle and dealership is in Spokane, you should still consider including the dealership in the list - if they will have a good offer it can be possible to use it while negotiating with a dealership in Puyallup, it is well worth it. Dealerships in Oregon (Portland, specifically) sometimes can offer fantastic deals (but remember that you will still have to pay sales tax in WA, mention it very clearly that your car will be registered in WA, they know how to deal with this as they have around 1/3rd of their clients from WA)
Plan about a week for the whole process. You will start around Friday and you will likely have a car on the next weekend. You need to write the first message and send it to all dealerships at the same time. Web sites of the dealerships usually have "contact us" button with a form that includes the message. You will use that to send them the first message, all your future communication will go via your email. The form may ask for the phone number. Never put your phone number there. If the number is required to submit a form, provide a fake one. Always put the email for reply back. Also put your email in the message text. If asked for preferred communication method, explicitly specify "email". Also mention that all communications will be via email in the message you will be sending.
(Side note for geeks): as a fun exercise you can leave a different email in each form and make it go to a single email automatically. GMail supports it via youremail+tag@gmail.com - no matter what "tag" is, email will always get to youremail@gmail.com, but you will know what the tag is from the email target. This is very useful for email-filtering and for figuring out who dealerships sell your email to afterwards :)
The message is going to be exactly the same and can be copy-pasted.
Hello,
I'm looking to buy the new car by the end of this week.
I am looking for
{Make} {Model} {Year} {Trim} preferably {Color1} exterior/{Color2} interior.
features I need
{Feature1} {Feature2}
Please quote me the best OTD price (including all applicable taxes and fees) for such a vehicle if you have one in stock. Please also include the OTD price breakdown and the link to the inventory that contains the VIN and the mileage
For the licensing fee calculation my address is in {City} {State}
I will not be doing a trade-in. I will be {paying in cash | financing with {your financial institution}}
my email is {your email}, please use it for all communications. Thanks
Note that you explicitly mentioned that there will be no trade-in. This may be not true if you actually plan on doing one, but negotiations are much easier if you do not negotiate on two things at once (new car price and trade-in price), therefore no matter what you want to do you always say that you do not plan to do trade in first. You can always change your mind after you get enough offers with the new car price, there is no penalty for changing your mind on trade in.
"OTD price" means out-the-door price - the amount of money that you will be paying put of pocket or financing to get the new car. All dealers know that term, by using it from the start you show that some entry-level tricks (e.g. "forgetting" to mention additional dealer "licensing fee" or certain "discounts") do not work for you - it will save time.
You will get replies that fall into several typical categories. There are ways to reply to them based on a category. You may have replies of a different categories with the same dealer multiple times before you get the right ones and can move to the next step
- The email that asks for your phone number or for the phone call. Reply that you prefer use email for communications. You may need to do it several times. Be polite but firm.
Hello Scott,
I would prefer to use email for all communications about buying the car. Please share the OTD price breakdown with the link to the inventory for the car I am interested in.
{copy-paste the text that you put in the first web form here, it may be lost in their system, it will be easier for salesperson to get on the email track}
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Name-your-own-price emails ("what price will make you buy a car from us today" "what should I do to win your business"): reply with the price below the dealer cost from step 2, repeat the list of vehicle requirements in the reply email and repeat that you need their best OTD price breakdown.
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"We don’t have this exact car, are you interested in another one which is similar" - do not reply anymore, save this contact for later, you will need it for trade-in negotiations or in case you decide to go with another color/trim (this is not recommended as it makes it harder to negotiate, but it is possible).
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Links to the web sites with "exclusive internet price" or just numbers listed in email without the price breakdown. Reply with thank-you email explaining that you actually want OTD price breakdown. You may need to do it several times.
Hello {}, This is an interesting offer,
Can you please include the information on license and doc fees and also calculate the appropriate sales tax for your county as I am trying to figure out the OTD price. What I need is the best OTD price that you commit to in the written form. You can send it in a form of purchase agreement that I will have to sign when making a deal in the office.
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Anything that mentions a deposit you need to make to hold the vehicle under your name (they may mention that the vehicle is in high demand and can be bought by someone else). Reply that you do not plan doing any deposits and you know other dealerships that work without deposits.
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Emails containing the "purchase agreement", "offer" or containing OTD price breakdown - usually it is a PDF or a scan with price breakdown and a place for the signature (does not need to be signed by the dealer, it is not important). It should include the VIN of the vehicle, if it does not, politely ask to add one (this way you know that vehicle you are talking about is the one you think it is and this a sign of the fact that dealership commits to the deal fully, google the VIN to make sure dealer has that car). Dealer may say that they are not able to include the VIN if the car has just arrived and is being added to inventory - this may or may not be true, assume that they are not lying and trust them (but ask to provide VIN and Monroney sticker separately - if they have the car on their lot and do not play games they will do this. If they still refuse to provide it, they are playing games on you, stop replying them)
The offer does not always have to be a PDF (it usually is though), what the email should absolutely include is the detailed OTD price breakdown and the VIN of the vehicle and/or link to the inventory. Dealerships have automation systems that make it very easy for them to construct such offers for printing them when you are in the office for repeated negotiations. This is why having a PDF is a sign that you got past empty talk in email and are on the next level.
Emails with offers and OTD price breakdown are the ones you want to get from each dealership. The more you get is the better. They usually look like this:
Hello Dan,
Here is a breakdown:
$33,310.00 Sale Price $3,530.28 Sales Tax $521.25 Licensing $150.00 Document Fee
$37,511.25 Out the Door Total
link to the inventory: http://.... VIN XXXXXXX
If a dealership is refusing to provide OTD price breakdown after being asked to do it multiple times, stop replying to them. You may want to contact them later for trade-in negotiations. Though there is a high chance that they will not have a good deal for trade-in as well, you may ignore them altogether.
Actively dismiss any attempts to have a phone call (there will be many with different creative pretexts), you may mention that you are busy and want to make a deal quickly. Email is a way that works the best for that. Talking over the phone is slower than writing and reading emails - having a call only benefits the dealer and they know that. Make them understand that you know that too. Politely tell it to them.
Make sure that VIN in email matches the spec of the car (sometimes salespeople make mistakes, usually not intentionally, it will save your time). You also need and the car that does not have any additional dealer-installed options that drive the price up (like wheel locks or some paint protections), if it does, politely ask if you can refuse from them. Dealerships make a lot of money by selling these at insanely inflated price. You can get them installed elsewhere for much lower cost if you need it.
At this point you should have OTD price breakdown from several different dealerships, the more is the better. Make a spreadsheet from them. The table should list
- Dealership name
- Sale price breakdown (including all discounts, incentives and rebates), including the price for any optional dealer-installed equipment
- Sales Tax
- Dealership fees (or "document fees")
- Licensing fee estimate
- Total OTD price
also add the column "MSRP discount" - ask the dealer to provide it unless it is already there. MSRP for each car is an official value that is displayed on the Monroney sticker. Each dealer will provide it to you by request.
To request a picture of Monroney sticker if you do not already have one (most likely you already do), write something like this
Hello Amanda,
Can you please also attach the picture of Monroney sticker for the car we are talking about and add MSRP discount to the OTD price breakdown?
This will help me better compare the offers.
Thanks
"MSRP discount" is the difference between MSRP and the Sale price of the car. It is easier to negotiate between different offers if you have this number for each deal.
Online guides tell you to not negotiate from MSRP and down, but rather negotiate from dealer cost and up (or "invoice and up"). This is a good suggestion, but I found that it is hard to follow in practice as it is really hard to determine the real dealer cost including all incentives and holdbacks. Since MSRP is the same for same car, comparing offers by the difference between MSRP and Sale price (assuming other fees are more or less identical) is as good as comparing between dealer cost (which dealer is not motivated to tell you) and the Sale price.
The term "Monroney sticker" (also known as "window sticker" for most of us) is usually not known by someone outside of the car sales industry. In some cases this will make a person talking to you treat you more seriously and not try to play games with you. Just do not write "window sticker", write "Monroney sticker" or just "Monroney". They will understand.
As an alternative approach, you may share the dealer invoice price that you have found online with the dealer and ask the dealer to calculate the difference in his offer from invoice - and use "Dealer profit" (Sales price - invoice) as an alternative for offer comparisons. This strategy will enable you to ask a dealer "can you sell below invoice" and if someone agrees to do that to use that as a negotiation point with the other dealerships.
Dealerships cannot change the following:
- Licensing fee estimate (it depends on the place you live, it would be lower a little if the car is priced lower, but not that much)
- Sales tax rate - the rate is determined by the county dealership is in. In some remote counties like Colwitz county sales tax is lower than in counties like King County where most of the dealerships are. Lower sales tax can make the OTD price lower with the other things being equal. If you happen to have such an offer, this is very good. Typically, in the counties with lower sales tax dealerships also have fewer deals and the price the same cars higher to make more profit off each car.
- Their location - how much time you need to drive to them.
Dealerships can change:
- Sale price - can change it to any number they agree to - this is the thing subject to negotiation.
- Dealership fees - they can waive them completely (it really is not different from #1)
- Price of the dealer-installed equipment: they can either remove it (or not install it) or sell it on much lower price. You should try to avoid deals that have additional options installed by dealer as this will certainly be a way to overpay for something that you either do not need or can get much cheaper or for free elsewhere. Always ask if it is possible to remove it or avoid having it installed. If the answer is "no", treat it as an increase in a sale price and never assume the car they have is better and can cost more than the ones from competitors.
Start by finding the best possible OTD price (pay attention to the fact that licensing fee is only estimate and should not be considered as a deal breaker when you compare offers) and send the copy of it (ideally as a PDF) to all other dealerships asking if they can do better than that. Gather the new offers, ask them in PDF form if possible.
Hello Jack,
I have an offer (attached) for 37003 OTD for the car I want. Can you do better than that?
If you receive a reply with an offer with lower OTD than the best one, repeat this process with the new offer until you get best possible offer from everyone.
Some dealers may reply that they "cannot open your attachment" or "did not receive a file" or "link does not work". It may or may not be true. Re-send the attachment again. Use place like google drive to share files. Mention that other dealers are able to access it. Make it clear that you will not move forward in conversation if they can't open the attached offer.
After you have new offers that either match what best OTD is or are better than original ones, look at MSRP discount (or, as alternative, the difference between sale price and the invoice price you found in step 3) for each offer. They will be different - the better ones have MSRP discount higher or difference from invoice lower (MSRP should be the same if the car is the same in all dealerships).
Find the offer with the best MSRP discount and send it to other dealerships asking if they can match MSRP discount - this may further reduce the price as other dealerships will see that their competitors are moving less from the invoice price then they do and will try to match that
Hello Bonnie,
I have the offer from {Other dealer} (attached) that has a better MSRP discount, I wonder if you can match it - OTD will be lower because sales tax in your county is lower than in {Other dealers county}. Can you do that?
At this point you may start noticing a difference in dealer behavior: some of them are more open to negotiation that others. One of the reasons for that is that some of the cars are sitting on the lot for too long and they would like to get rid of them quicker to avoid burning money (keeping the car on the lot costs some amount each day due to insurance, parking space etc etc). This event is more likely in the end of the month or in the end of the calendar year (this post assumes that you cannot pick at what time of the year you buy a car. If you can choose, buy close to the end of December - there will be more inventory dealers will want to get rid of due to model line replacement).
There is another factor that makes a huge difference: the mileage on the new car.
If the new car has ~100 miles on it means that it has been on a dealers' lot for a long time and has been used for a lot of test drives, but no one bought it yet. You use that as a leverage and assume that the dealer is more willing to negotiate on it for selling it close to invoice or below invoice. This is the sweet spot for you (if you happen to find one) - because this is a new car that dealer was not able to sell quickly and it so happens that you want exactly that make and model and color and the dealer is motivated to sell it fast. If it is indeed the case, you will likely get the best deal from such dealership. Use that deal (in writing) to negotiate with other dealers as described above.
You can always find what the mileage is on the new car (dealers typically provide this information on their web sites in inventory pages) or you can explicitly ask for it if you cannot find it.
During all the time when sending emails to dealers you must periodically mention that you are currently reviewing offers from different dealerships and they want to earn your business. This will make salesperson want to close the deal faster and come up with the best offer they can.
At this point you should have several offers with more or less matching OTD price. If you do not plan doing any trade-in, simply chose the one that has smallest OTD price and is not too far away (you can calculate how much it costs to drive to some faraway place and back by using your hourly salary adding a price of gas. If the offer does not compensate that, it is not worth driving there, this offer can and should be used for negotiations though). Then make the final pass around all dealers saying that this is the last possible time for them to earn your business. You are going to accept the attached offer unless you get better OTD price until certain specific time (usually, 24 hours or so). Wait for the better offer and then go to the dealership - skip to the Step 13.
Dealerships love trade-ins - in most cases it allows them to compensate even for selling the new car below the invoice price. You must make dealerships compete for your car to get the best deal for trade-in.
You have a choice between trade-in and a private party sale, the price of the car that you trade-in will be less than that for the private party sale - and the reasons for that are:
- convenience (you will definitely sell your car the same day you buy a new one, you do not have to deal with different potential buyers and paperwork)
- safety (you won't get mugged in the process of showing the car to someone)
- tax savings in some states.
Most people think that tax savings on trade-ins is something that is significant (and dealerships like to make you believe this), in fact they are not that big and well compensated by lower price of trade-in as compared to the private party price. The real reasons most people chose to do trade-ins and not do private sell are convenience and safety. Think about that when choosing trade-in over the private party sale. Consider how much you can pay for the convenience anв safety to decide.
Regarding tax break for Washington read https://dor.wa.gov/education/industry-guides/auto-dealers/trade-ins The price of your trade-in that you will negotiate with the dealer will be exempt from the sales tax that you will have to pay for your new car. This means that if you will have a trade-in, all OTD prices you currently have negotiated will have to be recalculated given that the taxable amount is different (you recalculate the tax value and the total cost you will pay). This has some interesting consequences.
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If you are doing trade-in the difference between tax rates in different counties becomes less important. The dealerships that you preferred as the ones that have the lowest tax rate may no longer have the best deal (assuming they all offer the same trade-in value, we will get to it later).
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If you are trading in a good car in a good condition and low mileage (meaning that your trade-in price will be comparable to the price of the car you are buying) the best offer is not the one that saves you couple thousand dollars on the sale price of the new car, but the one that gives the best value for your trade-in. Tables have turned, now you are selling and they are buying. It is still same market economy in action with limited supply (your 1 good car) and multiple demand (several dealerships with OTD offers from step 9 who want a deal with you assuming you do not want trade in and waiting to be surprised)
I assume that your car is in a good condition and has a reasonable mileage with maybe some minor repairs that are required (like, fixing scratches, fixing curb damage on wheels, replacing tires, deep detailing, maybe some minor bodywork like replacing the fender that you have postponed).
I also assume that the car you want to trade in does not have any serious mechanical / electrical condition that you are aware of that needs to be fixed.
If your car is in excellent condition and has a low mileage (absolutely no issues at all, you have just fixed everything) this is great - this car may be sold as certified-preowned, dealers love those (but they won't tell you about it for obvious reasons). You can mention that the car is perfect fit for CPO as a negotiation point.
What is important for next steps is for you to be able to be absolutely honest about the car and willing and able to provide all information that dealers might request about it.
Do not worry about anything that can show up on CarFax (unless this was something big, not fender-bender or parking lot hit-and-run). If you have some big repairs done to the car, the below ideas may not work for you or work against you.
If you have some repairs required on the car to get it to the excellent condition and they cost above your deductible, you may want to file a claim with your auto insurance and get the check before trading the car in. This way in some cases you can get the free money. You do not have to spend it on repairing the car, dealership will do the repairs. Depending on your insurance it may or may not be a good idea to do (in some cases it may cause your premium to increase but not always, it depends on your insurance, e.g. some of them have "single accident forgiveness program" that you can use, do your research).
If you file a claim you will also get a good lowball estimate of the repair cost that you can use when negotiating about your trade-in.
If you decide not to file a claim, just go to your insurance preferred body shop and do the estimate - get the numbers from them which will include the repair price and the list of things they need to do, this is usually free and can be done within 1-2 business days. You goal is to get as small estimate as possible, do not go to places that are known of high prices and good quality of work - you need an estimate for negotiation, not for repairs.
If you did not already do it in Step 2, drive to the closest dealership and ask them to give the best trade-in deal for your car - this will take them no more than 10-30 minutes to do. This may be a dealership that you have already contacted. Ask for written offer from them that will include the trade-in price, mention that you are still comparing the offers and will get back to them if no one else will be able to match their deal.
After that you will need to ask "sight unseen trade-in appraisal" from other dealerships to avoid driving to each one of them. They will be more likely to perform it after seeing your offer and knowing that some other dealership already saw a car in-person.
For preparation for sight unseen appraisal, do the following:
- wash the car, clean it inside if needed (no need to do the deep detailing though)
- park outside in clear sunlight
- take a pictures of the odometer and VIN
- open hood, take lots of pictures of the engine, close hood
- take pictures of all the scratches and dents / things that require repair you know about
- take pictures of the car from all directions (8 minimum)
- take as many pictures inside as possible
- take pictures with open doors and open trunk
Then upload the pictures to somewhere like google photos and get a shareable link to them.
Send the following email to all dealers including the ones that did not have the car that you wanted in stock.
Thanks for the offer, Jeremy
What may help me choose to buy a car from you is the trade-in value.
I am currently reviewing multiple different offers which more or less match for the vehicle spec and price is about the same OTD and all of them are willing to make a deal now, the only difference remaining is a trade-in value.
I will be trading in my {make} {model} {year} {trim}. {single owner (me) [if true]} odometer reading {odometer} current service and maintenance records no mechanical / electrical issues, {still on warranty [if true]} no other problems, no noises/rattles, no problems with keeping straight, steering etc. {never used for rideshare ([if true]} the car is {financed - payoff amount XXXXX| not financed [this is important for further calculations]}
VIN is {VIN of your car} ([list the accidents that will show up on carfax to save time and show honesty])
photos (can add more / retake any moment if needed) {url with the photos - e.g. google photo album shared after you took pictures with your phone}
Things that need to be fixed are (I took additional pictures of them): {description1} {description2}
Interior of the car is without any damage, just needs a typical detailing.
can you please provide the best possible estimated real sight unseen appraisal for its trade-in value (I can take any photos / videos you request now or share any records that you may need)?
I am interested in real sight unseen trade-in appraisal (I know what it is like, I expect more questions about the car from your used car department): the one that your used/preowned department can make based on any possible information about the vehicle that you can request and I can provide (e.g. if you need maintenance or repair records, insurance estimates and so forth). I can also make any required videos and photos that person doing the appraisal might ask.
In the very end I would like to get a number in writing that will not be different when I come to you to finalize the deal. If you know something that can be checked about the car that cannot be done with photos/videos by request, let me know - I would be really interested (as I did exactly the same for insurance repair estimates and it worked very well)
I understand that you may change the number after looking at the car as something may happen to the car during the drive to the dealership - and I accept that risk. What I do not want is a surprise "whoops, we forgot to ask you about something and just realized that now: because of that your trade in is worth less than we thought".
I shared this reasoning with multiple dealers and some of them agree with this approach (specifically due to COVID more people do stuff online, insurance work like this now 100% of time for photo estimates etc)
Can you ask your used/preowned department to perform the sight unseen trade in appraisal as described and provide the realistic number that you can commit to?
The trade-in price I have so far is from {Place where you drove} and is attached - they offer $XXXXX for the car.
You will get different replies, depending on them you need to do different things:
- The reply that will include any number right away and asking to come for in-person final appraisal - they are trying to give you unrealistic number (it will most likely be too high, can also be too low in some cases) just to get you to come to dealership. What you need is a real sight unseen appraisal. You have to repeat it multiple times in different ways, eventually they will likely understand. They know how to do it, they just do not want to as it makes it hard for them to lowball you and you can compare the results between dealerships. The way to tell if number is realistic is to compare it to KBB offer. Anything that matches KBB or above KBB is most likely unrealistic.
Your reply should be something like this:
Thanks for the number, Briana,
Let me clarify: I need the real sight unseen trade-in appraisal done for my car by one of your people specializing in used cars or preowned cars. The number that is currently provided was likely provided without any appraisal (as questions that are important for sight unseen trade-in appraisal were not even asked).
Can you do real sight unseen trade-in appraisal (I know what it looks like, I know how other dealerships do it) and provide the number that you can commit to? I plan to come to dealership only to finalize the deal, I do not want any surprises with appraisal value based on something that you can learn about the car now (I can provide any information that you may request and I have no reason to play games with you - I need the most accurate trade-in value that is based on assumption that I am not withholding any information about my car and you requested everything you need to price it accordingly). It is ok to have it lower than you can provide after seeing the car, just provide best number you can commit to that will be competitive.
- Replies that do not contain the value and saying that you must come to have the vehicle appraised and it is not possible to do online or asking for a phone call
Thanks Rick,
If you know something that can be checked about the car that cannot be done with photos/videos by request or by other information I provide, let me know - I would be really interested (as I did online appraisal for insurance repair estimates and it worked very well). I am currently working with other dealerships on appraisal and some of them provide the number based on the information that I provide to their used/preowned car department. If you will not be able to do the same, we will not be able to continue working with you on the trade-in.
- Replies that ask additional questions about the car
These are the ones that you want to get. You may not have noticed, but you are playing a trick on dealers by leveraging that we know more about the car then they do and can tell whether or not they are honest with us by observing what they do not do. You have a way to tell if they are lying to you and not performing the appraisal but giving away fake number that is either inflated or too low. If they really do the real sight unseen trade-in appraisal they absolutely must ask questions such that:
- answer to a question is not possible to get from photos, but possible to get from you over email.
- you will likely not lie if you do not want the trade-in value lowered after they see the car.
- you never mentioned anything about it in your emails.
- it is very important and can affect the trade-in price a lot.
one of these "marker" questions is related to whether anyone have smoked in the car (and about the smells/odors in the car in general).
If the dealer starts asking such questions, you are on the right track. Make every possible effort to help them to determine the most accurate price - they work for your benefit here (as it benefits them too and they decided not to play trade-in devaluation game on you - maybe they hope they will be doing it some other way). You should make it absolutely clear, multiple times, that you can provide everything for their used car department, with all honesty, take any additional photos they may require or share insurance estimates - all to make sure what they will see in person will be exactly what you have shown and told them over email. Your goal is to have the moral right to walk away if after they will see the car in person they will name you a different trade-in price for some crazy reason. You will have to do it in this case and it may be hard to do. Dealer should be aware of that and you should have a written commitment to not trying to do trade-in devaluation on you. After you mention "trade-in devaluation" and that you do not plan to negotiate at the dealership they will likely understand that you are serious about it. Not many people know that term. Google it, results may surprise you :)
You will still be asked to come to dealerships for the final appraisal, for example, if you have carfax reports on your car. It is fine as long as they still provide the number after you offer to provide insurance estimates and repair records. They should agree that their number should not be going down after they see the car, but can go up if it will be more than they expected (the latter will, of course, never happen).
Dealerships are more interested in the number of CarFax reports on the car and the car mileage, not on what exactly happened to the car (unless it was something major). They can use it to make a car pre-owned and sell it for higher price for example. Help them understand that you will walk away if they will try to negotiate with you after seeing the car if the reason of negotiation could have been determined in advance.
Be prepared to wait for additional day for used car department to review the trade-in: salesperson you are talking to usually cannot perform the real sight unseen appraisal. If you are asked to wait, it is a good sign that they are trying to get a hold of someone from used car department or are calling the other dealerships (if you are selling different brand) to get the sense of the best price. Assure them that you can wait and mention that you are working with other dealerships and you know that this can take some time. This will show 2 things: that there is a competition and that you are serious and honest about the trade-in appraisal.
Hi Dan,
I'll see if my used car manager is still here today, if I can't catch him today I'll probably see if somebody on my team can catch him early tomorrow. When did you need to do this by, this wasn't something you were looking to complete today correct?
Thanks Pete,
Yes, I am not in a hurry, can definitely wait until tomorrow. I am currently getting the best possible trade-in appraisals from other dealerships, so the process can take 1-2 days, it is absolutely fine, I will wait for your reply.
After you get the trade-in appraised by used car department you should start to get an understanding of how dealers want to give for your car. As a fun exercise you can now try to match it with KBB and see how it goes. Once at least one department does the real appraisal it becomes much easier to get the same information from others: just mention that you already have appraisal from other dealership and mention questions they asked and information you provided. Do not initially share the trade-in value. Your email will get to the right people faster this way.
Ask each dealer to update the Purchase agreement they have provided taking into account the trade-in value they offered. They might refuse saying that this is not the final trade-in value and it may change after they see the car - make them sure that you are willing to accept that risk but only if the value changes because something happens to the car while you are driving it to dealership. For all other cases, politely ask them what exactly they will be checking about the car that cannot be done now - say that they can put a lower but realistic number. If they want to do business with you they will have no way of not answering this question. If they do not, they will not do business with you - politely make it clear to them in writing.
You will receive the updated offers. You already know what to do with them - take the best one and share it among all participating dealerships (at this point there will be not many left). You can also use just the trade-in value from the offers if some offers include the car you do not want - these offers are still valid for trade-in negotiations.
After you follow the same process of decreasing OTD price (it may so happen that in some cases dealerships may have to pay you if your trade-in is worth more than the new car - this is fine and they know how to do it) you will get the list of offers.
Make one final call saying that this will be the last call and you are waiting for the best possible offer to beat the existing one until some deadline. Wait until deadline and choose the best deal.
Print the offer that you received over email with OTD price breakdown and take it with you. If you are making a trade-in do not forget to bring
- the title of the car you will be trading in
- second key for the car if you have one
- proof of insurance
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Mention that you are really busy, schedule a dealership visit on Saturday evening around 30 minutes to 1 hour until closing time. Saturday is the busiest day in dealerships, everyone will be tired and want to go home sooner and this will save you from typical dealer upsell tricks and additional insurance / warranty / options they might want to add. Refuse all of them, do not believe anything about extended warranties or additional protections. Salespeople are never entirely honest with you - your interests about money are exactly opposite, you have no reason to believe anything you cannot check yourself. You likely can get some products cheaper elsewhere, there is nothing special about current time that will be different tomorrow when you are out of the dealership that would prevent you from buying anything they offer from someone else.
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Make sure trade-in value they offer after they see your car is the same that was offered over the email. Check that the final OTD price matches the one you had in email. If something does not match and you believe that they could've checked that online with you before visit, politely check if there was any mistake, and if they try to start a negotiation either on trade-in or on a new car, stop talking, walk away and try the next best offer. This will be hard to do (and this is why dealerships want you to come so badly), it is up to you to decide. Probability of such event is small, but it still exists. Remember: they have no way to force you to stay in the dealership or listen to them (except brainwashing you), you can walk away at any moment.
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Take the new car for a test drive, check that everything is the way it looked on pictures, that it is indeed same VIN. If anything is wrong (e.g. "we just sold that car, but we have the same, just different VIN" or "we forgot to mention this optional thing that comes preinstalled"), walk away, do not listen to any excuses.
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Sign the contract. The car is now yours, do the remaining paperwork politely refusing any additional upsell from finance, shake hands and drive away.