Along with a house and a college education, a car is often one of the most expensive things you’ll ever purchase. Unlike with college tuition (which you can’t negotiate at all), or a house (which you typically negotiate through a real estate agent), haggling over the price of a car requires in-the-moment, face-to-face interaction.
The experience can certainly be a stress- and anxiety-ridden one; most of us don’t practice our negotiating skills on a regular basis, and certainly not with car salesmen, who are often really good at their job. Adding to the anxiety begotten by a lack of experience, is the fact that customers typically only possess the haziest idea of how car dealerships actually make money. This puts them at a true strategic disadvantage.
Knowledge is power, so today we’ll walk you through how car dealerships turn a profit, how this understanding can help empower you in the transaction, and the key strategies for negotiating the best deal on a new or used vehicle.
How Car Dealerships Make Money
A customer wants to pay as little money as possible for their new ride; a car salesman wants to make as much money as possible on the customer’s purchase. To ensure you’re engaging on an even playing field with the dealership, you need to know exactly how they make a profit. Armed with this knowledge, you’ll know where there’s more wiggle room in the negotiation and where there’s not; where there’s flexibility in the deal and where the salesman is going to put more pressure. So let’s break it down.
HOW TO BUY A CAR: With…
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A car dealership makes most of its money from 4 things:
- Sale of new cars. You might think dealerships make most of their money from these shiny…