The car that I bought last time had 0% interest rate. The number that we played with was the monthly payment. In stead of saying, "I think my trade in car worth ...", I said, "I like to keep my monthly payment under ...".
Worst thing you can do. I know a few guys who sell cars, and they’ll tell you the same thing (if you’re friends and they’re not trying to sell you a car). My uncles (brothers) co-own a used car lot. They’re honest guys, and I’m not saying that because they’re my family. I know car salesmen’s tricks.
If you’re monthly payment driven, and there’s nothing wrong with that at all, here’s what you do: you figure out what your willing to pay per month and for how long. You add in interest and a down payment into it, and you get a total amount you’d spend on the car. There are online calculators you can play with for this.
You take that amount and start negotiating a price for a car. You know approximately what the monthly payment will be going into it. Now you’re in control. Somewhat.
You go in, find the car, and talk price of the car only. You tell them you’re financing through your own bank. If they ask the interest rate, you tell them a little less than the calculations you came up with. This is valuable later on; I’ll get to that.
You tell them you’re selling your car to a friend.
When they start their whole trade-in value, interest rate, down payment, monthly payment scheme (because that’s what it really is), you tell them they’re trying to do too many things at once, and right now you’re only interested in negotiating the price of the car. You tell them if they can secure a good deal, you’ll discuss that stuff afterwards.
Now you make an offer (not a monthly payment offer). They’ll tell you they need to talk to their boss, to which you reply “you mean that sheet in the back where it tells you the minimum is your boss? Sure, I’ll wait here while you look at that and keep me waiting, because you think the longer I wait, the more Im going to justify spending more.” And that one’s a known fact among them. Remember, it’s all a game.
They come back with a price after what seems like 15-20 minutes. They counter. You tell them about 90% of what you’re really willing to spend, and they’ll usually somehow get to right where you’re at. Provided you’re making a reasonable offer, of course.
After you lock down the price, remember, they agreed, then you start with the trade-in. Know what the average trade-in value is. Know the condition of your car. If they give you the average and your car’s above average, tell them you want more.
Once that’s settled, then see what the finance guy can do. If they give you a number that’s off, tell them what your calculations lead you to. They like to sneak in extras like an extended warranty. Tell them to take it off and give you the price you negotiated and stop with the nonsense or you’re leaving.
If they tell you they just put tires, brakes, etc. on it, tell them they had to because they can’t legally sell a car that doesn’t pass inspection. Also remind them they don’t pay retail for parts (tires included) nor labor. They get parts for approximately 60% less than retail if they’re a dealer, and 40% less if they’re independent. That $2k tire and brake job cost the dealer $600 tops when all was said and done. Add another $1k for a certified used because someone from the manufacturer comes for this and charges the dealer.
If you can, find out the average dealer’s price at auction for the used car. When all’s said and done, about $2500 more than they paid should be a great deal. They need to make money, and you need to save money. Depending on the car, that’s a decent markup they’ll be barely comfortable with.
New cars have little wiggle room on price. Dealers make their money on used cars and service, not on new cars, relatively speaking.
Don’t fall for doing 3 deals at once - your car, financing, and the car payment all in one. They’ll easily get what they want for the car and give you practically nothing for yours. They’ll just extend the length of the payments and/or do a “balloon payment” while letting you think you got a deal. They definitely won’t show it, but they’ll walk away a lot happier than you, trust me.
(the practical application of it.) Bringing it full circle 
