photo of red car

Negotiate the Best Deal for Your Next Auto

No matter how many cars you buy, you will never be as good at buying a vehicle from a dealership as the salesperson is at selling them.  Even a mediocre salesperson will sell at least 100 vehicles a year and a good one will sell hundreds.  You, on the other hand will only purchase 5 to 10 in your entire lifetime.  Buying a car is like walking onto a golf course with a golf pro and thinking that you have a fighting chance at beating the pro.  The car salesman is a pro at selling and he practices every day.  When he is not with a customer, chances are he is still working on something to make him even better at his job.  His very livelihood depends on it!

Do not let that get you down.  There are some tools you can use to negotiate the best deal for your auto purchase.   You just need to know what those tools are, and how to use them. Notice I did not say you are going to beat the salesperson at his game.  What I did say is that you can work to get the fairest deal possible.

Getting Sized Up

If you want to negotiate the best deal for your auto purchase, you need to understand how the game is played.  Before you even spot a salesperson at a dealership, the salesperson has been sizing you up.  He notices what you are driving when you arrive, who you brought with you, and which of you seems to have the most interest in looking at vehicles. He observes how you are dressed and compares your appearance to other customers in the past who looked and dressed like you.  He guesses your age range, knowing that certain aged persons are more likely to make purchases and qualify for financing.  His observations and experiences help him determine how motivated you are to buy, how likely you are to buy, how tough you are going to be in the negotiation process, and how likely you are to qualify for financing and leave with a new vehicle.

Commission Sales

Dealership salespeople are paid either by the number of vehicles they sell, or by a commission based on a portion of the profit from the sale of the vehicle, or some combination of both.  So, before the salesperson thinks about what you want or need, he asks himself if you can qualify for financing.  If he thinks you can’t pay for, or qualify to finance the vehicle you are considering, he struggles to refrain from dragging you into the finance office for a credit application or from walking away from you altogether.

Prequalify at ASCU before you shop: What can prequalifying do for you?

American Southwest Credit Union can help you understand what you can afford and help you get the deal you want by pre-qualifying for financing before you walk into a dealership.  Being pre-qualified for financing means that when you walk into the dealership you can,

  1. Immediately remove any preconceived ideas the salesperson may have.
  2. Signal to the salesperson that you can and are ready to make a purchase, which will motivate the salesperson to begin working to win your business.
  3. Concentrate on finding the vehicle that is right for you in the price-range that you can afford.
  4. Eliminate much of the time at the dealership since you are Pre-Qualified. The price negotiation process is much smoother and the sales manager won’t have to hold back extra money to cover the deal in case there are any surprises with your credit or financing.
  5. Remove the pressure put on you from dealership Finance and Insurance Specialists (F&I Specialists) to tack on additional products and services, because you eliminate the dealer financing step altogether.

Once Pre-Qualified for financing, start shopping for your vehicle.

Once you find the right vehicle, instead of turning you over to a dealer finance manager, you and your salesperson can sit down and work out a fair price for your vehicle.  Since you are already Pre-Qualified for financing, you can also reach out to your Lending Sales Specialist at the Credit Union with the Vehicle Identification Number (VIN), mileage and options for the vehicle you have decided to purchase.

Your Lending Sales Specialist at American Southwest Credit Union can assist you.

  1. Reach out to your ASCU Lending Sales Specialist with the Vehicle Identification Number (VIN), mileage and options for the vehicle you have decided to purchase.
  2. We can quickly let you know the various values of the vehicle and the dollar amount we would approve to finance it.
  3. We can perform a quick Title search to let you know if that vehicle has a clear Title (if you are looking at a used vehicle) or if it is a Rebuilt/Salvage vehicle.
  4. We can perform a complete Vehicle History Report to give you the peace of mind knowing everything about the vehicle you want to purchase.

What Type Of Buyer Are You? 

There are four types of buyers. Which one are you? During conversations with your salesperson, he will be analyzing you to uncover which of four “Buyer” categories you fit in to. Knowing what type of buyer you are will help him negotiate effectively.  Are you a Price Buyer, a Payment Buyer, a Trade-in Buyer, or a Money Difference Buyer?

The Price Buyer

A price buyer is a person who negotiates on the price of the vehicle exclusively.  The price buyer usually goes to the dealership after doing a ton of research on the vehicle. They know what others have paid for the same or similar vehicles, or they may be simply guess what they think they should pay for the vehicle.  For a Price Buyer, the salesperson will usually start at the MSRP (on new vehicles) or the “List Price” (on used vehicles), then apply any factory rebates or incentives and present that to the buyer as his first offer.  A common tactic of a “Price Buyer” will sometimes be an attempt to shortcut the process by telling the salesperson to provide the “best price” up front.  However, experience has taught the salesperson that this tactic is used by buyers who are either unreasonable, or those who are intimidated by the negotiation process.  An experienced salesperson has a bag of tools to manage those that demand the “best price” as the first offer.

For all other price buyers, the negotiation begins when the buyer tells the salesperson what they think is a fair price for the vehicle they want to buy.  This is where the buyer’s research will payoff.  If the counteroffer results in a price that is fair to both buyer and dealership, the counteroffer will be accepted.  If the counteroffer seems weighted in favor of the buyer, and the buyer can present valid reasons that the offer is fair based on facts, the dealership may still consider the offer if it will not cause them a loss.  (Remember that the intent is not to beat the dealership at their own game, but to make the fairest deal possible for both buyer and dealership.)  For a “Price Buyer,” coming to the negotiation table Pre-Qualified or “preapproved” for financing gives their offer more credibility.

Additionally, if the buyer also comes with a Vehicle History Report (for a used vehicle purchase) they are in a better position when negotiating the value of the vehicle.  The information your ASCU lending sales specialist has provided you about the various values of the vehicle and the dollar amount ASCU would approve to finance it can be an essential tool in the negotiation process.

The Price Buyer (along with other types of buyers) may also attempt to continue the negotiation process, even after negotiations have ended with the signing of a sales agreement or a buyer’s order.  They ask for additional products or services right up to the end of the delivery process.  Floor mats, free service appointments, complimentary undercoating, etc. are additional items that the buyer attempts to have the salesperson “throw in” as part of the “deal.”  This practice comes at a cost to the dealership and is the reason that some salespeople and dealerships hold back some extra profit to pay for these items.  Even though ethical salespeople and dealerships are required to abide by the terms of the sales agreement, many buyers often claim the privilege of modifying the agreement themselves.

The Payment Buyer

A payment buyer is the easiest to take advantage of and is the most common of all buyers.  When the salesperson asks, “How much are you thinking about spending?” and the buyer responds with a monthly payment amount, the salesperson knows that all he has to do is to get the buyer somewhere close to that payment amount and they have a deal.  Since the salesperson is not usually the one who will be pulling credit, they may use the best rates to calculate monthly payments and financing terms to thoroughly maximize the amount of the sale.  Remember:  They are paid on a portion of the profit of the vehicle they sell or on the number of the vehicles they sell or some combination of both.  If they can use low interest rates and extended terms to increase the sale price of the vehicle they are trying to sell, then it means more commission for them and more profit for the dealership.  Profit is not wrong.  The dealership deserves to make money so that they can stay in business.  But remember your objective is to get the fairest deal possible, not to get something for nothing.  However, if a salesperson can increase the price and profit of a particular vehicle beyond the value of that vehicle by using artificially low interest rates and long financing terms to quote a monthly payment that is within the desired range, then the overwhelming advantage in that negotiation goes to the dealership.

When a buyer responds with a monthly payment amount to the question, “How much are you thinking about spending?” the salesperson may reply with another question that goes something like, “Great! If I can get you to that monthly payment on this vehicle, do you think you will be ready to take it home today?”

  1. If the buyer responds with a “No” answer, the salesperson will recognize the buyer is not yet ready or motivated to buy.
  2. If the buyer responds with “Yes,” the salesperson knows that all they have to do is to initially get the buyer to fall in love with the vehicle, then get them excited about a payment the buyer has already agreed is acceptable to them.

From there all that is necessary is to get the buyer’s signature on an agreement and turn them over to the Finance and Insurance (F&I) Specialist.

It is important to note: The agreement that the buyer signs at this point has no information about payments.  This agreement deals only with the sale price of the vehicle.

Once turned over to the F&I Specialist, the salesperson is typically out of the rotation until the delivery of the vehicle.  The buyer is excited that they have just said “Yes” to purchasing a vehicle that they really want or need, but they are typically a bit worn down from the buying process.  The buyer’s perception is that they have survived the negotiation process and that the chance of being taken advantage of is behind them.

The Trade-In Buyer

The Trade-In Buyer is the person who thinks the vehicle they are trading is worth far more than it really is.  Sometimes they attempt to “hide” the trade until price negotiations are in process. Most often, however, they pull up in their newly polished and detailed vehicle and start asking what it is worth if they trade it in.  Most salespeople will avoid answering but are usually skilled at coaxing an expected value out of the buyer.  Once they have that valuable piece of information, the salesperson will show how they are able to give the buyer what they want for their trade-in.

Many Trade-In Buyers will use NADA or Kelly Blue Book or some other valuation tool, assigning the clean retail value to the trade-in vehicle while using a wholesale value for the vehicle they want to purchase.  Most salespeople will avoid using these tools altogether.  To be fair, when using one of those books to place a value on the vehicles, both the trade and the purchase vehicles should use the same valuation measure (i.e. both receive Clean Retail, or both receive Wholesale/Trade values).

Even more common is the Trade-In Buyer who owes much more on their vehicle than it is worth.  This typically occurs when a person likes to trade vehicles more often than once every three to five years with no money down and long-term financing.  When that happens, the Dealer’s only possible route to a sale is to “Pump Up” the numbers to offset the negative equity of the trade.  For example, if a person is trading a vehicle worth $8,500 but they owe $10,000, they have $1,500 in negative equity.  If they are trying to purchase a vehicle with a price of $20,000, to get bank financing, the Sales Agreement would show the Sale Price of the vehicle at $21,500, giving $10,000 for the Trade with a $10,000 Payoff for the Trade.  (We will talk more about wholesale and retail numbers in the next section.  For people with lower credit scores, overcoming negative equity is the biggest challenge to financing terms.

The Money Difference Buyer

The Money Difference Buyer (aka the Bottom Line Buyer) can be the most logical and the most confused type of buyer.  The logic is that if a person takes the price of the vehicle they want to purchase and deduct from that price the value of their trade, the “Money Difference” is what they should expected spend.  The confusion can come when either party (the buyer or the salesperson) intentionally or unintentionally interweaves wholesale numbers and retail numbers in the same calculation.  To keep everything clear and to avoid all confusion, it is simpler to use only wholesale numbers through the negotiation process so long as the bottom line remains the same when recalculating “Retail” Numbers.  (See the following example)

Retail:                                                 Wholesale:           

MSRP:             $18,593                       Sale Price:       $16,000

Trade:             $7,693                          Trade:              $ 5,100

Difference:      $10,900                      Difference:      $10,900

When a salesperson meets a Trade-In Buyer, they will often use the retail numbers to show the most for the trade.  That set of numbers appeals, not only to the ego of the Trade-In Buyer, but they appeal to the finance companies as well since they are able to show a larger down payment by way of the trade, or to cover more of the negative equity if too much is owed on the trade.

There are some research aids to help a person to have a realistic expectation of how much they should expect to pay for a vehicle, and what they should expect to get on their trade using wholesale and retail numbers.  These tools cannot define actual sale prices or values, but they can serve as a guide to let a consumer know if they have reasonable expectations regarding a purchase or if the seller is taking unfair advantage.  One of the most “user friendly” tools on the internet, and one successfully used by customers over the years is  This site lets a consumer know what others in our area have paid for the same or a similar vehicle, and what they can expect to receive for their trade if they have one.

One important thing to remember:  The true value of a vehicle is what someone is willing to pay for it.  Kelly Blue Book and NADA are valuation tools used by financial institutions for financing guidelines and insurance companies to calculate what they will reimburse in the event of a total loss.

The Finance and Insurance Specialist (FI Specialist)

Once you and your salesperson have negotiated the price for your new or used vehicle, you are not out of the negotiating process.  The real work of profit building for the dealership begins in the F&I Specialist’s office.

Continuing to keep the buyer saying “Yes” is a primary focus as the credit inquiry and search for financing begins.  Since the F&I Specialist knows that the buyer is somewhat “captive” at this point, they slow everything down a little by offering GAP Protection and Mechanical Breakdown Insurance (MBI) at a huge mark-up.  Undercoating, paint protection and interior stain proofing are all presented to protect the value of the Buyer’s new “investment.”  Service plans are offered, and other insurance plans may be explored as well.  Each will add “only a few dollars a month” to the monthly payment.

In the middle of this whole process, the F&I Specialist may “shotgun” a credit application out to all of their lenders and may use the first “Approved” response for the buyer, even though the first response may not have the best lending terms.  This is where the reality of the process starts to emerge as the F&I Specialist may present that the salesperson wasn’t aware that there are some challenges lying in the buyer’s credit history that prevent them from being able to qualify for the payment that they initially wanted.  Then, a new set of negotiations begin as the F&I Specialist works with the buyer to drive up their tolerance for a higher monthly payment.  A good F&I Specialist can recognize when a buyer is nearing a breaking point, so they settle on a new higher payment and start negotiating what ancillary services (GAP, Service Contracts, MBI, Undercoating, Paint Protection, etc.) the buyer is willing to forgo to be able to afford their new vehicle.  When the F&I process is finally over, the buyer is glad to get out of there with their new vehicle, despite the fact they are spending more, and for a longer term, than they planned.

The Credit Union Difference

Coming to the table “Pre-Qualified” for financing by American Southwest Credit Union will help you avoid the weak position of being a “Payment Buyer” because the salesperson will  already know what you can afford and what your payments will be.  Additionally, if you have opted for any ancillary products or services from the Credit Union such as GAP Protection, Mechanical Breakdown Insurance or Debt Protection, the salesman knows that you are receiving the benefit of those at the lowest possible cost.

The perception that the sales and negotiation processes begin and end with the salesperson is false.  The profit margin on a new vehicle is far lower than the typical consumer believes.  With print ads and other advertising that include all the applicable discounts that a dealership could possibly use, the sale price and profit from the actual sale of a vehicle has become almost a marginal part of the sales process.  I said “almost,” because the salesperson still has a very important function:  He is there to maintain the illusion that he is the real face of the negotiation process.  His job is to find ways to get the buyer to say, “Yes,” and then to keep them saying “Yes”.  When the buyer is done with the salesperson, they usually feel like the negotiation process is over.  However, the true negotiation process begins when a buyer is turned over to the F&I Specialist.  That is where the real profits for the dealership are generated.  The profits made on the sale of a vehicle are often miniscule when compared to those generated by the F&I Specialist. To get the fairest deal possible, stay out of the dealer F&I Office as much as you can.

Although it can be very convenient; financing at a dealership can be extremely costly for several reasons:

  1. Even with a low financing rate or even a 0% rate, you may be coaxed and persuaded to make a purchase that is beyond what you can afford or want to spend.
  2. This overspending is offset by seemingly low interest rates, but treacherously long financing terms to find a payment that is “affordable” for the you.
  3. Financing for a longer term for a lower monthly payment will cost much more in interest paid over time and risk for loss due to carrying negative equity for a longer period.
  4. You may be coaxed into high or inflated cost items and/or high profit ancillary items like
    • GAP Protection
    • Undercoating,
    • Paint Protection,
    • ESP’s
    • and MBI

Getting Pre-Qualified for financing at American Southwest Credit Union:

  1. Determines how much you can afford BEFORE you go to the dealer.
  2. Protects you because you cannot be sold more vehicle than you can afford by stretching out loan terms.
  3. Still offers low cost ancillary items (such as debt protection, GAP, etc) but at great Credit Union rates. These ancillary items include:
    • Debt Protection
      • in the form of Life, Life & Disability, or Life Disability & Unemployment Insurance.
    • GAP Protection
      • GAP Protection to cover any negative Equity if there is a total loss
      • $1,000 Vehicle Replacement GAP Plus Benefit
      • $500.00 Deductible Reimbursement
    • Mechanical Breakdown Protection


Having American Southwest Credit Union as your financial partner can help you save time and money and eliminate much of the stress and added cost of purchasing a vehicle through a dealership.    

When you begin the process with a Pre-Qualification for financing, you eliminate many of the questions and overcome most of the obstacles that are typically encountered as you and your salesperson search for a vehicle that you want and can afford.

Consequently, you also eliminate much of the stress and confusion around the negotiation of the price of your new vehicle since you and your salesperson both know how much you can afford to spend.

Additionally, you avoid spending unnecessary time in the Finance and Insurance Office.  Since you are Pre-Qualified, you have already removed the risk of receiving financing rates and terms that you do not want and are unfavorable to you.  You will not be subjected to presentations for overpriced ancillary products and services, making the entire purchase a shorter and more positive experience while saving you risk, time, and money.


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