Money & Career

How to negotiate for a car or appliance

Author: Canadian Living

Money & Career

How to negotiate for a car or appliance

Buying a new car
What you need to know:
• The manufacturer's suggested retail price (MSRP), the published price, is what the dealer would like to make, but not what he expects to make. If you can get $500 to $1,000 off that price, you may be getting a good deal.

• The dealer doesn't pay the MSRP for the car -- he has a variety of discounts that are applied to that price.

• The dealer cost price. It includes every discount the dealer gets, so you know exactly what he paid for the car he's trying to sell you. (Find it at carcostcanada.com or ask the dealer directly.)

• The dealer's "hold back" incentive. The car manufacturer pays this amount to the dealer to cover overhead for keeping a vehicle. The longer a car stays on the lot, the less of a hold-back the dealer gets (it's an incentive to make dealers sell cars fast), so a dealer may be anxious to sell a car that's been on the lot for a while and ready to cut a better deal.

• Dealers make their money from financing, not the amount you pay for the car. The rust proofing, paint, seat protectors and the extended warranty also put real dollars into the dealer's pocket.

• Extended warranties are probably a waste of money. Most people don't own their cars for as long as these warranties last. And the engine, transmission and driveline are all covered by manufacturers' warranties of between five and eight years. What's more, extended warranties tend to have deductibles, exclusions and exceptions. (Car manufacturers have teams of professional actuaries who've already crunched the numbers -- the warranties cost about $3,000 and the actuaries have already figured out that they don't pay out that amount, on average.)

• Cars that are in demand always cost more. That's true of most things: if you have to have the latest and greatest, it will be priced at, or close to, the MSRP.

Page 1 of 2 - Read page two to learn about negotiating appliances

What you need to do:
• Visit your banker and see what kind of financing options she can offer. She may make a better offer than your dealer.

• Shop at the end of the month. Salespeople have deadlines, and this is it for the car business, so they are more willing to bargain.

• Negotiate from the dealer cost price up.

• Visit carcostcanada.com. For a fee, this website gives you the dealer cost price and puts you in touch with a dealer who's willing to deal from cost up on the car you want.

• Leave your card. The dealer may call you back. Yes, he has an incentive to sell you the car at the highest price and interest rate if there's financing involved (because he makes a commission), but he also has an incentive to sell a lot of cars (because he wants to make his boss happy).

What you need to say:
• "How much profit do you want to make on this car?" If the dealer says, "We don't work like that here," say, "OK, I'm going to your competitor." If the dealer doesn't want to answer this question, you don't want to deal with him. (On a small economy car, he probably wants to make about $1,000. On a luxury car, a Mercedes, for example, he may want as much as $3,000.)

• When you leave, say, "I'm going to talk to your competitor about cost-up negotiating. Here's my card. Call me if you change your mind."

Now that you have a car, click here to learn how to save money on repairs.

Buying appliances
What you need to know:
• The markup isn't very high. If you have your eye on a $1,500 fridge, for example, and a retailer offers to knock $50 off the price, take it.

• Even big name retailers will negotiate with you.

What you need to do:
• Visit the major retailers and get their price, or do it all online.

What you need to say:
• "What's your best price?" It should be less than the ticket, and if not, they should at least offer something, such as a reduced delivery charge.

• "Put it in writing, please." Salespeople don't like to do that -- they think you're going to take it down the street and get their competitor to beat it by $10. And they're exactly right.


Page 2 of 2

Learn how to negotiate in other areas of your life:

Get a raise
Negotiate lower bills

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How to negotiate for a car or appliance

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