Setting your target price  

It's easy to learn what the dealer's cost is on any vehicle. Find out before you start negotiations. 

Having more information gives you more power. Not long ago, auto dealers had the upper hand because they had most of the information about price, but knowing where to look online can give you an advantage. 

Using Web sites like Edmunds.com or Kelly Blue Book's KBB.com, you can find out the dealer's cost for any vehicle. You can also find out about customer or dealer rebates, subsidized lease deals, or other special breaks can cut your cost. Best of all, you can decide exactly what you intend to pay for the car or truck before you ever go near a showroom. 

The number most often cited as the dealer's cost is the so-called invoice price - the wholesale price that the manufacturer bills the dealer on shipment. But that is not the whole story. 

The manufacturer may offer so-called "dealer incentives" for slow-moving models - in effect, rebates paid to the dealer instead of the car buyer. Unlike heavily advertised consumer rebates, these dealer incentives are rarely publicized. If you have done your homework and know such an incentive exists, you often can negotiate half or more of that amount for yourself. 

A hot-selling new vehicle may sell for a while at full MSRP with no bargaining possible. But for more ordinary vehicles, a good starting point is to aim for a target price of 2 percent over the dealer invoice price. 

For a slow-selling model, you may be able to go even lower. If you discover that the model you want carries a sizable consumer rebate or dealer incentive of $750 or more, let that alert you to bargain harder, since the dealer and the manufacturer want to move that model. 

Negotiating the best deal 

Know your target price and be ready for dealer maneuvers. 

Before you head for the dealership you will have already done your homework, so you will know the dealer's invoice price, whether rebates or dealer incentives are available, and your target price, as well as where you plan to start bidding.  

You want to start the bidding as low as you reasonably can, but not so low that you will seem like an uninformed buyer just making a low-ball offer. Pull together a folder showing your data and sources for these details so you can readily refer to them yourself or show them to the salesman. 

At the showroom. Establish quickly that you are a serious buyer, not a browser. If you come across as just shopping, the salesperson will be eager to move on to a likelier sale. Don't say: "I'm looking at the Ford Taurus." Say instead: "I plan to buy a Ford Taurus LX within the next two weeks and I know pretty much how I want it equipped. I will buy where I get the best price. Let's talk about it." 

That keeps you in control. The salesman wants to know as much about you as possible to start spotting potential profit points. Stay pleasant, but just turn away questions and say: "We can talk about me later. Let's talk about price." 

Focus on the invoice price. As soon as you can, try to switch the discussion away from the MSRP, or list price, to how much you intend to bid over the dealer's invoice cost. Bring out your Internet printout to show you have done your research on this. The salesman may well say: "That is not the right invoice price for the car." He or she may in fact know less than you do since traditional dealer training focuses on the MSRP and many dealers do not give salesmen the invoice prices. Say: "This is the invoice price for the car I want with the equipment I want." Show him your printout. 

A note on buying cars as a couple: If you're negotiating to buy a car with your spouse, make sure that you both agree beforehand on what you're going to say and not say. If you're buying as a team, it's imperative that you act like one in front of the salesperson - who will doubtlessly try to exploit any division of interests you and your spouse may have. The negotiation table is no place to sort out monetary or philosophical differences with your mate. 

Start low. Though your target is $200 above invoice, you need to leave room for the dealership to budge you a little. So start out bidding at the invoice price on a car like the Taurus, where a rebate signals you to negotiate hard. You know you are entitled to the $500 consumer rebate that was offered recently, but don't bring that up yet. If that $500 had been a dealer instead of a consumer sales incentive payment, you would start out bidding to try to capture at least half that money. In that case, you would bid $300 below invoice and make it clear how you got that figure. "Since the dealership stands to get a $500 payment from Ford as a sales incentive, $300 below invoice seems fair." 

He who hesitates loses. At this point, the salesman is likely to say something like: "I think this is way too low, but I will take your offer to my sales manager and see what I can do for you." He or she may not even intend to talk to the sales manager, but plans to keep you waiting in the glassed-in office to pressure you into a higher offer before even seeking approval. Tell him or her you do not intend to wait long. Then don't just sit there. Wander around the showroom or go outside to look at other cars. That usually brings the salesman back quickly. It's likely that he will bring the news that your initial offer was not good enough. At this point, if you started the bidding at the invoice price, agree to $100 over invoice. 

If you get it, take it. If the dealership has a car in the color and equipment you want, and the salesman offers $200 over invoice, accept the offer. If not, get the best offer and take it to another dealer. If the second dealer beats the original offer, keep the competition going - play it back to the first dealer. 

When you hit your target or come as close as you think you can, agree on the price. Now, and not before, is the time to talk about a trade-in. You already will know what your car is worth from checking local ads and looking up your model on sites like Edmunds.com and the Kelley Blue Book. If your car is a popular model in good condition and you are sticking with the same brand, you might match or slightly beat that price with your new-car dealer who sees potential profit in selling your used car. If the trade-in offer is a good one, say yes. If not, plan to sell it yourself or take it to the used-car lot of other dealers for a price quote. 

Once your price and trade-in are set, you still have to finalize the deal. In our next section, we tell you how to close. 

Closing the deal 

Don't let your guard down at this crucial moment or you might close out your savings. 

The salesman may call it "doing the paperwork" or some similarly innocuous description. But the finance manager you are about to meet hopes to boost dealer profits at your expense with attractive-sounding offers of mechanical and financial add-ons. In most cases, just say, "no." But there are some exceptions. 

If you already have financing approved, just say so and you can avoid the financing pitch. The one exception: If you already know that the manufacturer is sponsoring a promotional deal with really low rates. 

The next pitch you are likely to hear is for an extended warranty. Whether you want to consider this depends on how long you expect to keep the car. If it is the three years or less that matches the typical warranty, reject it immediately. If, however, you are almost sure you will keep your car for five years or more, you might consider an extended warranty contract, which can cost $400 to $1,200.  

If you decide to buy one, ask when the extended-warranty coverage kicks in and what it covers. (So-called "power train only" warranties, for instance, may exclude expensive electronic repairs common in today's cars.) Also be sure you know how long the manufacturer's warranty runs. Volkswagen and Hyundai extend power train coverage for 10 years and luxury models Lexus and Infiniti for six to eight years. 

The latest vogue in add-ons (replacing rustproofing now that almost all new cars are rustproof to start with) is security etching. Having your vehicle identification number etched into the glass on your windows may, as claimed, make your car somewhat less likely to be stolen. But it is certainly not worth the $1,100 some dealers charge