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new car buying guide

Arm yourself with information ahead of negotiating for a new car.Rattankun Thongbun/iStockPhoto / Getty Images

Dreading a trip to the dealership to buy a new vehicle? You’re not alone. Here are tips for any buyer on how to negotiate for the best deal on a new car with a dealership.

1. Arm yourself with knowledge

Do your homework. It’s easier than ever these days, thanks to online resources. After narrowing down the make and model of your desired vehicle and selecting the trim, options and colour you want, start compiling the quotes. Call, text or e-mail several local dealerships to get prices for the exact vehicle you want, so you can compare apples to apples. (It’s always a good negotiating tactic to have competing bids on hand.)

Save time by searching websites such as Globe Drive’s Build and Price tool, Auto Trader or Kelley Blue Book to compare prices and browse dozens of new vehicles simultaneously. Some of these sites offer valuable car-buying tools, including the wholesale or dealer-invoice price. While the manufacturer’s suggested retail price or MSRP – also known as the sticker price – is the amount the dealer wants you to pay for a vehicle, they’ll often sell the vehicle for considerably less than that. The wholesale or invoice price is the key to negotiating a good deal because it’s the approximate price the dealer paid for the vehicle, including the price of options and packages.

Many of these websites also offer other useful information, such as the average cash payment, monthly lease and finance payments, and unadvertised incentives, including factory rebates or cash incentives. Of course, you can also pay for annual memberships to get your hands on new-car price reports and expert advice from services such as Car Help Canada or Car Cost Canada.

2. Don’t be afraid to haggle

Never rush the negotiating process at the dealership. Expect to spend a few hours haggling to get the lowest price possible. When starting to negotiate, always bargain up from the wholesale price or your lowest quote. Don’t bargain down from the sticker price or MSRP, which is often what salespeople want to do.

Don’t fall into other traps such as answering the question, “What’s your budget for monthly payments?” Looking specifically at monthly payments works to the advantage of the salesperson. It’s difficult to keep track of the total price when it’s broken down into monthly payments. It’s also easier for dealers to add extra fees to boost their bottom lines without customers even knowing it. So focus on the purchase price. Don’t be afraid to share your research or a competitor’s quote to see whether they can beat the offer. Keep in mind that if a vehicle is in high demand, you may have to pay closer to the asking price.

3. Skip expensive add-ons

Don’t get pressured into buying expensive add-ons; this is where dealerships make big profits. Most of these items, such as fabric protection, rustproofing, tire and rim replacement plans, and extended warranties, are overpriced and inessential. If you do feel the need, you can often buy them later from third-party companies for significantly less money. Some dealers claim that rustproofing through a third party can void your warranty, but they might not put that in writing.

Do ask for extras – free oil changes, free floor mats or even a free set of winter tires – to sweeten the deal. They might refuse, but it never hurts to ask.

4. Mention your trade-in last

After agreeing on a price, mention your trade-in vehicle. Be sure to know the value of it, too. To find the value of a vehicle, visit websites such as Canadian Black Book, Kelley Blue Book or the Canadian Red Book.

You’ll get more money selling your old car privately than trading it in at a dealership, but you’ll have to face the challenges of dealing with potential buyers and test drives. Still, if you have the time and patience, it can pay off to sell privately.

If it’s an older vehicle, consider taking it off the road entirely. Donating your car to a charity, such as Homeless Cars or Kars4Kids, is another smart option. These programs are designed to permanently remove high-polluting cars from Canadian streets while supporting charities. They come to your home, tow away your vehicle for nothing and give you a charitable tax receipt in return.

5. Read the fine print

If you’re planning on financing or leasing a vehicle, getting a preapproved loan from a bank before sitting down at the dealership will likely result in a lower interest rate and extra bargaining power. Consider dealership financing and leasing deals, too, to see whether you can negotiate a better interest rate.

Avoid seven- or eight-year terms. Although popular because the monthly payments are smaller, you’ll be paying much more interest in the long run while driving an aging vehicle with an expired warranty in many cases before it’s fully paid for.

Don’t forget to discuss all of the details, such as warranty terms and mileage limitations, too. Negotiate to lower the price per kilometre for exceeding mileage restrictions at the end of your lease. Have the dealer put it in writing, too.

Finally, read the contract and all the fine print. Crunch the numbers, make sure there are no extra charges or fees and that the payment terms are correct. Before signing on the dotted line, understand the entire contract. And if a dealer makes promises, such as free oil changes for life, get it in writing.