What are the rules for negotiating a price when incentives are already high?

Ask the Hackrs
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Noob here. I recently have been perusing Edmunds for good deals on a lease. I came across some Jeeps that Edmunds has listed as “good” and “great” deals in my area. However, I noticed that the discount being applied is entirely through Jeep incentives and not through dealership discounts. The individual dealerships themselves show almost no discount.

If a manufacturer is giving out great incentives, how much room does that leave you to negotiate at the dealership? Should you negotiate as if there were no incentives, or should you treat it as if the incentives have already done most of the work for you?

Real world example, a vehicle’s MSRP is $30k and there are $4k on incentives. Edmunds recommends I pay $26k for the vehicle, after incentives. It implies that the $30k sticker price is a totally fair price that I shouldn’t have to negotiate. Is that true? Would a dealer laugh me out of the building if I try get the price down to $27k before incentives? Or is negotiating on top of manufacturer incentives still normal?

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Pretty much every single deal shared on this forum has discounts negotiated before incentives. Check out the Shared Deals section

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Look, there are 3 schools of thought on this

  1. Greedy Dealer Perspective: "The customer is already receiving, $X in discounts! Why should I discount the car further because you’re already getting a GREAT DEAL?"
  2. Greedy Customer Perspective: “I, the customer, will completely ignore incentives and rebates in my negotiation so I don’t conflate the two, I want the dealer to give me at least Y% in DEALER discount to make sure that I’m getting the BEST price from the dealer. I can’t let them win.”
  3. Fair Deal Perspective: “This car has a ton of incentives; the dealer can offer a modest discount at or around invoice price, so it isn’t a ‘loser’ deal for the dealership, plus the customer can claim the incentives, and both sides get a good, fair deal.”

Now, perspectives one and two are the Exact same school of thought. The customer isn’t happy until the dealer is losing money on the deal, or the dealer isn’t happy until the customer is making the dealer a few grand. In either case, whether it be the dealer or the customer, the party that’s pretending that the dealer discount and incentive discount are completely unrelated - is the party that’s being an asshole.

In reality, the transaction price for your car is based on the market conditions for the car you’re trying to buy. If it’s a really in-demand car, the total percentage discount is going to be less, than on a less desirable car that manufacturers are really trying to incentivize and get out the door. The % off you can get is based on the overall market demand for the car, at a macro level.

There is no magic “right amount” or “percentage off” that universally makes sense as a good deal. I get people telling me all the time that they would Never lease a car unless it has 10% dealer discount. These are cars that have 15-20 year Leasehackr scores. Those customers are not shopping based on a monthly payment for a car that meets their needs, they’re just shopping for the biggest “win” or the biggest “fuck you to the dealer”. For that kind of customer, there is always a greedy, shady dealer waiting in the wings that is the perfect matchup.

But - in my experience - when the “Greedy Customer” goes through a few dealers looking for a percentage discount, then finally finds a dealer that’s willing to play ball, that means that the “Greedy Customer” finally found the “Greedy Dealer” they were looking for. When they find each other, the greedy dealer is a lot more experienced at playing the game than the greedy customer.

These customers that fixate on the absolute lowest bottom line above all else, are the ones that end up getting screwed the most on mandatory add-ons or dishonest sales practices. They often go home with their tail between their legs because they wanted a fight, got the fight they wanted, but lost and got themselves tricked into paying more. The Greedy Dealer has a Type A personality coming in trying to get 10% off a car every day; they know how to push your buttons, hold you hostage, and squeeze money out of you.

How do you know if a dealer is greedy before you go dishonest? Simple - if you have 5 dealers telling you one price and one dealer with a price that is much lower, you probably found the dishonest one. Consider that before making the trip in. They all pay the same price for the cars from the manufacturer, and they all have to pay their rent/utilities/payroll to be able to sell those cars to you.

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I don’t agree with your assertion here. Removing incentives and rebates from the discussion doesn’t make a customer greedy, it simplifies the conversation down to the customer and the dealer negotiating over the only knobs that the dealer can turn and removes the rest of the fluff. Having a transparent negotiation doesn’t make one greedy… it just makes sense.

Having a conversation with the dealer about the knobs that can be turned doesn’t mean that the agreed upon price isn’t reflective of market value or that it has to be a loser for the dealer, it just means you’re actually discussing numbers that are relevant. There are cars that don’t support as much of a pre-incentive discount as others. There are times (like now), when supply and demand result in lower pre-incentive discounts than were previously common. That reflects the current market value and is completely independent on any incentives that the manufacturer is offering.

Do you feel that the customer is being greedy when they target the same discount amount after the manufacturer adjusts a residual value?

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Maybe I should rephrase. A lot of people with the % method are just shooting for a number.

If you’re well-educated on the right % off for the right car, it could work, but it’s usually easier to compute that number as dollar amount versus a percentage, at least for the deals I work. The greedy part comes from asking for a percentage without understanding what percentage the dealer actually has to play with to begin with.

Also, big thing here, not all makes have the same % markup in every car.

You have some brands like Porsche where it’s really easy - 10% more or less in everything.

Then you have brands like Hyundai where a base model car has 2% markup. Customer is gonna have a bad time if they want 6% off a Hyundai Venue because they have a friend that got that much % off a 3-series.

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Absolutely. It’s important to go in with realistic expectations and understand that there is variation in not just brand, but models as well.

That, of course, is more rationale for breaking down everything to pre-incentive numbers and removing any discussion over incentives and rebates from the conversation. When you normalize the data set that you’re pulling from for comparisons, you can get a much better idea as to how much room dealers have and what the market will support. Including incentives/rebates in those comparisons just muddies the water for the consumer.

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I agree 100% with what you’re saying. But in practice, what I’m seeing is your advice is being distilled down to uninformed customers demanding an outrageous % off on in-demand cars.

Usually, some factor like colors, options, lot damage, AWD/2WD, etc will cause someone to get an “exceptionally good” deal, and post it here (or, cause it to reflected on TrueCar.com bell curve). That drives the TrueCar/LH crowd to dealerships en masse, demanding the same % off on a more in-demand version of the “same” (but not really the same) car.

It’s particularly rough when someone gets a good deal on a “fully loaded” car that has a bit more markup - say, a Sonata Limited, and then someone else wants the same “% off before discounts” on the base model Sonata SE because “it’s the same car”.

I like thinking about the dealer discount in terms of dollars instead of percentage for this reason.

On a Sonata Limited, you’ve got 3.94% between MSRP and Invoice, or $1372 to play with.
$38/month between sticker price and “great price”.

On a base model, you’ve got about half that.

With the % method it’s easy for people to fantasize about the car being thousands cheaper, in reality, at least on economy cars, people spend hours deliberating and fighting over a $20-40/month swing. That’s 2-3 take out meals/month, tops.

Most of the time, it’s the incentives that make the lease deals slick, more than the dealer discount these days.

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Let’s get something out of the way: there’s obviously limits to every deal and vehicle. You’re not getting 20% off sticker before incentives on the average car, although some regions are more eager to deal than others (Midwest, Texas will give Bolts away at 15% because they have to, PNW region can’t seem to buy a strong deal on almost anything).

It’s up to you as the customer to decide how much you want to push those limits and get a real Hackrworthy deal. A customer who wants to try to push those limits isn’t being “greedy” per se, nor is a dealer trying to maximize profit on a particular sale (although some tactics and add ons have become out of control).

The person on either side of that negotiation that is successful is the one who recognizes that whether or not a particular deal makes or loses money in isolation is usually meaningless. The name of the game is volume bonuses and overall front end gross. The fact of the matter is without the behind the scenes machinations most dealerships would go out of business even if they managed to sell every car they had at full sticker price every month.

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I’m probably going to ramble for a minute, so bear with me.

One thing I often try to do is dilute down the difference between a good value and a good deal. A vehicle with large incentives, low mf, high rv, etc is an easy candidate for being a good value. The programs are such that the lease payment is likely to be low. A good deal, on the other hand, would represent a negotiated deal on a vehicle that is very aggressive for the current market. A 3 sigma outlier to the right of the curve, if you will. One can have a lease that is an amazing deal, but still a poor value. Likewise, one can have a lease that’s a good value, but a pretty poor deal considering the current market conditions. With these two terms defined, there becomes more reason to differentiate between incentives/rebates and dealer discount. It’s the lease programs that make for a good value. When you start negotiating numbers with a dealer, you trying to achieve a good deal.

Now, generally the goal here, at least when it comes to the really popular deals that get posted, is to find something that’s both an excellent value AND and excellent deal.

I’m leasing a Palisade currently. I believe that for the time I leased it, I got an excellent deal on it, but compared to some of the competition, it wasn’t an excellent value. Unfortunately, it’s also a vehicle where we see lots of people get offered deals that are very poor values and poor deals.

As a customer, my goal when I start negotiating is to do everything I can to maximize the quality of my deal. At a basic level, I don’t care if the dealer makes money or not. I’m not entering into the transaction with their best interests in mind, I’m not responsible for paying their bills, etc. That doesn’t make me greedy, that makes me realistic. With that said, I do understand that the dealer needs to make a net positive income or they would cease to exist, so them making money is a reality. My personal goal is to minimize the amount of work I expect a dealer to do, in turn minimizing the amount of profit they need to make to justify the transaction. Market conditions and incentive structures will dictate the opportunity cost to the dealer of not having the inventory. I want to get to the lowest possible number I can where the dealer will still say “yah, this deal makes sense to do”. They get to define where that number is; all I can do is offer the path of least resistance. The more of their time I waste, the higher the opportunity cost goes.

I do always find the dealer pulling the “it’s only dinner once a week difference… don’t even worry about the $40!” line funny. Cool, if it’s no big deal, then you should have no problem eating the $40/mo and agreeing to my price… after all, it’s only dinner once a week.

I don’t think greed really plays into this at all. The dealer wants to maximize their profit. The customer wants to minimize their costs. Anything in between is a concession to facilitate the transaction. A customer fighting for a significant amount less than what the dealer is willing to do isn’t being greedy, they’re just being unreasonable.

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Fuck this. Fuck both sides of this. Fuck dealers saying this, fuck customers saying this.

“A good deal” that involves a hostage situation is a “bad value” - every time. And maybe that’s just where we’ll agree to disagree.

This should not be a war. This should not take hours. It should take 30 minutes to buy a car. Running numbers and price negotiation should take 10 minutes.

Anything more than that is either side trying to tip the needle beyond a “fair and painless” transaction into something where one side “wins”.

Trying to seek out edge case scenarios where YOU are the “Exceptional Price”, not by some stroke of luck, but by dragging things out, is the same thing as the dealer trying to seek out the scenario where YOU are the sucker that overpays. They call it an Exceptional Price for a reason.

I maintain that the two greatest things that you can SAVE BIG on when buying a car is your time, and your sanity. If “time wasting” is part of the plan, that’s just not my philosophy.

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I think you misinterpreted my point. Perhaps opportunity cost in this context was poor word choice.

What I’m saying is that the more time wasted, the more money the dealer needs to make. My goal is to minimize how much time the dealer has to involve… if I want them to make as little money as possible, I should facilitate them doing as little work as possible.

If I go into the interaction with the dealer broadcasting that they’re going to have to work at it… negotiating every item line by line, asking tons of questions, etc, I should expect the price that that dealer is willing to tolerate to be higher.

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I never understand why pricing needs to become a “fight” between dealer and customer. You don’t like the customer’s offer? Say “no.” You don’t like the dealer’s price? Say “no.” It is an amazingly simple word. I personally take emotion completely out of it. I laugh at SMs who seem to get all worked up. I couldn’t possibly count the number of times I have said some version of the phrase “hey, its cool. no worries. no hard feelings. this obviously isn’t the right car, that’s all. take care.” As both posts above this state, I want to minimize my time invested, as well as the time of the dealer/salesperson. Adding in emotions inevitably adds time.

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The OP could have answered his or her question by simply perusing the Shared Deals and Marketplace sections for 5 minutes.

Did you do that @bellamira?

It would be harder to find a deal there that did not include any dealer discount in addition to incentives.

Instead this is, quite predictably, veering towards yet another “who is worse, the dealer or the customer” thread.

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