If you’re trying to buy a car right now, you’re probably experiencing a world of frustration, between a lack of inventory and crazy-high prices. There are some helpful tips to navigate this market, but you should know that a lot of conventional wisdom no longer applies in our superheated car market. And some common tips could actually hurt you when buying a car today.
I’ve seen articles all over the internet pitching “top tips” for negotiating with car dealers. While some of the advice still applies — like doing your research before you visit the dealer, or getting pre-approved for a loan — a lot of those old reliable tips will only work if you take a time machine back to the “buyer’s market” of 2018, when inventory was plentiful and dealer markups were a rarity.
These are the worst bits of recycled car-buying advice I’ve seen on the internet — all of which need to be recalibrated for today’s market.
Bad Tip #1: Focus On the “Invoice Price”
For the longest time, buyers and advice blogs were obsessed with the idea of knowing the “invoice price” on a new car. The invoice price is the amount the dealer pays the factory, usually about 5 to 8 percent below the MSRP. I always found this advice strange, because even if a buyer knows how much the dealer paid for the car, that number in and of itself doesn’t provide the buyer with any leverage to convince the dealer to discount the vehicle.
While there are still some rare instances of getting discounts on cars today, for the most part, in 2022, the MSRP is the best-case scenario on any remotely desirable car model. I conduct dozens of new-car deals every month, and I’ve seen a pattern emerging. The dealers that have cars available to buy right now are usually the ones that add markups, hence why they have inventory sitting around. The dealers willing to sell at competitive prices are almost always pre-selling their inventory several months before the cars arrive. So if you have the luxury of time on your side, you’re more likely to get a better deal, but it’s going to take some hunting — and some faith that the car you want will arrive at the dealer and not get tied up in supply-chain woes.
Bad Tip #2: Tell the Salesperson Your “Out-The-Door Price” and Stick to Your Guns
I can’t tell you how many folks I’ve talked to who all say the same thing: “I just tell the salesperson the total price I’m willing to pay, and if they can’t get there, I walk.” On the surface, this sounds like solid advice, but this tactic involves some big assumptions that may or may not hold water.
First, the “out-the-door price” strategy assumes you’ve correctly calculated a total transaction price that includes your local taxes and DMV fees. (Unless you do this for a living, you probably won’t come up with the correct number off the top of your head.) Second, this tactic assumes that your target price is achievable for the market. Given today’s sky-high demand, that’s unlikely. Finally, this approach assumes that your dealer actually has the car you want in stock, and is willing to meet your target price.
Another complicating factor: This negotiating method only really works in-person. So you might drive all the way to the dealer, only to find out the car you want isn’t in stock (incredibly likely right now) or your out-the-door target price is either inaccurate, or not remotely realistic in today’s market. Bottom line, you’ve wasted a ton of time and come back empty-handed. A more efficient tactic is to call or email a few dealers and ask what’s actually available, and what their total price would be on the car you want.
In today’s market, the only way to understand what’s an achievable price goal is to comparison shop actual bids on actual cars. But keep in mind that when you’re comparing bids, you have to know when to take advantage of an opportunity when it arises, versus waiting around for a theoretical “best price.” Oftentimes, I watch a pretty good offer come through, but the customer wants to wait for an even better price; that bid never materializes, and the good offer gets snatched up by someone else.
Given how fast inventory is moving right now, if a dealer can get what you want at a price that seems fair to you, it’s probably worth jumping on.
Bad Tip #3: Say No to Extra Fees
This follows along with the “out-the-door price” approach. Most buyers know that the final sale price of a car will include a number of additional charges. Some of these are unavoidable, like sales tax and DMV/registration fees. Others, though, are pure profit generators for dealerships. While the Federal Trade Commission is proposing new rules to minimize these shenanigans, right now, many car buyers still find themselves getting hit with unexpected fees.
Should you push back on bogus charges like “reconditioning fees”? Absolutely! But remember that in today’s high-demand market, buyers don’t have the leverage we once did. You can demand anything you want, but with so many people hungry to buy a new car, oftentimes the dealer will let you walk and just find another sucker.
Sometimes it’s best not to get caught up in the nitty-gritty details and simply take the most competitive offer. If Dealer A has the car you want, with a $5,000 markup but no bogus fees, but Dealer B has it at MSRP with $1,000 worth of overpriced accessories, neither situation is ideal — but one is still clearly better than the other.
Bad Tip #4: Don’t Mention Your Trade Until the Last Minute
You’ve probably heard this one: “Don’t tell the dealer you want to trade in your current car until you’ve got a final price on the car you want to buy.” On the whole, it’s not terrible advice, and it comes from a valid concern that a dealer will offer you a strong price on your trade, but make up for it by removing any discounts on the new-car price (or vice-versa, a great discount and a lowball trade offer).
Here in 2022, the situation is a little different. Dealers are desperate for used cars, and a lot of them are paying good money to boost their pre-owned inventory. I’ve seen a few instances where telling the dealer a trade might be on the table coaxed out a more competitive deal, or got a new-car customer moved to the front of the line for a factory order (because, again, if you really want a specific car with specific equipment, you’re putting in an order and waiting). I’ve also seen deals where the trade offer was so high, it offset the dealer markup on the new car, making the net deal worthwhile.
If you’re afraid of getting a lowball offer on your trade, it’s trivially easy to get a bid from Carvana, Carmax or Vroom, and use that as leverage in your discussion with your local dealer. Keep in mind that some states will give you a tax savings when you trade in a car, meaning you only pay sales tax on the price of the new car minus the trade offer. So even if your local dealer comes in lower than the online car markets, the tax savings might make it a wash.
It’s still possible to get a good deal in today’s car market. You just have to understand that every deal is relative, and what might have seemed like a sucker’s buy a year ago could be your best option today. Your chances of success are directly related to your flexibility and patience. And if you’re not in a hurry to buy a new car, now’s a great time to get caught up on preventative maintenance on your current ride. Because in today’s market, the best buying advice is probably “stick with your current car until the market calms down.”
Tom McParland is a contributing writer for Jalopnik and runs AutomatchConsulting.com. He takes the hassle out of buying or leasing a car. Got a car buying question? Send it to Tom@AutomatchConsulting.com