More Consumers Haggle Over New Car Prices

More car buyers are haggling over the price of their new car than at any point in recent history, according to new data compiled by CNW Research of Bandon, Oregon. Across the three main purchase paths –- cash, financing and leasing -- haggling has been on a steady rise over the last 15 years. Over 44 percent of all new car buyers are now negotiating their price against the dealer’s initial offer.

Data for the first half of 2010 showed similar numbers to years past: Those who buy with cash are in a much stronger position to negotiate. Some 66.1 percent of cash buyers now haggle, an all-time high, compared to 17.8 percent for those who lease. Consumers who finance are now haggling 48.2 percent of the time, also an all-time high.

CNW President Art Spinella told AOL Autos that the rise in haggling isn’t so much a result of more combative sales environment, but rather a savvier, informed shopper.

“Consumers have more information now than ever before,” said Spinella. “Through the internet, they have the ability to see things like invoice pricing that were previously unavailable to them.”

Spinella also noted that the rise in social media played a significant role in the increase in price haggling.

“Internet social media is incredibly important as people share what they paid for something more willingly than before,” said Spinella. “Their friends see that price then say to the salesman ‘My friend paid this price for that car.’”

The study was compiled through a combination of in-store surveys, observations at car dealerships and post purchase surveys, all of which centered on a common theme: Did the car buyer, upon receiving a price offer from the salesman, counteroffer with a different, lower price? If they did, Spinella said, that constituted haggling.

The Car Dealers

Car dealerships have noticed the rise in consumer negotiating and attribute it to the wide availability of information on the Internet as well. Free price quotes along with the transparency of invoice pricing and the ability of consumers to obtain financing quotes from institutions beyond the dealer has made for a much more prepared car shopper.

John Nelson, the Pre-Owned Operations Manager of Mercedes-Benz of Hoffman Estates, near Chicago, said that he was not surprised by the statistics. “You have a more educated buyer [in showrooms] today. With the amount of information available, there’s no more feeling of being in the dark,” he said.

That education on the part of the customer translates into a more aggressive car buyer, according to Nelson. But this does not necessarily mean that the process has become any more hostile. In fact, in many ways, car dealers have found negotiation has become an easier, tamer process for sellers and buyers alike.

“It makes for a much less stressful sale,” Nelson said. “The transparency is good, as it makes for much less of a fight. People don’t come in anymore and demand $10,000 off the price of a car. They are more realistic because they know what the car should cost.”

Nelson said that because the educated shopper has an idea already in their mind of what they want to pay, it has become a much easier process for the salesman and the consumer to agree upon a price.

Fortunately, haggling isn’t a psychological game of cat and mouse with the guy in the plaid suit. It’s more about homework than anything else. Michael Royce, a former car salesman and consumer advocate at his beatthecarsalesman.com, told AOL Autos that knowing a few key things can put you in a position to be an expert negotiator without even realizing it.

“Information has always been available, just much harder to find and you had to pay for it. Companies like Kelly Blue Book and Edmunds as well as others published guides you could buy that would give you invoice prices. Now that information is free on the Internet. The websites tell you how to do it.”

Royce said that, counting the invoice price, there are three pieces of information that car buyers should always have prepared before they even think about setting foot inside of a dealer showroom, which makes negotiating a breeze and can put you at a huge advantage in the car buying process.

“Handling your financing separately, having the invoice price, and having a price quote are the three most important arms a consumer can have,” Royce said.

By handling one’s financing separately you will get a better deal as the quote will be void of any “padding” that the dealers like to add on, such as extended warranties. Thus, as you will already have a lower financing rate in your hand, Royce said, the dealer will be pressed to beat it when the time comes during the negotiation.

You can obtain financing quotes from your local bank or credit union or for free online by using sites such as car.com.

Obtaining the invoice price of the vehicle that you want to buy is of the utmost importance, Royce said. By doing so, you know how much the dealer stands to make on the markup of the car. You can then decide how much profit you are willing to let the dealer have by starting at the invoice price and negotiating up, instead of the other way around. Doing so will put you in a much better position to get the deal you are looking for.

Many sites these days will provide you with a vehicle’s invoice price free of charge and with relative ease. The new car pages within AOL Autos, for instance, provides this information on every kind of new vehicle currently available.

Finally, getting a price quote from other local dealers should be the third weapon in your car-shopping arsenal, Royce says. By having an idea of what other dealers want to charge for the vehicle you are looking at, you can pit them against one another. As the dealers duke it out for your business, you can sit back and watch your purchase price drop.