Get access to the same vehicle valuation tool that dealers rely on. With Black Book, you’ll have insider data to accurately assess trade-in and purchase values—empowering you to negotiate the best possible deal.
We all know that buying a car is harder than it needs to be. From the prolonged sales process to the trip to the “back office” for financing and warranty sales, buying a car certainly isn’t as fun as you’d think the second largest purchase of your life should be.
Fortunately for us there are a handful of people out there who recognize this terribly unpleasant process and took action to make it better. I’m referring to one-price, or negotiation-free car dealers like CarMax, Carvana, and others. The premise of negotiation-free car dealerships is in the name; the price is the price, there are no gimmicks, no haggling, no bartering, no headache.
A lot of people like buying a car from a one-price car dealer. It doesn’t take a rocket scientist to figure out why. The experience is simply more pleasant and less aggravating than going to a traditional car dealer. There is one downside though, you can’t negotiate!
It may sound paradoxical, but one of the biggest frustrations when buying from a negotiation free car dealer is that you can’t get them to lower their selling price of the car. It may come as a surprise, but you actually can negotiate at a negotiation free car dealership, the trick is what you are negotiating on. Interested to learn more? Let’s dive into how you can negotiate at CarMax, Carvana, and any other negotiation free car dealership!
Car dealers don’t make their money selling cars
Go ahead and re-read that title … Yes, it is true, most car dealerships don’t make their money selling cars. Instead, they make most of their profits from fixed operations (parts and service), as well as when they sell finance and insurance products.
Specifically, dealers make money when they originate the loan you use to purchase your vehicle. Dealers also make a healthy margin when you purchase a vehicle service contract or GAP insurance. The sale of a car is simply a means to an end for a lot of car dealers.
For example, Carvana, one of the largest used car dealers in the United States makes more than 50% of their gross profit per vehicle sold on the “back-end” of the car deal; the sale of loans, extended warranties, and more.
One price car dealerships do make money selling their inventory, and if you buy a car from one of them, you will be buying at a bit above market value. That’s simply the reality of purchasing from a negotiation free dealership.
If you buy a car from CarMax, it is true that you cannot negotiate the price of the actual vehicle, however, where you can negotiate at CarMax (and Carvana, et al) is on the back-end of the deal.
Do dealers want you to negotiate on the interest rate of the loan they secure on your behalf? No. Should you negotiate the interest rate on the loan they secure on your behalf? YES!
When you buy a car from a dealership and require financing for your purchase, you have a few options for how to secure a loan. You may be tempted to secure a loan through the dealership. When a dealer provides you with financing options you need to understand that the dealer is profiting from this.
Car dealers place a lot more loans than any individual would. Because of this, they are able to work with their financial partners to secure lower interest rates on loans. When you fill out a credit application at a dealership the dealer circulates your application to multiple lenders and receives many quotes for what you qualify for. The dealer will then present to you options that are marked up from what they received from their lending partners.
For example, if you qualify for a 3% interest rate loan, the dealer may present to you a 5% interest rate loan as your best option. Why would the dealer do that if you were approved for 3%? Because the dealer is able to pocket the difference. This has been going on for decades, and this is one of the primary revenue channels for car dealers, especially one-price dealerships.
What does this mean for you? Two things:
Always consider getting prequalified from your local credit union or bank before going to a dealership; and
Negotiate the interest rate the dealer presents to you.
This is the first area in a negotiation free car dealership that you can negotiate.For example you can negotiate at CarMax when you’re presented with an interest rate of 6% and you know you can qualify for something better. Don’t agree to 6%. The dealer will not want to lose a car deal simply because you won’t agree to their marked up interest rate. Even in negotiation free car dealerships this is negotiable.
What do you do when your salesperson tells you that for only $10 more per month you can get an extended warranty on that 2017 BMW X3? You sign the dotted line, don’t you? Not so fast … This is yet another area within a one-price dealership that is actually negotiable.
Don’t be swayed by sales tactics that make it seem like you’re getting a “great deal” when you add a $2,500 extended warranty onto your purchase, “but Mary, it only increases your monthly payment a few bucks each month.”
The reality is, extended warranty sales, GAP insurance, tire and wheel protection, and any other insurance product you can buy after you purchase your vehicle are all negotiable. These products are generally marked up 200-300%. Yes, you read that right, 200-300%. That means the $2,500 extended warranty you are “tacking on” to your loan might only cost the dealer $700-$800.
Not only are insurance products negotiable at a one-price car dealership, you should also consider buying them from a different provider. Shopping extended warranties at other dealers or directly from providers is a wise move. But at a minimum, be sure to negotiate at CarMax, Carvana, etc, when you think about purchasing an extended warranty or other insurance product.
Negotiate the sale of your vehicle
Last but not least, you can always negotiate the selling price of your trade-in (if you’re in a position to sell your current vehicle). One price dealers are constantly looking to secure new inventory so that they can sell more cars (to ultimately sell more loans and more extended warranties), and nine times out of ten, they’d prefer to buy a car directly from you rather than from an auction.
Buying vehicles from the auction entail many other expenses, so generally speaking, it’s more profitable to purchase vehicles directly from consumers. Keep this in mind if you’re purchasing from a CarMax, Carvana, or somewhere similar. You can and should negotiate the best selling price for your car before agreeing to what you are initially offered.
Proceed with caution
Is online car buying too good to be true? Carvana and Vroom have been subject to controversy in 2024. Vroom is under investigation in Texas, and Carvana is all over the news for failing to transfer car titles, selling vehicles in horrible condition, and more.
Before you give online car retailers your business, it’s wise to be informed about the latest lawsuits and license revocations that could impact your own buying experience. This is a developing situation, we’ll update this page when we know more.
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As if buying a car wasn’t difficult enough, buying a car on craigslist, eBay, or from any private party ads an additional layer of complexity. Knowing you are buying a car that is reliable and safe is one concern. Making sure you get a fair price is yet another. At the end of the day, buying a car private-party poses many of the same challenges you experience when purchasing from a dealer, and then some!
That’s why we decided to take the time to draft this guide to buying a car on craigslist (or similar peer to peer websites). The last thing you want to do is get taken advantage of, and by reading through this guide, you’ll be more prepared as you navigate your buying process.
Without further ado, let’s dive in! And, as always, if you’d prefer to watch instead of read, you can click “play” on the video up above.
Check the title of the car
It may come as a surprise, but the first thing you need to confirm is that the seller of the vehicle is actually the owner of the vehicle. Yes, people sell cars without owning them, and when they inevitably get caught, you’ll be the one who no longer has a car. That “great deal” you see on craigslist? Yeah, there’s a chance that’s because the person selling it isn’t actually the person who owns it!
I’d sell a car cheaply (and quickly) if I wasn’t the actual owner of it! Sure, when you buy a car from a car dealership you don’t have to worry about confirming that the name on the title of the vehicle matches the person selling it to you, but when you purchase from a private party, you certainly do.
How can you confirm that the seller of the vehicle is the true owner of the vehicle? Simply ask for a copy of the vehicle title and a copy of the seller’s driver’s license. The two names should match. If the title is in someone else’s name but they have “signed off” on the back of the title, that isn’t good enough. The current owner needs to take the signed off title to the state and get a new title in their name.
Once the vehicle title and the seller’s identification match, you can purchase the vehicle without hesitation.
Get a CARFAX or VIN history report
Let’s say the car you’re interested in is being sold lawfully by the current owner. Great, now what? The first thing I would recommend is that you call your insurance company and tell them you are interested in purchasing a vehicle, and that you were wondering if they could run the VIN to see what history they are able to pull on it.
Insurance companies are in the business of maximizing their profits, and one way they do that is by keeping track of every vehicle on the road to make sure they are able to charge a fair price to insure it. That being said, insurance companies have access to much more robust systems than you and I, and as a customer, you are well within your right to call them and ask for their help in assessing the history of a vehicle.
Of course you can also check the Carfax on the vehicle, however, as we have discussed in recent videos on YouTube, a vehicle’s Carfax is only as good as the information Carfax was able to receive. At the end of the day, a vehicle’s Carfax is not entirely accurate, and frequently key service and repair records will not be available on the report. Carfax reports are also not “realtime,” meaning that there are sometimes serious delays in when an event happens, and when it ultimately appears on the Carfax report.
Our recommendation is that you work with your insurance company to get their full history report on a VIN before purchasing a Carfax or AutoCheck report. However, what is most important to understand is that you need to get some VIN history on the vehicle before purchasing it.
Get a pre-purchase inspection
The history of a vehicle is critically important, however, there is something that is even more necessary for you to consider before buying a car on craigslist or a similar peer-to-peer website; a pre-purchase inspection.
Buying a used car is a crapshoot. Whether you’re buying a used car on craigslist, Facebook Marketplace, or from the local car dealership, you really don’t know what you’re getting yourself into. As I like to say, “no two used cars are the same.”
With that in mind, the worst thing you can do is blindly purchase a used car without ever having a qualified mechanic look it over. Buying a used car without a pre-purchase inspection is like buying a house without a home inspection. You just don’t do it.
This is especially true when buying a car from a private party. What warranty does the individual selling the car have to you? None! If they sell you a piece of junk, and you don’t realize it, there are very few repercussions for them. At least when you buy from a dealership you can go to the Better Business Bureau and leave online reviews. When you buy a car on craigslist and it turns out to be a clunker, what can you do? Not much.
Last but not least, make sure you negotiate a fair price for the car you are buying. Sometimes people think that just because they are purchasing a car from a private party, they can’t negotiate on the price. This couldn’t be further from the truth.
Cars, trucks, and SUVs are some of the few commodities that we negotiate on in the United States. Just because you are dealing with a private party, and not a dealership, doesn’t mean you can’t, or shouldn’t negotiate on price.
As if buying a car wasn’t tricky enough, the equation becomes even more complex when the topic of your trade-in comes into play. If you’re like one of the millions of car buyers each year that trades-in their car at the time of purchase, you’re most likely wondering, “when do I bring up the trade-in during the negotiation process so that I get the best deal?”
Well, fortunately for you, we’re going to discuss when to bring up your trade-in (and more) today. If you’re less interested in reading about how to navigate your trade-in, you can watch the YouTube video above. If you prefer to read, then continue on below, over the next few minutes we’ll explain exactly how to approach your trade-in during the car buying process.
Without further ado, let’s dive in!
They’re two separate transactions
First and foremost you need to recognize that buying a car and trading-in a car are two separate transactions, and each should be treated as such. Negotiating a car purchase, and selling your existing vehicle are independent of each other, however dealers will diligently try to combine the two into one “deal.” Why? Because when you’re working two transactions at once there are more opportunities to generate profits (if you’re a dealer), and lose focus (if you’re the consumer).
Why should you approach the trade-in process and the negotiation of a vehicle purchase as two separate events? It’s simple, by focusing on selling your car for the greatest amount of money possible, you’ll sell your car for more, and by focusing on negotiating the best possible out-the-door price on the vehicle you’re purchasing, you’ll get the best deal possible. Attempting to combine the two simply muddies the waters and allows the dealer the opportunity to “pull a fast one” on you.
Negotiate the out-the-door price
Since your purchase and your trade-in are two separate transactions, you should turn your focus to negotiating the best possible out-the-door price. If you’re unfamiliar with the term “out-the-door price” then I highly suggest you read our guide here, or listen to this podcast episode on out-the-door price (or watch the video above). We created a 100% free out-the-door price calculator that you can access at any time as well to get an estimate for what the OTD price will be on any car you’re interested in.
To negotiate the best out-the-door price you’ll want to follow all of the best practices in the resources above, as well as what we outline in Deal School. For example, if you know how long a vehicle has been on a dealer’s lot, what the local market days supply is, and more, you’ll be able to negotiate a better out-the-door price.
Once you have agreed to terms with the dealer on the vehicle’s total price, you should then transition the conversation to your trade-in, and here’s how to approach that …
Get multiple quotes on your trade-in
My recommendation is simple: get as many competitive quotes for your trade-in as possible before engaging with the dealer. For example, you should get a quote from Carvana, CarMax, and any other applicable major used car dealers in your area before discussing your trade-in with the dealer you are going to buy the car from.
It is important to understand that most car dealers will lowball you on their initial trade-in offer. This should come as no surprise. Dealerships are incentivized to purchase your vehicle for as little as possible so that when they sell it to another car buyer they maximize their profit. Your objective is the opposite. You want the greatest amount possible when you sell your vehicle, and the only way you’ll get that is if you get multiple quotes from a handful of dealers in your area.
Another option worth considering is also selling your car to a private party, however if you’re objective is to trade-in the vehicle (and there are financial reasons why you’d want to do this), then getting offers from private parties won’t really help your cause. The point of getting multiple quotes from other dealers is to have leverage with the dealer where you are purchasing your new vehicle, and a verbal offer from a private party isn’t much of a negotiating chip.
Once you have these quotes you can move on to the next phase of the negotiation process.
Vehicle trade-in sales tax benefit
At this point it’s clear that the trade-in of your existing vehicle, and the negotiation of the new vehicle you are purchasing are two separate events. First you should negotiate a fair out-the-door price, and then bring up competitive quotes from other dealers to purchase your car.
Now, let’s say the dealer makes a compelling offer, but they don’t match the highest offer you’ve received from another dealer. What do you do? Which offer do you take? You need to understand the sales tax benefit of trading a car in versus selling it.
The trade-in sales tax benefit is different in each state, so please double-check with your local tax codes before signing any documents, however in the state of California, the District of Columbia, Hawaii, Kentucky, Michigan, Montana, Oregon, and Virginia there is no sales-tax benefit from trading in your vehicle.
Update for 2022: In Michigan, you can reduce the taxable value of your new car by up to $8,000 and reduce your sales tax by up to $480.
Update for 2022: In Arkansas you can sell your vehicle private party and still retain a sales tax basis benefit.
This means that if you trade-in your vehicle you will not receive any sales tax credit applied to the purchase of your next vehicle. In all other states (again double-check with your local tax codes) you receive a sales tax credit applied to the price of the new vehicle you are purchasing.
For example:
You’re purchasing a $20,000 vehicle
The sales tax is 10 percent in your state
Your total sales tax would be $2,000
You’re trading in your current car for $12,000
The new basis for the sales tax on your purchase is decreased by $12,000
You now only pay $800 in sales tax on your purchase
In this scenario it would make more sense to trade-in your vehicle so long as the dealer is offering you an amount that is within $1,200 of your highest direct-sale offer.
Some things in life are worth checking twice. For example, when you leave your home it isn’t a bad idea to double check that you locked the door. Checking twice can save you a lot of headache, right? The same principle applies when purchasing a used car, and it’s exactly why you need to consider getting a pre-purchase inspection (PPI) on any used car you’re thinking of buying.
We’ve recorded countless videos for our YouTube channel talking about pre-purchase inspections and their importance. The long and short of it is that pre-purchase car inspections are 100% necessary for used car purchases. If you’re buying a used car, you need to get a pre-purchase inspection on it first, no ifs, ands, buts, or maybes.
Let’s dive into the details of what a PPI includes.
What is a pre-purchase inspection?
Simply put, a pre-purchase inspection is a vehicle inspection that occurs in advance of a vehicle sale. There are no set parameters for what constitutes a pre-purchase inspection (that is to say there isn’t a universally accepted “checklist” of things that a mechanic needs to review to complete the inspection).
Pre-purchase inspections (commonly referred to as PPIs) are simply a mechanical review of a vehicle in advance of a sale.
When should I get a PPI?
As the name suggests, you should get a PPI conducted in advance of purchasing a vehicle. Specifically you should have a PPI conducted the same day, or within a few days of taking delivery of a vehicle.
The last thing you want to do is have a pre-purchase inspection conducted only to have an issue crop up a few days later unexpectedly. Taking ownership as quickly as possible after your PPI is conducted is a best practice.
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Where can I get a pre-purchase car inspection?
There are a few options for where you can get a pre-purchase inspection completed. First and foremost, if you have family or friends who are auto mechanics, ask them to help. If not, fallback to your trusted local mechanic. If you don’t have a local mechanic who can help (or if you’re buying the vehicle from out of state), consider using a national service like Lemon Squad.
We recommend Lemon Squad because they have been in business for a decade and have an “A” rating with the Better Business Bureau. We don’t get compensated for saying that, we simply think they’re a viable option if you don’t have a trusted family member, friend, or local mechanic.
What should be inspected?
It’s important to keep in mind that there is no universally accepted “checklist” for what is inspected during a PPI. That being said, there are a few things your mechanic will absolutely pay attention to. Specifically they’ll inspect:
The vehicle dashboard
Tires and suspension
Fluids
Brakes
Engine
Transmission
Exhaust
The body and frame of the vehicle
Lights
HVAC
At the end of the day each mechanic will have a slightly different pre-purchase inspection process. Bear in mind that most mechanics will find at least one thing that should be done on the car. Remember, it’s their job to find things and make you aware of them!
A PPI is similar to a home inspection on a house. You want your mechanic to be thorough (just like you want the home inspector to be thorough), and so you’d almost be disappointed if there wasn’t anything wrong with the car (or the house). Keep this in mind when you receive the pre-purchase inspection report. Your mechanic will make you aware of what is really important, and what is lower priority.
How much does a pre-purchase inspection cost, and who pays?
If your mechanic charges you more than a couple hundred dollars for the pre-purchase inspection, you may want to ask them a few questions. Depending on the vehicle, a PPI should range anywhere from $100 to $300.
Considering the vehicle you’re thinking of purchasing is most likely worth tens of thousands of dollars, the investment upfront in a PPI is well worth it. The headache you save, and the peace of mind you gain makes a pre-purchase inspection a worthy investment.
Do you have other questions about pre-purchase car inspections? If so, let us know in the comments down below.
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Trust is at the crux of any human interaction. Whether you’re navigating the aisles at the grocery store, having a conversation with your significant other, or interacting with your boss at work, trust plays a critical role in how we approach each and every aspect of our life. Seemingly, there is no trust in a car dealership (not between the customer and the salesperson, and not even between the salesperson and the sales manager). For decades now, car salespeople have constantly gone to “talk my manager” for permission to negotiate during the sales process.
This tactic, paired with countless other dealer antics is very frustrating for customers. If you’re unfamiliar with your salesperson saying “let me go check with my manager,” you’re lucky! If you’re not, it means you’ve certainly spent countless hours at a dealership before being frustrated and disappointed that the process is so drawn out.
Today I wanted to provide some insight into why salespeople have to go talk to their managers to ask them questions when negotiating with a customer, and what really happens behind the scenes. If you prefer to watch instead, consider clicking on the video above.
It starts with trust
It’s important to recognize that car dealerships have been operating in a similar manner for nearly one hundred years. The manufacturer to dealership model has been in place since before you were born, and the tactics and strategies dealers deploy to maximize profits are ingrained in dealership culture.
Traditional dealership culture is anti-consumer — that is to say most dealerships operate in a way that isn’t transparent, friendly, or buyer oriented. Dealers are tasked with one primary goal: maximize profits, and in that quest, a lot of antiquated practices have become the reality of the car buying process.
The way dealerships are structured from a staff perspective is worth noting. There is an owner (either a mom and pop owner, or a big corporation), and then below them are the staff. There is a General Manager, a New Car Sales Manager, and a Used Car Sales Manager, and below them are the salespeople.
The structure may be different depending on each organization, but generally speaking, this is the typical formation of a dealership’s sales staff.
The New Car Sales Manager is responsible for (and their pay is tied to) how much gross profit the dealership makes in any given month off of new car sales. That means that the managers goal is to work with their salespeople to get the most profit out of every new car deal.
Now that you know that, it should be clear how the “let me go talk to my manager” tactic came to be. Managers don’t trust their salespeople to maximize profits. Instead, they fear that salespeople will jump right to the bottom line number right after shaking hands (or I guess elbow bumping) their prospective customer.
Most sales managers operate out of fear. Their compensation is directly tied to how much gross profit the dealership generates on any given month, and the idea of giving up “control” to salespeople to be able to make their own independent decisions during the negotiation process is a foreign concept to them. Instead, sales managers typically try to retain as much control over the process as possible, and that’s why you see salespeople frequently doting to the sales managers office.
Most customers prefer to deal directly with a decision maker
This control dynamic is ironic, however. Car buyers don’t want to be dragged into some strange power struggle between a salesperson and a sales manager. Instead, they simply want to deal with the actual decision maker from the start.
This makes sense considering most buyers research their purchase for 14 hours or more. To then be stuck at a dealership negotiating with a salesperson who really can’t make a final decision, only to drag on the process even more … It’s no wonder that buying a car can be a tiring event.
The construct of “let me go ask my manager” also allows sales managers to mitigate their fear of becoming irrelevant. As many car dealerships pivot towards one price selling, sales managers fear that they won’t be able to retain their roles within the dealership.
Car salespeople are trained “whoever has control wins”
Everything in life starts with trust, but in the car dealership it also starts with control. Antiquated training has led to salespeople and sales management staff being reliant on the concept of “whoever has control wins.” This “us” versus “them” mentality is not pleasant for anyone involved, but as a car buyer it is important you understand just how deeply it is rooted within the dealership.
For example:
Salespeople don’t want to give up control to the customer
The sales manager doesn’t want to give up control to the salesperson
The finance manager doesn’t want to give up control to the sales manager
The owner doesn’t want to give up control to … anyone!
As you can see, trust is lacking across the board, and when that’s the case, getting anything done at a dealership comes to a standstill.
The sales manager is trying to think two or three steps ahead to try and get the deal done
So what really happens when the salesperson goes to talk to the sales manager? The sales manager quizzes the salesperson to better understand how likely the customer is to make their purchase today.
If it’s likely they can close the deal today, the sales manager will work the salesperson to retain as much margin in the deal as possible. If the deal feels shaky, the sales manager might coach the salesperson to negotiate a slightly lower price to see if they can move the needle.
At the end of the day in the sales manager’s office the word they are most concerned about is “now”. “How likely are they to make the deal now?” Everything is about getting the deal done today, and it’s not only the sales managers responsibility to coach the salesperson to get the deal done now, but also with the most gross profit possible.
So there you have it, that’s what really happens when the salesperson goes to “talk to the manager.” Is it frustrating and annoying when it happens? Absolutely. Do you now understand why it happens? I hope so. Patterns of behavior that have been in place for decades will take time to erode. Let’s hope that this one goes away in the not too distant future.
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