By Josh RosenbergAfter quite a rough stretch, there's finally some good news for new car buyers ... dealer's are negotiating again! And sometimes quite a lot if a buyer goes about it the right way.
It's been a fairly difficult new car market the last couple of years following the pandemic. As the economy recovered and people needed new cars, there just weren't many to be found. And with inventories so low, prices spiked to all-time record levels. Prices actually above the MSRP (sticker price) became the norm.
So, What's Caused The Change Now?
In a word, inventories. New car inventories have pretty much normalized while consumer demand has not yet returned to pre-pandemic levels, some of which is caused by the current very high interest rates.
So, while new cars have been at historically high prices for a while now, the trend has finally been swinging in favor of the buyers, and there's been a return to dealer price concessions, or "incentives", as they are usually referred to in the industry.
This is not to say that dealers are hurting and are drastically cutting prices. No, business is generally pretty good and certainly up over last year. But the numbers indicate that buyers now have a solid opportunity for significant savings.
The Actual Numbers Spell Out The Opportunity
According to industry leader Cox Automotive (July 3, 2024):
"Initial numbers indicate that new-vehicle sales volume was down year over year by more than 3%; we were forecasting a slight increase. The sales pace last month is now being pegged at 15.3 million (SAAR) (seasonally adjusted annual rate), well below our forecast of 16.0 million."
And when sales drop, dealers start dealing.
Also from Cox (June 24, 2024):
"New-vehicle inventories are up nearly 1 million units or 50% compared to last year. In 2021, the ratio of new inventory to used was 55%; today, that ratio is 125%. Some brands, particularly Mazda, Nissan, Audi, Stellantis, and Ford/Lincoln, have days’ supply levels well above the industry average."
Lots of inventory usually leads to lower prices to move it.
And from Kelly Blue Book (June 26, 2024):
"Vehicle Incentives Going Up: Carmakers continue to use incentives to attract buyers. According to Kelley Blue Book’s analysts, carmakers spent 6.7% of the average transaction price on incentives, or $3,200, meant to move vehicles.
"When automakers build up an oversupply of cars, they discount the vehicles to get them off dealer lots. For several years, carmakers and dealerships showed no glut of cars to sell and barely offered discounts. Now, supply is bulking up again, partly because of higher interest rates on car loans."
And that 6.7% average discount is the highest level since May, 2021. Also, the $3,200 discount is "average", meaning that for every buyer who only gets a $1,000 discount, there is another more informed and effective buyer who is getting more like a $5,000+ discount.
And also from Kelly Blue Book:
"It’s a Buyer’s Market for New Cars: The new car landscape is a buyer’s market. Shoppers heading out to purchase a new vehicle will find many incentives to help lower the price."
So, dealers have gone from selling cars at prices actually higher than MSRP to now discounting again through negotiation. And this opens a significant opportunity for buyers once again.
How To Get The Best Price In This Environment
So, how do you get the best price in a sales environment where the car business is generally doing fairly well, but where dealers are also finally willing to negotiate again to keep it going in their quest to return to pre-pandemic levels?
Well, those buyers who walk into a dealership to negotiate are very unlikely to be the ones getting the good deals. That's too "old school" and a big mistake in this day and age. These aren't the buyers getting the best prices.
No, the biggest discounts are going to those buyers who are using the available online price and research tools, and most importantly, those getting online quotes from multiple dealers (see "How To Start The Competition" below) before ever setting foot in a dealership. These are the most informed and prepared buyers.
The Reasons This Works So Well
1. Dealer Competition: As soon as they get them, dealers know they are now in a multi-dealer competition for your business and may need to offer you their most competitive price to get it, and often do right upfront.
2. Increased Buyer Leverage: You can then negotiate further if you choose to. There's more "how to" specifics on this below.
3. Transparency: Requesting quotes from multiple dealerships encourages price transparency. Dealers are more likely to provide clear and competitive quotes when they know they're being compared to other options.
4. Market Price Awareness: By getting quotes from multiple dealers, you get a better understanding of the market price for the specific car you are interested in. And with this information, you can negotiate more effectively and know when a dealer's offer is above or below the market average.
5. Incentives and Promotions: It is not unusual for different dealerships to offer varying incentives, promotions, or discounts at different times. By obtaining multiple quotes, you can identify which is currently offering the best overall deal.
6. Very Little Stress: There's little or no stress because you are doing this from the comfort of your own home or office, so there's no sales pressure and the buyer is actually the one in control.
7. Access To Information: You'll have all the resources of the internet at your fingertips to study the offers you are getting or research any questions you may have as opposed to being more limited while sitting at a salesperson's desk.
Okay, Here's How To Start The Competition:
My two personal favorite free quote services, both of which provide multiple dealer quotes from a single form, in no particular order:
I've found that CarsDirect.com has just massive dealer participation and is super fast and easy, with quick response times as well.
In addition, I also highly recommend Edmunds.com due to their quick and easy format as well. They also provide lots of vehicle research, if needed.
Just enter your make and model, then select the year, and then "Check Availability".
Doing both ensures more dealer competition ... and the more competition, the more prices tend to drop. 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.
Both sites also have long-standing reputations for helping consumers in what can be a fairly "adversarial" auto industry. Their participating dealers are required to offer significant discounts right up front to anyone who does this. And you can then compare these discounts and negotiate further as described above, if you choose to.
In addition, you are never under any obligation at any time.
And fortunately, they both literally take all of about one minute.
Tips For Dealing With the Quotes Once You Get Them
You will receive all your quotes via email or text. Sometimes, you could be called and you can decide if you want to engage with that or not. If not, you can say something like ...
"Hey, I appreciate you following up. But I'm looking at a number of offers and would prefer handling this by email or text for now until I'm closer to wrapping things up."
That always seems to handle this. You then can compare the quotes and simply go with the best ... or you can usually negotiate still further if you like. It's up to you.
And always make sure you get their OTD (out the door) price, including any fees, to make sure you are comparing apples to apples. It may not be included in their first contact. All you'll need to do is respond and ask for it.
If you want to negotiate further, which I recommend, you can respond to the highest bidders with an email telling them you have gotten a lower competitive quote. Never tell them what it is. Just tell them you'll consider their new offer if they want to send one. Simple, that's it.
You can even do something similar with the low bidder if you are not satisfied with the price. I don't recommend lying in any way. At the same time, you don't have to tell them they were the lowest bidder either. You can just tell them the truth, something like ...
"Based on your offer, I'm not prepared to purchase this vehicle at this price. If you'd like to submit another offer, I'd certainly consider it. It's up to you."
When no one is sending you any more quotes, you know you've gotten the best price. You've won ... and you've won on your own terms.
If you think you'd like to buy it, tell them you'll buy it at their quoted price only after you test drive the vehicle. Now it's up to you. You can do whatever you want.
Also, always remember that a very good time to buy a new car is when you don't really need one. Your lack of urgency will also put you in a very strong position. You can get quotes from time to time and then pounce when you see an absolutely outstanding offer.
Does This Method Work For Leasing As Well?
Absolutely. Your monthly lease payment is based on the final price negotiated. To give you an idea of the savings, for every $1,000 the price comes down, your payment will decrease by approximately $28 per month on a 36 month lease.
Once you've decided to accept a price, you just tell them to convert that capitalized cost (the agreed upon price) into a lease. Or, ask them to do it along the way, whichever you prefer.
So, to get started, head on over to CarsDirect.com and/or Edmunds.com and I think you just may find this quite illuminating, and even fun.
Well, I hope this has been helpful. Have fun turning the tables with this ... and let me know how you do.
All the best - Josh