Auto Loan Center

Negotiation With a Dealer

How to Get the Right Vehicle at the Best Price

A vehicle purchase is considered to be the second or third most costly purchase that most households make, after a home and/or paying for a college education.  Yet many consumers enter into the process ill-prepared and end up with a less than ideal result. Ohio Valley Bank can help you to get the best rate, find the right vehicle and remove most if not all of the stress associated with the vehicle buying process.  Here are some proven tips that will help you to shop with confidence and knowledge.

1. Do the Research

This by far is the most important step of the car buying process.  Taking the time upfront – long before you set foot on the dealer’s lot – can save you time, frustration and money!

  • Homework – The basics of car buying start long before you even go to a dealer.  Things to consider and discuss:  how the vehicle will be used, annual mileage (will it change with the next vehicle), and if this is to be a family vehicle with several different drivers, encourage input from each driver.  Budget is an important issue to establish early in the process so that you will not end up buying or financing more vehicle than you can afford.  You can use Ohio Valley Bank’s Payment Calculation Tool to help you with your budget, plus find vehicles that will fit into your budget. NOTE #1: When considering your budget, don’t forget that your car insurance will ALSO increase depending on how much newer the vehicle under consideration will be.  If you are considering a new vehicle, go to the manufacturer’s website for basic information (NOT THE DEALER).  Most automotive manufacturers’ sites allow you to “Build your vehicle” so that you can compare and price different options, trim levels and features.  This is a big help when evaluating what to do next.  NOTE #2: DO NOT provide information when asked by the site if you “want to be contacted by the dealership”.  At this point you are just looking and not ready to start talking hard numbers.  If you are considering a used vehicle, our auto resource website is a great place to get information – our website contains years of vehicle reviews that you will find helpful at comparing used vehicles as well.
  • Legwork - Once you have an idea of budget and vehicle type, it’s good to spend some time “walking the lot.” You can search millions of vehicles from our “Vehicle Central” resource in order to see what is currently available, at what price and what specials may be available.  Or if you want to physically walk the lot, it’s best if you do so when the dealership is closed.  That way, you can look and compare with no pressure.
  • Loan Approval – As a car buyer, your strongest negotiating position during the process is having loan arrangements in place.  At Ohio Valley Bank, our knowledgeable loan officers will sit down with you and review your credit history to work with you so that you will already know how much you can borrow and what your terms and interest rate will be.  Because Ohio Valley Bank works for you, we will be able to help you work through the challenges of financing, especially if your history with credit is complicated. You can start the process online.
  • Test Drive – Never buy a vehicle without TEST DRIVING it first!  New or used, it’s equally important!  It helps if you also take a pad of paper along.  That way you can take notes during and after the test drive.  Things you like, things you don’t like.  These notes will form the basis of your solid comparison when test driving different vehicles.
  • Pricing – There are many resources online and at Ohio Valley Bank when researching a fair price – be the vehicle new or used.  Once you have your top two or three choices, find out what a fair purchase price should be.  Again, being well informed is your best way to a good deal. If you have a trade-in, this is a good place to also get an idea of what your vehicle may be worth.  You can access Ohio Valley Bank’s Trade-In Valuation feature here. Do remember, the value of a used vehicle is subject to many different things, mileage, condition, market demand, and how it’s equipped.  The market guides should only be considered just that – a guide but not an exact number on what you might be offered for your vehicle.

2. Do the Negotiation

It is important to understand how dealers make their money from a car deal.  First is the price of the vehicle, second is financing, third is trade-in and lastly is add-on services and products. Since you have already been preapproved for a car loan, your focus should be in two areas: 1) the price of the vehicle you want to purchase and 2) the amount the dealer will give you for your trade-in.

  • The Price - It is important to stay focused on the price of the vehicle you want and not waiver to other topics. If a dealer thinks there are other revenue opportunities from you, he/she is likely to take less for the vehicle. In negotiating the price of the vehicle, there is no need to inform the dealer you have already lined up your financing. If they know this, it will be difficult to negotiate a lower price for the vehicle you are interested in. Often, discounts are available for the vehicle you are interested in. New car dealers may have manufacturer discounts or club membership discounts they can offer. If you are a member of clubs such as Sam’s or Costco, you may be able to receive additional discounts from dealers. If you are not a member, mentioning the discount to the dealer and asking for the same break may help you reduce the price. If you are considering a car buying service, we recommend handling the sale yourself. Car buying services make as much as $300 to $1,000 for bringing buyers to dealers. Also, those services limit the selection of inventory to only dealers that have contracted with them. That means the price and selection may not be the best for what you are most interested in because it is based on limited inventory. If the dealer works with a buying service, then they should be willing to offer you the amount of commission they would have paid the buying service off the price of the vehicle. Again, stay focused only on the price of vehicle until you are satisfied you have reached your target price. If the dealer is not willing to budge, then move on to the next dealer.
  • The Trade-In - Trade-in negotiation is the next most important area to focus. Again, if you have been able to negotiate your target price, now you need to see what the dealer will give you for your existing vehicle. Using our “Trade-In” value tool, you will be able to get an idea of the market value of your vehicle. The dealer will do his best to give you as little as possible because he makes his money on his ability to resell your vehicle for more than he paid you. Typically, a dealer would like to make at least $1,500 profit from the resell of a trade-in some dealer’s profit goal is higher. Usually, the dealer has real costs associated with trade-ins. If the tires need replacing, brakes need to be changed or other service items need repair, the dealer has to bare those expenses. So, consider the condition of your trade-in. What needs to be repaired on your trade-n vehicle? Once you determine that, start deducting the related expenses from the trade-in value and vehicles you have seen similar to yours from our website. Now you should have a realistic idea of what the dealer might give for your vehicle. As mentioned previously, refrain from informing the dealer you already have your financing. The dealer could quite possibly give more of a discount on the price of the vehicle and offer more to you for your trade-in if he thinks there is chance to profit from financing and add-ons. If he brings up monthly payment amounts or extended warranty opportunities to you before you have your price and trade-in quotes, redirect the conversation back to the price or trade-in amounts.
  • The Pressure - Most car buyers dislike this part of the process.  To be honest, the sales person sitting across the desk from you is skilled at making the sale.  However, since you have already done your homework, have been pre-approved and have your choices down to your top two or three, the deal ends up being the dealer’s to lose.  Don’t be swayed by attempts to get you into a vehicle that you are not familiar with.  Most importantly, if you feel you are being pressured into something you don’t want – walk out.   You have the right to take home the offer sheet to look at the numbers and think it over.  Again, if they are not willing to provide that information for your review, walk out.  There are millions of vehicles built each year with thousands of dealers – new and used – willing to sell them. If you are still unsure of the numbers or the deal being offered, bring it by Ohio Valley Bank, we will be glad to go over the numbers with you.  If you are buying a used vehicle, be sure to do two more things – ask for a copy of the vehicle history report and make the deal subject to a mechanic’s inspection of your choosing.  If they do not have one to share with you, we have the InstaVin vehicle history report link on our website that you can go to for an up-to-the-minute history of the vehicle you are interested in. With the complexity of vehicles today, a test drive will not identify some of the more potentially expensive problems that may be lurking.  The InstaVin report will give you some idea about the vehicle’s history – ownership, mileage, accidents (if any).  An inspection by an ASE certified mechanic will check all the major systems and give you a snapshot of the vehicle condition.  The purpose of the inspection is to identify any potential problems that the vehicle history report and the test drive may not have revealed.  Expect to pay $6.99 for the history report and $75 to $100 for the inspection.  Consider it money well spent.

3. Sitting in the F&I Office

You have chosen and test driven the vehicle, you have made a deal to purchase it from the dealer at the price you researched.  Yet, your experience is not over.  The sales person brings you into a small office where you meet the F&I (Finance & Insurance) sales person.  This is the last place for the dealer to make money on your deal.  Add-ons such as extended warranties, special sealants and/or other aftermarket items are pretty much almost all profit.  In a close deal, the dealer will attempt to generate additional profit through the sale of one or more of these items.  Are any of these right for you?  Typically the answer is no.  Today’s automakers build some of the most reliable and sophisticated vehicles.  New vehicles sold today are engineered to last a minimum of 50 percent LONGER than vehicles of the recent past.  Maintenance intervals are much longer and many components today are “lubricated for life”.  If you think that any of these “add-ons” may be right for you, get the literature, take it home and sleep on it first.  You are NOT obligated to make that commitment at that time.  If you decide that you DO want it, you can usually return within the first few weeks to have the work done.

4. Trust your Instincts

If it’s a good deal today, it will be a good deal tomorrow.  NEVER submit to high pressure sales tactics.  You are making a commitment that will affect your household and your finances in a variety of ways.  Make sure you are comfortable with the deal and NEVER sign anything you don’t understand.  Better to take it home and read it carefully before signing.  Once you sign, you are legally bound.  Remember, we here at Ohio Valley Bank are always here to help you through the process.  You are not alone.