Unlocking Secret Steals: A Savvy Guide to Car Negotiation
"Let us never negotiate out of fear.
But let us never fear to negotiate."
- John F. Kennedy
Welcome to our Savvy Negotiation Guide!
This guide is unlike any other guide you'll see on car negotiations.
It involves a strategy that is not common practice among everyday car buyers, which is precisely why it is so effective.
Most consumers focus on immediate discounts and visible savings, overlooking the dealer's internal pressures and motivations that can be leveraged in negotiations.
In summary:
- Understanding the trade price reveals the dealer's possible markup and actual room for negotiation, far beyond what a typical buyer might guess.
- Meanwhile, aligning your negotiations with the dealership’s financial imperatives—particularly around month/quarter/year-ends can make your offer more appealing as it helps the dealer meet crucial sales targets.
In essence, this approach does more than just save you money.
It turns the negotiation table in your favour by aligning your proposal with the dealer's needs, creating a win-win scenario that is too good for them to pass up.
This method not only empowers you as a buyer but disrupts the traditional car buying process, ensuring you come out ahead with a deal that others might miss.
Remember, the best negotiators are those who come prepared with knowledge and timing on their side.
Ready? Good, let's begin!...
Step 1: Log the Retail Price
Identify the car you're interested in and note the current retail price listed by the dealer. This is your starting point, the figure most buyers would consider negotiating down from.
- For the purpose of this training we're going to assume that we're interested in this particular car...
A BMW 5 Series M Sport Diesel Saloon, with 50,313 miles on the clock which is listed at a Retail Price of £22,000 with the well-known dealer Sytner.
BMW of interest below...
Step 2: Determine the Trade Price
- Find the trade price for the vehicle you're interested in by visiting one of the numerous online car buying/valuation services.
Visit an online valuation site, such as We Buy Any Car, Motorway or our favourites Arnold Clark or Hey Car (as they don't require an email) to find out the trade price of the vehicle you're targeting.
This price typically reflects what the dealer might pay to acquire the vehicle or its potential auction value. Knowing this gives you a clear picture of the dealer's gross margin—the difference between what they paid for the car and what they're selling it for.
Simply do a Google search for "value my car" and choose one.
Online search for trade valuation tool is shown below...
- Add the registration number and mileage of the vehicle you're interested in into the valuation tool of your choice and you'll be presented with a price (or price range). The initial valuation is all you require.
This price is the current trade price of that vehicle and indicates the price that the dealer would sell the vehicle for if they were to trade it to another dealer or at an auction.
The trade price also gives you a rough idea of what the dealer might have purchased the motor for.
This trade price is key as it's the difference between this trade price and the dealer's advertised price which gives you a very good idea of the potential profit/margin that the dealer has within that vehicle.
In simple terms, the nearer you get to the trade price the better the deal you're getting.
Don't see the registration of the car you're interested in the Dealers listing?... Simply contact the dealer and ask them for it. Tell them you're interested in the vehicle and want to check the specifications, get a HPI report and check the insurance costs.
Don't forget the trade price represents the vehicle being in average condition and doesn't make allowance for any extras that the vehicle may have.
Online Valuation from Arnold Clark for our BMW is shown below...
Step 3: Assess the Gross Margin
- The purpose of this exercise is to get an understanding of the figures before any negotiations.
In our example, the retail price is £22,000 whilst the trade price is a tad under £18,000.
That leaves the dealer's gross profit (GP) at approximately £4,000 or as a percentage an 18% gross profit margin (GPM). This is fairly typical.
It's important to remember that this figure doesn't account for any direct costs related to the vehicle, such as servicing, repair and other preparation costs.
You'll never truly know this preparation cost figure- it could be as low as just a few hundred pounds or as high as several thousand pounds.
The Dealer will also have allowances for other indirect costs such as fees and allowances towards the overheads of their business.
So remember, the £4,000 isn't their net profit (NP)...
The true net profit for our example is more likely somewhere between £2,500-£3,500.
This figure is where the wiggle room for negotiation resides.
Top Tip: This exercise can also help you decipher whether a vehicle is already a great deal. We find vehicles every day where the retail price is just a few hundred pounds over the trade price. So for example, if you find a car you're interested in that has a retail price of £15,500 and the trade price is £15,000 then you can assume the vehicle is already a great deal... just remember to do your due diligence to ensure the motor is sound!
Step 4: Research the Dealer's Financial Calendar
- Understanding a dealership’s financial pressures can give you a negotiating edge.
To do this, we're going to go to Companies House, find out the dealer's fiscal year-end, and calculate their quarter ends from this date. Dealers are often under pressure to meet quarterly sales targets, making the end of these periods the perfect time to negotiate.
Here's how we can quickly achieve this...
Firstly we need to find out the dealer's official LTD company name. This won't always be their trading name.
You'll be able to find this information either in their website footer or on the Terms & Conditions and/or Privacy Policy page.
Below you can see we have found the LTD company for our example in their website footer...
- Now let's visit the Companies House website to find their year-end.
Go to the Companies House web search here> Companies House search
Simply add the Dealer's LTD company details into the search bar and you'll be presented with the publically available information for them.
We're interested in the date for when their "Next accounts are made up to".
In our example below we can see that their year-end date for Sytner is 31st December. This is important as the Dealer's year-end is fixed and the date on which the accounts for their year are closed.
Within their financial year, they have 4 quarter ends where the Dealers are often under pressure to meet quarterly sales targets, making the end of these periods the perfect time to negotiate.
So for our example: Sytners Quarter Ends are 31st Mar/30th Jun/31st Sept/31st Dec.
Finally, don't forget that Dealer's are also targeted monthly so even if it's not the end of a quarter the chances are that a Dealer who is behind on sales coming into the last week of the month will still be prepared to do a deal!
As of writing this guide, the date is 29th April, which means the dealer's next quarter end isn't until June 30th. Whilst this isn't perfect for a quarter-end, as the next one is 30th June, I still have the advantage of it being the end of the month which can still work wonders.
In this scenario, I could look to negotiate now and see how it goes or alternatively monitor the vehicle and diarise and see if it's still available in mid-June to negotiate then.
Below are the Companies House search details for our example...
Step 5: Initiate Contact and Speak to a Decision Maker
- Ok, this is important... contact the dealer and secure a deal BEFORE you leave home.
Why?
Firstly, travelling to see a vehicle you haven't done a deal on is a waste of your time and money.
Secondly, there is no guarantee that the dealer will necessarily play ball (in many cases its because you're not speaking to a decision maker whilst others can just be plain stubborn) so you don't want to travel, to then be disappointed.
You'll likely have questions about the vehicle so in most cases having a "discovery" telephone conversation with a sales exec will be your first port of call.
If you're still interested in the vehicle then it's time to start the negotiations and it's at this stage you must speak to the decision maker.
Reach out to the dealership via email or phone. Ensure you’re communicating directly with someone who has the authority to make decisions—typically a sales manager or a senior salesperson (or in the case of a small independent dealership, the owner).
Conversations with decision-makers can often lead to more substantial negotiations and better deals.
Remember, you've got everything you need to strike a great deal:
1) The details of a Secret Steal motor that a dealer needs to sell.
2) The trade price of the vehicle if they were to trade or auction it (which is also the approx price they paid for it).
3) The estimated net profit margin that the dealer has in that vehicle.
4) The dealer's year-end and quarter-end dates.
Top Tip: Never tell the Dealer you "love" the motor! This one word will kill your negotiations. Instead, be pragmatic and to the point, whilst also letting them know you're a serious buyer.
If you're making an offer then our suggestion would be to make it sensible and be respectful that the dealer will be trying to make a small profit.
Of course, you could go in low and see how it goes but in our experience, this approach is normally counterproductive and has less chance of working.
Either way, when making an offer, make sure you tell them that you're a serious buyer and that you're prepared to put a deposit down immediately.
If you're looking to negotiate (instead of making an offer) then starting low is fine as you'll naturally come to a compromise with the dealer by meeting somewhere in between their advertised price and your negotiated price... just remember to keep that trade price in the back of your mind.
It's this trade price that is both yours and the dealer's benchmark.
Be prepared for the Dealer's first response to be- "We don't negotiate... we price our vehicles competitively, etc, etc".
Don't be deterred. This is the official line of almost every dealer on the planet.
No matter how plain-faced they are, the fact is that they as a business under real pressure to sell these motors and shutting the door on you is neither polite nor a sound business decision.
Any Dealer worth his salt won't want to risk losing the sale of a retail customer because their only other real alternative would be to trade or auction the vehicle, which will likely mean they lose money on that vehicle.
This is particularly relevant for large network & franchise main dealers as they are targeted on retail sales, not trade sales!
Remember: Most sales execs have very limited knowledge of what's going on in the business and cannot sanction any kind of discount (they are tasked purely to sell) so in the event that you're stuck with the salesman and they are not responsive then simply tell them that your offer stands and ask them if you can speak to (or that they present it to) their sales manager.
Step 6: Secure the Deal and Reserve the Motor
- Once you've agreed on the price of the motor the final part of the deal is to tell them that you'd like to reserve the vehicle.
Most dealers will allow you to reserve a vehicle for between £100-£250.
Ensure you make the reservation payment on a credit card to cover you in the event of anything untoward and also make sure that the deposit is refundable (they should always be refundable if you haven't physically viewed the vehicle) if you are unhappy with the quality of the vehicle when you physically get to see it.
By reserving the motor it does two important things...
1) It ensures the dealer cannot sell it to someone else (most dealers will mark it as sold or reserved on their website).
2) It shows that you're serious and keen to buy at the price agreed.
All you need to do now is to visit the dealer and view the vehicle and the best bit is that you've already agreed on a price which means the whole experience is pretty much pain-free :)
If the Dealer doesn't play ball (or you can't reach a deal)...
If no immediate deal is reached, let the dealer know your offer stands until the end of the month. Propose that they can invoice you within this month-end to secure their sales figures, with actual vehicle pickup occurring later. This is especially appealing towards the end of financial periods, as dealers strive to meet targets.
If they still don't bite then ensure you monitor the vehicle instead... I cannot tell you how many times a Dealer has said no to negotiating a deal for them to then reduce it substantially on their website just a few weeks later! I'm guessing this is once their pride and ego has settled down :)
Remember, you must be prepared to walk away. Never let your emotions (or a manipulative sales exec) get the better of you. Remember, there are plenty more fish in the sea and this won't be the last vehicle you fall in love with.
Important Note: You should always carry out due diligence when buying a used vehicle.
Check out the dealer: For example using online reviews, finding out how long they've been trading and seeing if they're part of any associations etc.
Check out the vehicle: If you're not mechanically minded then bring someone with you that is competent (or alternatively you could use an expert such as the RAC).
Always take the vehicle for a test drive, ensure the vehicle drives well (at high and low speeds), is mechanically sound, has no signs of bodywork repairs, has 2 keys, check the service history and confirm the details of the warranty etc.
Remember, We have not inspected any vehicle that we notify you about. We are not affiliated with any dealer or manufacturer and we make no assurances about the quality, condition or ownership of any vehicle or dealer we notify you about. You should always carry out due diligence on each and every motor you intend to buy. The motors, dealers, prices and all other elements of the buying process are your responsibility, not Matt's Motor Club.
