By on July 1, 2007

donedeal.jpgWhen it comes to buying a used car there are two basic negotiating mindsets. You can either be fair and decent or unfair and obnoxious. You need only visit a used car lot to know that unfair and obnoxious works. But it is also true that many sellers respond extremely well to honesty and decency. Win – win is no sin. So, karma lovers, here's some tips for negotiating the purchase of a used car by traveling down the righteous route.

If you've followed steps one through three, you've already achieved a major victory. You've found a car that's superior to 90-plus percent of what's out there. Rejoice and let the seller enjoy the benefits of properly maintaining his car. Again, the "completed items" section of eBay is the only guide to the "right" price to pay for a given used car.

I always perform the final negotiations face-to-face. Do not discount the importance of charm, relaxed body language and a civilized tone of voice. Prepare yourself by deciding the absolute top price you're willing to pay for the car. The basic formula: the seller's asking price – agreed deductions for repair costs = the eBay price. More or less. 

Begin by declaring your intention to buy the car, subject to a nominal adjustment for necessary repairs. If these repairs are minor, immediately offer to split the difference for the repair costs and call it good. If, however, mission critical repairs run into the high hundreds to thousands of dollars, you have an "opportunity" ahead of you.

In this case, it's often helpful to ask your mechanic to fax the used car's inspection report to the seller before you speak with them. At first, the seller (and possibly you) may be shocked by the numbers involved. This can be especially true with older vehicles and luxury cars. However, with a little constructive conversation, even the most alarming repair costs needn't kill the possibility of an amicable agreement.

I like to start negotiations for cars with repair "issues" by giving the seller an opportunity to do the right thing. "Given what's in front of us right now," I ask. "What would be the fair way for both of us to resolve these repair costs?"

Worst case, the sellers stand pat. In that case, walk. Best case, the seller says they'll simply lop-off the total bill from the asking price. If that happens, it's time to shake hands and do the deal.

Some sellers offer to reduce the asking price by a very low number, figuring you're there to haggle (hoping you won't). Provided the asking price minus 50 percent of the repair costs is acceptable, again, offer to split the difference. If that doesn't work for either or both of you, it's time to go through the inspection report– and the probable costs of repair– line by line.

Keep in mind some items are your financial responsibility. Unless it involves a major repair (timing belt, water pump, adjusting the valves, etc.), upcoming maintenance regimens are always down to you. In particular, oil changes, tune-ups and replacing filters that aren't necessary right now should be removed from your list. By doing this from the onset, you're showing goodwill and fairness.

If the seller claims the cost of repair listed in your inspection is too high, ask them if they know of another mechanic who'd be willing to do it for less, and the type of guarantee they will offer. I've seen $450 repairs with 30-day guarantees turn into $200 repairs with a full year guarantee. If the car is worth it to you, it pays to explore alternatives that will benefit both of you. It may take research and patience, but it can be done.

Finally, if you have experience repairing minor automotive issues, use that skill to create some wiggle room to help close the deal. "You know, I think I could handle that myself. What do you think about us taking off x repair? Would a price of y make it a fair deal for both of us?"

If you can come to a mutual understanding, congratulations! If not, don't beat a dead horse. I like to back-out by thanking the seller for their time, leaving a copy of the inspection report as a "gift" and telling them my final price, should they reconsider. Above all, don't sweat it. There are plenty of excellent used cars out there looking for a good home.

To recap: research diligently, test drive patiently, let an expert figure out the unknowns, and negotiate in good faith. Do this and you'll save unnecessary test drives and thousands of dollars in future repair costs. You'll also buy the cream of the automotive crop at an extremely fair price.  

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8 Comments on “How to Buy a Used Car Part 4: Negotiating...”


  • avatar
    AGR

    This negotiation scenario works with a private seller who is understanding and receptive, has a vehicle for sale with limited market appeal and did not get many calls or inquiries, and is motivated to sell.

    AutoTrader has a Value Finder feature which is helpful to give guidance at what price to pay for a specific vehicle.

  • avatar
    Pch101

    This is a very useful series, and I thank you for it. But I believe that waiting to negotiate until after the inspection is too late in the game.

    I wouldn’t want to invest the time and expense of having a third-party inspection without first knowing that I have a deal, assuming the inspection comes back as acceptable.

    Instead, I’d negotiate the deal before the inspection, with the understanding that the deal is off if the mechanic discovers serious problems, and that the price can be revisited if the inspection turns up costly but repairable items that weren’t apparent prior to the inspection.

    Once you’ve paid for the inspection, you’ve handed leverage to the seller because you now have skin in the game, i.e. you’ve already spent money and undue effort on buying this particular car. That makes the seller less inclined to give up on price for the repairs, unless perhaps if the phone hasn’t been ringing much or s/he’s sick of the sales process and wants to get it over with.

    Also, in regards to win-win, buyers have to be careful not to allow win-win tactics to result in overpaying. Win-win negotiations make sense when you have an ongoing relationship, but in a one-off car purchase, paving the way to a future relationship with the seller is generally not required.

    A frequent buyer such as a fleet operator might be wise to use win-win tactics because they have other requirements, such as service and timeliness of delivery. But for a purchase from a vendor whom you’ll never see again, “win-win” usually translates into paying more money. (If you are never going to see this person again, why pay good hard cash for a relationship that you don’t need?)

    You can avoid using win-win tactics without being rude or insulting, it just requires remaining focused on price. If the car has a certain value, there’s no reason to pay more than that value just for the sake of being nice.

  • avatar
    turbosaab

    Pch101, you make very good points. I’d add that the ideal situation is to find a vehicle that is appropriately priced to begin with. Unfortunately, most private sellers are overly optimistic about what their vehicle is worth. However, there are exceptions, such as the seller who has already selected, ordered, or purchased a new vehicle and is asking a reasonably small premium above what the dealer offered them for trade-in.

  • avatar
    taxman100

    When I’ve sold cars that I’ve owned in the past, I price them fairly with the understanding it is a car with X miles and X years old.

    If I get a buyer who wants to negotiate too much, I just let them walk – I’ve always found someone who will buy it.

    Of course, I won’t sell a piece of crap to a private owner – I sold one to a dealer for that very reason.

  • avatar
    Terry Parkhurst

    The National Auto Dealers Association has a series of books with used car, motorcycle and truck values; additionally, the NADA has books on vintage motorcycle and classic, collectible and special interest car values (the latter three, all in one book). I recommend these highly, and not just because I am an advisory board member to the vintage books; but rather, because these are the same books the dealers use. (The copy they get show a “trade in” value as well a “retail” on older used cars. That tells them how much to give for a trade in and how much to mark up.) The used car books have a table on how much to mark up for low miles, as well as how much to mark down, for miles over 100,000 (to 200,000). You can, as I recall, also get values at the NADA web site, which is http://www.nada.org (and if that doesn’t give you the booklets on line, try a Google induced search). There are also the Kelley Blue Book values; but used car dealers I have known told me that those values are more than any dealer really gives. Vehicle Market Research, operated by John Iafolla, is also a good place to get a value guide. The key in all this is the word “guide.” Nothing is cast in stone, when it comes to used cars, or even collectibles. Hell, I was at an auction, conducted by Bonhams and Butterfield yesterday, in Aurora, Oregon of the Jack Hogan collection of vintage Fords and automobilia. There was a 1934 Ford Model BB V8 1 and 1/2 ton stake bed truck, with a hydraulic lift on the bed (dump truck style) that sold for $80,000 plus 17 percent buyer’s fee. I’m pretty sure, without even looking that up, it’s way above the NADA book value. That’s what happens when you get a room full of motivated buyers and some other bidders on a cell phone.

  • avatar
    noley

    The last car we got was a CPO car at a reputable dealer. I got the list price over the phone and the sales guy pulled the service records and emailed them to me. The same store had serviced the car and sold its replacement to the previous owner who’d bought several cars there.

    I talked with a sales rep I know for the same make who works in another state and he gave me an idea of the wiggle room the dealer probably had in the deal and what I could likely get for my trade-in.

    We were paying cash, so I went in with a check for $X. The dealer offered me a low number for the trade. I said no and told him I had a check for $X and what I needed to see for the trade. He checked with the manager and the deal was done. I got what I wanted on the trade (and what my friend said I should expect). Could I have gotten a little more off the car? Sure. But I don’t like to haggle much and play that game and I had been treated fairly from the get-go.

    But that said, I’d already told my wife that if they didn’t meet my number fast we were going to walk. It would have been interesting to see how that would have turned out, but there was no need.

  • avatar
    AGR

    At any dealer the mention of “this is my price, we do it or I walk out” is a very powerful tool / lever. This works best if the seller / buyer are within a reasonable distance from each other.

    Most folks tolerate 1 or 2 rounds in a negotiation, at more than 2 it starts getting unpleasant and adversarial.

    New car franchised dealers have a tendency of asking big money for their CPO cars, in many instances they have no choice. Independent dealers constantly adjust their prices to reflect the “current market” reality.

    Many private sellers are disconnect with the market, and with the ability to post ads for free they can go on a “fishing expedition” to see what if the market will tolerate their asking price. Especially for older cars. “I don’t think my car is worth my asking price, but if I can get it I’ll consider selling, if not I will keep it”.

  • avatar

    Regarding KBB, it is mostly only dealers in CA that use it – almost no one else in the U.S. uses KBB. It’s all NADA and Black Book. Consumers that use Blue Book to determine the value of their cars are basically kidding themselves unless they reside in CA.

    We offer wholesale and retail pricing on sample used cars every month on Autosavant.net – go to http://usedcars.autosavant.net and scroll down until you hit it. It’s pretty big, so you can’t miss it.

    In another life, I used to send about 2000 off-lease cars/trucks a month across the block at the auctions in the U.S., so I have some experience in residual values and secondary market pricing.

    B Moore – Autosavant.net


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