6 Things to Remember When Negotiating a Car Purchase
Nathan Stretch July 30, 2015

Tip 6: Financing and Trade-ins

Tip 6: Financing and Trade-ins

Notice that this entire time we’ve been talking in terms of the price of the car only. What if you’re planning on financing? What about the value of your trade-in? There’s a good reason for that. If you bring up either of those too early – ie. before you’ve settled on a sale price – they will just get rolled into that price by the seller.

For example, say you’re looking at a car listed at $22,500 at a local dealership. Right off the bat, you ask for an appraisal of your trade-in. “Good news,” he tells you, “we can give you 4 grand for your old car!” You know the car’s a junker and would only get about $2000 in a private sale, so you think, “Great! This guy’s so eager to sell me this car, he’s giving me an awesome deal on my trade-in.” You then apply all the strategies you learned above, and manage to get the price down to $20,000 – so with your trade you pay $16,000.

Sounds alright. But what really happened? The dealer knows your junker isn’t worth much to him, but he wants to give you a good deal to get you interested. Fortunately (for him), he can just mentally raise the price of the car you’re buying! Without the trade he might have been willing to go down to $16,500 (with no trade), but now the money he’s losing on your trade has to be factored in.

If you wait until after a price is settled to talk about the trade, you have a better chance of finding their true best price for the car they’re selling, and then you can find out what the trade is really worth to them. If it’s too low for you, you can always sell privately. (Do remember that there is usually some savings of sales tax when you trade in though, so factor this into your decision.)

If asked about your trade before you’re ready, you can always just say you’re thinking you’ll probably sell privately. If they offer an appraisal “just in case”, politely let them know you’re not really interested until you’re sure what car you’re buying.

Read more tips for getting the best price for your old car.

Financing is similar. Most dealerships make some money when you take their financing, so if they think you might finance, they may be willing to give you a better price. However, if they know for sure that you’ll finance, they will want to discuss in terms of monthly payments, and it will be more difficult to feel out the lowest price they will accept for the car.

That’s why it’s better to wait until the price for the car is settled before discussing financing. Just say you haven’t decided yet to avoid making a mistake that will cost you on dealership financing. And if you are considering financing, don’t just settle for whatever the dealership offers. We recommend also getting quotes from banks and other vehicle financing companies such as AutoCreditExpressup2drive, CarsDirect and MyAutoLoan.com.

When you’re ready to talk financing with a dealership, it’s best to come pre-armed with competing quotes. First ask the dealer’s rate, then if one of yours is better, you can see if they will beat it.

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Nathan Stretch Founder & CEO

Founder of the AutoTempest used car search engine, as well as SearchTempest.com. I do a bit of everything around here now, and may even get a chance to write some blog posts! Oh, and I drive a 2003 Z4 3.0i, but working from home I don't get to drive it much; 12 years old and it's got under 70k miles on it. I'll have to get working on that too...