A new car dealership's initial offer was lower than what I found online

Question

I picked out a car yesterday and was offered it for about $22k. This actually surprised me because from what I've seen on Edmunds and Car Guru, the market rate for this car is $23k. I was prepared to negotiate them down to that from $24-25k. Now I'm wondering if I can get the car for even lower, but I don't feel like I have a leg to stand on due to their initial offer.

Is there any way I could get this car cheaper? Would they be insulted if I pretended that $22k was unacceptable?

Answer 1

This might be a car they are having trouble moving it, meaning they are desperate to sell. The numbers on Edmunds and Car Guru or similar are subjective (believe me I have insider info how they are calculated) take them just as a reference. Dealers get whole bunch of incentives from manufacturers not visible to consumers, so if you are comfortable with the price and liked the car, go for it.

Answer 2

There are a whole lot of reasons why the price they quoted you may not match what you see in online pricing tools:

• Options are substantially different. Many online tools are set up with generic options that may or may not match what the vehicle is actually available with, so the prices don't always align with actual configurations sitting on dealership lots. Or, even if they do, you may not be accurately picking the options when using the pricing tool.
• The dealer is hiding profit elsewhere. The dealer may be quoting you a low price on the car because they're expecting to make their profit elsewhere. This may be in bogus fees, or (semi-) legitimate add-on products or services, which are often heavily marked up: rustproofing, aftermarket warranties, and so on. Dealerships that lean heavily on these other profit tools will often throw out "low" prices on the car itself as a trick to suck consumers in. Then once you're sitting in the little office with the F&I guy, the actual bottom line amount of money on the paperwork is mysteriously higher. Dealerships can't technically lie to you about these add-ons, but some dealers will do everything they can to sell them to you in order to recoup the lost profit on the car itself.
• The dealer may be getting kickbacks that make up the difference. The manufacturer may be offering kickbacks to the dealer right now for certain vehicles. Sometimes these are advertised to the public but often they are not. Also, the dealer may be counting on getting a kickback from a bank when they finance your loan - if the dealer does your loan for you, they're getting at least a flat rate fee from the bank for originating the loan, and potentially a portion of the interest as an incentive kickback.
• The dealer may just be really interested in moving inventory right now. Maybe they're getting ready for the next model year, or a new model, or that vehicle has just been sitting for a while and they need it off their books. They may even have financial pressure to do so: dealerships are sometimes incented by manufacturers based on inventory age as a way to keep the brand's image looking fresh (no manufacturer wants a bunch of old inventory sitting on their dealer's lots).
• The online price may not reflect your actual reality for other reasons. Even though online pricing tools like to give the impression that they're giving you exact, local, relevant prices, in the end they're essentially guessing, and they may be missing factors other than the above. Maybe that particular model sells well in your city. Maybe there's a dealership right down the street that puts pressure on this specific dealer for some reason. Who knows - but in the end, the online price is really just a rough starting point.

All that said, your point was:

Now I'm wondering if I can get the car for even lower, but I don't feel like I have a leg to stand on due to their initial offer.

The answer to this is almost certainly yes - you can get the car cheaper. And at any rate, it pretty much can't hurt to try. Dealerships expect there to be at least a little haggling. As a consumer, the most powerful tool you have is the ability to walk away, followed closely by the word "no." Don't be afraid to use those tools. The dealership is using every tool they can to get more of your money. Make sure you're leveling the playing field.

If you throw out a lower price, and they don't accept, walk away. Even if you really want the car. You may find the answer changes to "yes" as you're walking away, or if you come back in a week. There are always more cars to buy, don't feel pressure to buy this one right now because you're in love with it. You being in love with a particular specific vehicle is yet another tool a dealer will use to leverage against you, so be ready for that.

Answer 3

because from what I've seen on Edmunds and Car Guru, the market rate for this car is $23k

Congratulations. If the data is correct you found one that was lower than the average. That is the nature of the situation when the price for a car can't be fixed. Of course you still have to understand how much of a match there is between you and the ones that were used to calculate the average.

One unpopular option, or one unpopular configuration, or the selection of the unpopular color can mean that your car is actually overpriced at the amount they offered.

Also understand the role of a trade in and financing have in the negotiation. These two items can make the true price harder to know.

Make sure you understand how much other stuff they are including in their final price. Some items you can't escape (state sales tax), and others are dealer dependent (destination fee, dealer processing...).

You can always try and lower the price. They won't really be offended, though they may act like they are. It isn't an all or nothing negotiation, if you ask for a 2K lower price they don't throw away your phone number.