Shopping for a new car can be fun, taking the time to test drive brand new cars with the intention of purchasing one is not the same as actually making the purchase. Therefore, what you need to know when you buy a new car is how low of a price would be acceptable to the dealer.

New car dealerships typically have sales people that can make anywhere from $100 to several thousand dollars on a new car sold, depending on the price of the car and the financing. Financing is one of the ways that new car dealers make their profits.

Negotiating with a Car Salesman

While most businesses have set commissions for sales, a salesman’s commission on a new car varies widely. For example, a car that has been sitting in the showroom for a long time will generally earn the salesman more of a commission if they sell it.

Other incentives for the sales force could include bonuses depending on how many cars they have sold or if the dealership gets a bonus for selling a particular line from the car manufacturer. Knowing which new cars carry any of these incentives would probably get you a better price.

Offering Cash versus Financing

Many people are under the false impression that car dealerships prefer cash sales; the truth is that the dealer makes more money from financed cars. Therefore, offering cash when negotiating for a new car generally makes no difference to the salesperson.

Financing terms also significantly affect the price of a new car, so negotiating a good deal on financing can be just as important as the sale price. Nevertheless, getting the best deal depends largely on the salesman’s incentives to sell.

Once you have settled on a price with the salesman, they will typically have to present the sale to management before letting you make the purchase. The manager will then authorize the sale once they find the terms acceptable, and you can then drive away in your new car.