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Dealer’s Voice: The art of negotiation

Negotiating a fair price for a vehicle is an important skill that can benefit all parties involved.

Published August 31, 2012

Over the years, I’ve had a number of customers say to me they don’t enjoy the negotiating process when buying a new car. I’ve even read the comment that “they would rather to go the dentist than negotiate to buy a vehicle.”

My experience has led me to believe differently — more people actually enjoy negotiating than do not.

Readers may wonder why dealers don’t adopt a one-price, no-haggle system for all makes and models as opposed to negotiating. No-haggle pricing is a flat-rate pricing system, where the dealership posts a non-negotiable price on the windshield. That price normally includes a standard-options package, plus any additional options, freight charges and a fair profit margin for the dealer (taxes are extra).

This concept has been tried and it mostly ended in failure. In 1990, Saturn became the first automobile manufacturer in North America to adopt a one-price, negotiation-free pricing structure.

At the time, the one-price model was heralded as the future of automotive retailing. Although Saturn had limited success with the one-price model, market pressures eventually forced the automaker to concede market share to competitors that offered negotiated pricing.

Today, most manufacturers offer “all-in” pricing on selected models. This simply means that all dealers representing that nameplate are obliged to sell those vehicles at the advertised prices. Competition laws require all ads to state: “Dealer may sell for less.”

In such cases, there is very little negotiation if any and consumers don’t have to drive across town hoping to get a better deal. The advertised price is one that customers should expect to pay.

I suspect that consumers who’ve had an unpleasant experience didn’t feel comfortable with the negotiating process because they were afraid of paying too much for the vehicle. Those customers need to do their homework before they get into the negotiation process.

The act of negotiating anything in life — a car, a boat or a house — is actually an art and a skill that can be learned. Real estate mogul Donald Trump once said that in the best negotiating, everyone wins. He’s right.

A negotiation is simply a sharing of information, where both parties attempt to reach a mutual agreement. It usually starts when the buyer makes an offer to purchase with a deposit. This indicates that the buyer is committed to purchasing a particular vehicle and the negotiation process begins.

The salesperson is a facilitator in the negotiation. They should have your best interest at heart and work with the sales manager to get you the best deal possible. All buyers should understand that dealerships are in the business of providing sales and services to benefit their customers’ needs. Therefore, making a fair profit is important in meeting the needs of the consumer. Competition will always lead to fair pricing.

Before negotiating, I would consider what features and benefits are important to you; the manufacturer’s programs, your financial budget, what price are the manufacturer and dealers advertising for the model vehicle you’re looking at purchasing and dealership reputation.

Sometimes a negotiation involves a trade-in vehicle. In this case, be prepared to do some homework to determine its value. Always remember you only pay HST on the price difference so you actually receive an additional 13 per cent HST on the trade-in value. This generally makes up the difference in selling the trade-in privately.

Also ask yourself when you bring in your vehicle for appraisal, “Would I pay top dollar based on how my vehicle looks presently?” Appearance goes a long way to getting top trade in value.

Ultimately, people buy cars at dealerships where they feel most comfortable and where they feel they can get the best deal. Sometimes that process involves negotiating, and sometimes not.

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