Hi Jasper.

In general, you should start out with the assumption that in any negotiation with a car dealer, you’re starting at a disadvantage because they know a lot more about you than you know about them (in reference to the proposed purchase).

For example, they know exactly how much they need to charge to break even, while you only have a vague idea of how far you can push before they show you the door.

In the other direction, they know what their advertised price is, so they can estimate that you’re willing and able to spend at least that much. On top of that, they may be counting on enticing you into making choices that would increase the price, if they structure the deal properly (e.g., longer loan term so your monthly payment is lower).

That’s why I’d hold off on letting them know you plan to use all cash until you’ve finalized every other detail. This way, they may be more flexible on the pricing, expecting to make money from interest on the loan they expect you to take.

Thus, I’d start with deciding ahead of time what options you’re interested in, which ones you’re ok paying a bit more for, which ones you don’t mind but won’t pay any extra for, and which ones you simply don’t want in your car.

Then, get quotes from many sources (dealership websites, AAA, Edmunds.com, Costco, etc.) for the car you want that meets your specs.

Then, contact the people offering the 2nd and 3rd best price and ask if they can’t sharpen their pencil at least somewhat, because they’re not quite the top choice. For ethical reasons, I would not share with them the price to beat. It’s also a good way to get them to offer the best price they can (e.g., if they know the price to beat is $21,500, they may offer $21,450. If they don’t know that, they may play it safe by offering say $20,999.

As a final step before heading to the dealership, check what your trade-in should be worth by visiting Edmunds.com (look at the trade-in value). Also, get an official offer from CarMax.

Now, go to whomever offers the final best price, and start putting the deal together. Once the price is settled, see what they’ll offer for your trade-in (if any). If they offer less than CarMax, or if you’re willing to sell to a private party (which usually gets you a better price), tell them you’ll take care of your trade in yourself.

Finally, they will bring up their financing offer. Ask if they’re willing to give some extra incentives in lieu of their best APR offer. For example, they may offer a 0% APR 5-year loan, or a 3% APR 5-year loan with a $1000 cash incentive.

Ask if you can get that incentive if you don’t take any financing from them. If they say yes, grab the incentive and pull out your checkbook. If they say no, make sure there’s no prepayment penalty, take their (in this example) 3% loan so you get the incentive, and then pay off the loan the following day.

All the above is just how I would approach it. As they say, “your mileage will vary” due to things like your personal credit score, the type of car you buy (and your flexibility in accepting a car that’s been sitting on the dealership’s lot for a while), the dealership’s overall level of desperation, how good a negotiator you are, etc.