How much can you really negotiate off a new car? The answer can range from virtually nothing on a high-demand vehicle to thousands of dollars on a model with plentiful inventory or a dealer that's particularly motivated to make a sale.
But after spending years in the automobile business—and another 15+ years helping consumers buy cars—I wouldn't start by deciding that you need 5%, 8% or any other predetermined discount.
Once you've decided which new car you want, stop shopping for the car and start shopping for the dealer.
Several dealerships may be selling essentially the same vehicle, but they may have very different reasons for wanting your business. Instead of trying to guess which one will give you the best deal, contact several of them online and let them compete.
You can do almost the entire process from home. When the dealers eventually stop lowering their prices, you'll have a much better answer to "How much can I negotiate?" than any generic percentage can give you.
How Much Can You Negotiate Off a New Car?
There is no fixed percentage you can negotiate off every new car, but discounts can range from virtually nothing to several thousand dollars depending on the vehicle and market.
As a very broad reference point, a discount of a few percent from MSRP may be realistic on many ordinary new vehicles when inventory is healthy. Discounts of 5% or more are possible on some vehicles, while substantially larger discounts occasionally appear on slow-selling models, outgoing model years or vehicles supported by strong manufacturer incentives.
Those percentages can also be completely unrealistic on a newly redesigned model, popular hybrid, limited-production vehicle or anything dealers can easily sell at MSRP.
That's why I wouldn't begin by deciding that you must get a particular percentage off MSRP.
Suppose you're buying a $45,000 vehicle and decide that $3,000 off would be a good deal. What if several dealers are actually willing to discount it $4,000? You would have stopped too soon.
The opposite can happen too. You might insist on $4,000 off when every dealer in your market can easily sell the vehicle close to MSRP.
Use percentage discounts as reference points, not as your negotiating strategy.
If one dealer offers $1,500 off, another offers $2,400 off and another offers $3,100 off, you now have real information about what that particular vehicle can be bought for. Give the other dealers an opportunity to beat the $3,100 discount and see what happens.
That's how you find out how much you can really negotiate off the new car.
Once You've Chosen the Car, Start Shopping for the Dealer
This is where buying a new car is very different from buying a used one.
Every used car is different. Mileage, condition, previous ownership, accident history and maintenance can make two seemingly similar used cars worth different amounts.
With a new car, several dealerships may be selling essentially the same product.
If you've already decided on the make, model, trim and important equipment, much of your vehicle shopping is finished. Now you can shop for something else:
The dealership that's most motivated to sell it to you.
Why Would One Dealer Sell the Same New Car for Less?
Because dealerships selling identical vehicles can have very different reasons for wanting another sale.
One dealer might have two of the vehicle you want while another has fifteen. One may already be comfortably above its monthly sales objective while another needs several more sales. One dealership may have plenty of room for incoming inventory while another has another shipment arriving and too many similar vehicles already sitting on the lot.
Dealers also commonly finance new-vehicle inventory through what's known as floorplan financing. Vehicles sitting in inventory can therefore create financing and other carrying costs until they're sold.
Manufacturer programs, sales targets, how long a particular vehicle has been in inventory and simple differences in management philosophy can all affect how aggressively a dealer prices a car.
Same car. Different dealership. Different motivation.
The important part is that you don't need to know why one dealer is more motivated than another. You don't have to calculate its inventory costs or figure out whether it's trying to hit a sales target.
Give several dealers the opportunity to sell you the car. Their prices will tell you which ones are motivated.
Start the New-Car Negotiation Online
I would contact several dealerships online through one of the many excellent car listing websites before visiting any of them. The websites make it very simple to do. And then subsequent email and texts work particularly well because you can communicate with several dealers at the same time, keep a written record of every offer and respond whenever it's convenient.
You also avoid one of the biggest disadvantages buyers create for themselves: spending several hours at one dealership and becoming emotionally invested in completing the deal before going home.
From your couch, Dealer A doesn't have home-field advantage. If its price isn't competitive, move on to the next email or text.
How Many New-Car Dealers Should You Contact?
Contact enough dealerships to create genuine competition. Three may be sufficient in some markets, while five or more can give you a better picture when plenty of dealers sell the vehicle.
Don't unnecessarily limit yourself to the dealership closest to home. Depending on where you live and the price of the vehicle, expanding the search to 100 miles or more can make sense.
Remember, you're not driving to all of them.
You're letting them compete online.
Where Should You Find the Dealers?
Manufacturer inventory searches, individual dealer websites and major automotive shopping sites can all help you locate vehicles and dealerships.
There are many great auto sites that offer multiple dealer quotes. I happen to prefer Edmunds.com, due to their massive dealer participation and easy process. I've just had good experiences there.
But you can use any of the great car sites out there, such as AutoTrader, KBB, CarGurus, and others. The most important thing is to just get the quotes to set up the competition.
Usually, you'll just enter your make and model, then select the year, and then click on something like "Check Availability" or "Find Best Price". And I normally include dealers within 100 miles to be sure of a brisk competition, but you may have to go further if you are in a more rural area.
What Happens After You Request New-Car Dealer Quotes?
When you request prices through an online dealer-quote service, the participating dealerships already know you're shopping around. They understand that they're competing with other dealers for your business, so they have an incentive to make their initial offers attractive.
That's one of the advantages of using these services. You don't have to explain your negotiating strategy or convince a salesperson that you're a serious buyer. The dealerships know you're actively shopping and that price will play an important role in your decision.
Once the quotes start arriving, compare them carefully. Some dealers may provide an actual selling price immediately, while others may send a general invitation to visit or ask you to call. If a dealer hasn't provided a specific price, request one in writing.
I prefer handling these conversations by email or text. It's convenient, gives you a written record of the offers and makes comparing several dealerships much easier.
And remember, even though the dealers know they're competing and may offer attractive prices initially, their first offers aren't necessarily their lowest. That's why the next step is so important: giving the dealerships an opportunity to beat one another's prices.
Compare Out-the-Door Prices, Not Just Discounts
The number that ultimately matters is the complete out-the-door price.
A dealer can advertise an impressive discount and then add dealer fees, mandatory accessories, protection packages or other charges that make its actual deal worse than a competitor's.
If a quote doesn't include the complete out-the-door price, ask for it. You want to see the vehicle selling price, dealer fees, dealer-installed products or accessories, taxes and registration-related charges.
Taxes and government fees generally aren't where the competition takes place. The vehicle price, dealer charges and unwanted add-ons are.
A $2,500 discount with $1,500 in questionable extras may be worse than a straightforward $1,500 discount from another dealer.
How To Respond To The Offers
Getting several initial quotes is only the beginning.
Suppose you contact five dealerships and one comes back noticeably lower than the others. Give the higher-priced dealers an opportunity to improve their offers.
You can simply tell them:
"I've received a lower offer from another dealer. If you'd like to improve your price, I'll certainly consider it before I make a decision."
You don't necessarily have to tell them the competing dealer's exact price. Let them decide how much they're willing to move.
Some dealers won't change their offers. Some will. A dealer that wasn't initially the lowest may suddenly become the most aggressive once it realizes there is a real sale to win.
If another dealer then beats your lowest price, you can give the previous low bidder another opportunity. There's no need to invent offers or bluff. Tell the dealer you have a better price and ask whether it wants another chance at the sale.
You're not trying to trick anyone. You're giving several businesses an opportunity to compete for your money.
How Do You Know When You've Reached the Best New-Car Price?
You'll have a pretty good indication when the competing dealers stop lowering their offers.
This is one of the biggest advantages of the process.
You don't have to guess how much profit the dealer has in the car. You don't have to calculate exactly what it paid. And you don't have to wonder whether you should have demanded another $500.
You gave several dealerships a genuine opportunity to earn the same sale. If you've gone back to the competitive dealers and nobody is willing to beat the strongest offer, you've done a very good job of discovering what the market will bear.
In other words, the best answer to "How much can I negotiate off this new car?" isn't a predetermined percentage. It's the amount several competing dealers prove they're willing to discount it.
At that point, you can buy the car—or do nothing. You're still sitting at home.
Does New-Car Invoice Price Still Matter?
Invoice price is a useful reference point, but it doesn't tell you the lowest price a dealer will accept. Manufacturer programs, sales objectives and other factors can make the dealer's actual economics more complicated than simply subtracting invoice from MSRP.
I wouldn't use invoice as a rigid negotiating target. If several dealers are competing and one is willing to sell below the price you expected, that real offer is more useful than calculating what you think the dealer should accept.
Invoice gives you a reference point. Competing offers tell you today's market price.
Keep Financing and Your Trade-In Separate From the New-Car Price
Know what you're paying for the new car before allowing financing or a trade-in to blur the numbers.
If you're financing, don't negotiate solely from the monthly payment. A payment can be lowered by extending the loan term even though the vehicle price hasn't improved at all. Establish the selling price first, then evaluate the interest rate and loan terms.
The same principle applies to your trade. Dealers naturally look at the entire transaction, but you should be able to identify both the price you're paying for the new vehicle and the amount you're receiving for the old one.
Before negotiating your trade, get independent estimates of what it's worth. Here's why I recommend comparing more than one appraisal: KBB versus Edmunds trade-in values.
When Should You Finally Visit the Dealership?
Wait until you've narrowed the field and established a strong price before visiting the dealership.
At that point, you're no longer walking into a showroom wondering what the car will cost. You already have the deal in writing.
Confirm that the vehicle is actually available and that the quoted numbers haven't changed. If there's a particular VIN involved, make sure that's the vehicle you're expecting to buy.
Then inspect the car, drive it if necessary, verify the paperwork and complete the transaction if everything matches what you agreed to.
If the numbers suddenly change, an unwanted product appears or the dealership refuses to honor the written deal, remember that you already know where the other competitive dealers are.
What's the Best Way to Get a Good Deal on a New Car?
Decide what you want, shop several dealers online and make them compete before you ever walk into a showroom.
Don't begin with an arbitrary assumption about how much you should negotiate off MSRP. Don't worry about figuring out which dealer has the most room in the price or the strongest reason to sell.
Let the dealers show you.
Get several prices in writing. Compare the complete numbers. Give the higher-priced dealers an opportunity to beat the best offer, and continue until the prices stop going down.
The competition is the strategy.
Once you've chosen the car, stop worrying about becoming the world's greatest negotiator.
Shop the dealer.
You won't know which one wants your business the most until you give them a chance to prove it.
So, to get started, head on over to Edmunds.com or the site of your choice and I think you just may find this quite illuminating, and even fun.