What’s a good car price and why should you keep it a secret?

Going into any negotiation, you should always know the value of what you are buying. It’s important to establish a target purchase price and know the current car deals available to help you decide when to pull the trigger on a deal.

However, a target price should strictly be a point of reference for you. There is no reason to share this with a car salesman. I’ll explain why leaking information like this can be a very expensive negotiating mistake.

But first, let’s take a minute to understand car deals…

Understanding Car Deals

So how do you determine a target car price?

There are a few schools of thought on what to consider a “good deal”. Some will tell you to spend hours researching rebates and incentives and try to understand the car manufacturers’ tricky pricing terms and games. Others will tell you to take the cost of the car to the dealer (dealer invoice price) and add a small margin between 2-4%. While that’s a reasonable starting point, it’s not specific enough because some makes and models can be discounted more than others. And some salesmen may be inflexible on price, while others may be willing to sell a car below invoice.

My suggestion is to spend 5 minutes and check these sources to determine a good target car price:

1. Edmunds True Market Value (TMV®): Enter a make and model and then click on the Pricing tab to find out what people are typically paying.  You’ll get a breakdown by average base price plus the average price for each option.
2. CarsDirect instant quote: Their low, instant “CarsDirect Price” can be used as another point of comparison and comes with a guarantee. Also, if you end up not being able to find a better price elsewhere, you can always come back and buy here.

So why keep your target car price a secret?

Because as soon as you throw out a number to a salesman, you’ve set a price floor for yourself and they will not negotiate below that number. This can end up costing you hundreds of dollars. Instead, follow my new car buying guide and make car dealers compete with each other instead of competing with you. They will keep lowering their prices to beat their competitors and could very well drop below your target price. So don’t prevent yourself from getting the best possible car price and keep this number to yourself!