Finding the right car and the right price begins long before you arrive at the dealership. First you must decide what kind of car you want. Are practical features important to you, such as reliability, affordability, safety, and overall performance? How about aesthetics and style? It is best to narrow your interests to a couple of models so that you have flexibility when it comes time to focus in on details such as price and available options.

Do Your Homework!

Once you have a particular car in mind, it's time to do some research. First, does the car have a "twin," a similar model with a different name? For instance, if you're interested in a Plymouth Voyager, the Dodge Caravan is very similar. Having several comparable models in mind ensures more opportunities for getting a great deal. Consult your insurance agent about insurance costs for particular models and about possible features that can reduce your insurance rates, such as Anti-Lock Brakes and anti-theft systems. The difference between insuring a sports car and a sedan may be large enough to offset the loss of speed and glamour. If you are planning on keeping the car for more than a few years, check its reliability record.

Come up with a budget of how much you can spend on your new car, including monthly payments and a down payment. The more you can put down at purchase, the lower your interest rates and monthly payments will be. Many experts say that if you cannot afford a down payment of 20% of the total price, the car is too expensive for you. Whether you are buying or leasing, knowing your spending limits will keep you from overspending on a high-end model or extra luxury items.

Determine the Dealer's Actual Cost

Now it's time to focus on the price of your car. Learn the dealer's cost, or invoice price. Typically, it is about 10% below the Manufacturer's Suggested Retail Price. Also, be aware of dealer holdbacks, usually 2-3% of the MSRP, which are given to the dealership as profit after the sale of a car. Factory-to dealer incentives are another source of profit for dealerships, usually offered at the end of a model year. Thus, the invoice price may not reflect the dealer's actual cost. Don't forget to research different model editions and option packages. Many internet and book sources provide up-to-date information on these prices. Knowing what the dealership really pays for a car is crucial to getting the best deal. Armed with this information, it's time to head to the dealership.

The end of the month may be the best time to buy a car. Since many salespeople have monthly quotas, they may be more willing to accept a deal that results in a smaller profit. Ask to test drive the exact vehicles you're interested in. Make it clear that you pricing several models at several dealerships, so you will not be buying today. Do not let them make a copy of your driver's license or Social Security card in order to take a test drive- they may use it to run a credit check long before negotiations have begun. Don't let yourself be distracted by the salesperson, they use that personal information, including any enthusiasm you express, to their financial advantage.

Hate to Haggle?

If you truly hate to haggle and are willing to pay the MSRP, Saturn dealerships and other no-haggle dealerships may be right for you. One-price dealerships will save you time, if not money, and you will not be subjected to many of the high-pressure sales tactics common at other dealerships. If you have a trade-in, you may be able to save some money by haggling over its price. But beware, you will probably end up paying more than if you negotiate a deal at another dealership.

Buying direct from the factory is another way to avoid the dealership experience and guarantee the exact vehicle you want. Few foreign dealerships accept special orders, but most vehicles made in the U.S. can be ordered directly from the factory. You will have to wait several weeks for your car, but eliminating finance charges to the dealer may save you money.

Haggling can also be avoided by using car buying programs offered by warehouse clubs, some credit unions, and the American Automobile Association. These programs offer a discount on the sticker price, but you are limited to just a few participating dealerships in your area, and the price is probably not as good as what you could get as an educated negotiator. Several companies, such as CarBargains, also offer car buying services for a fee, and are not limited to certain dealerships.

Negotiating

When it comes time to deal, keep it simple. If you have a trade-in, wait and negotiate that transaction after you've agreed on the new car price or try selling it privately. If you plan on financing your new car, wait until after you have settled on a price. The key to getting a good price is to offer the dealership a reasonable profit, somewhere between 2-5% above their actual cost. This is your target price. Keep in mind that supply and demand will affect just how low the dealership will go. A good reflection of availability and demand is the number of rebates and incentives offered for a particular model. Negotiate your price up from the actual dealer price you have already determined, not down from the MSRP. If the salesperson disputes your numbers and shows you their invoice cost for the car, ignore it. Remember, that does not include the profit they will receive from factory holdbacks and incentives, not to mention other sources of profit, such as financing, add-ons, resale of your used car, and repairs.

Stand by your highest offer and be prepared to walk away. Your bargaining power is your information on the dealer's actual cost and your ability to take your business elsewhere. Never give a deposit before agreeing and signing on a price and ask that the keys to your trade-in be returned to you before negotiations resume. Stand firm and just walk away if necessary. Many dealership tactics are designed to wear you down or keep you from leaving, such as holding on to your keys or rotating several salespeople to continuously talk to you. They'll change their tune as soon as you start to leave. If they don't, you probably shouldn't do business with them anyway.

Hidden Fees

Make sure that you thoroughly read all contracts- many contain hidden extras that substantially increase the cost of the vehicle. Profit-packing charges include "ADM" or "ADP" charges, advertising fees, "Dealer Assistance" fees, Dealer Prep charges, and drive off deposits. These are their costs of business, avoid having them passed on to you. Check destination charges and documentation fees, such as registration, tags, and title to make sure they are not padding the charges. Get a detailed breakdown of each fee and compare that with information you have gotten from the Department of Motor Vehicles. Extended warranties may be a good idea if you plan on owning the car for a while, but keep in mind that they do not provide coverage until after the factory warranty has expired. Avoid dealer-installed extras, such as rust-proofing, detailing, and fabric protection- they are unnecessary, overpriced, and may void parts of your warranty. If a dealer insists these extras are already on the car and part of the deal, simply ask that they remove them.

The Finance Department

Careful! All the savings you have accrued during the purchase of your vehicle could disappear in the Business Office. Shop around for interest rates at banks, credit unions, and relatives before you make a decision. Oftentimes, the rates will be lower than at the dealership- know them before you start negotiating your new car. Some dealership finance companies offer incentives which include a choice between a rebate and a low interest rate deal. Low rate deals can save you money, but the terms to qualify for these loans can be strict. Make sure the dealer commits to your approval for the low rate before you sign the papers. If you opt for the rebate, consider using it directly against the price of the car.

How to Handle Your Trade-In

Once you've agreed on the price of your new car, it's time to negotiate your trade-in. Always treat your new car and trade-in as two separate deals. Clean your car inside and out, but leave any brochures you've gathered from shopping around. Bring your car to several local dealers to see what they'll offer in a straight-out sale. This should give you an idea of the value of your car in your area. Don't allow the dealership to attach conditions to your trade-in. Settle on a fair price independent of your new car price, financing, optional extras, or extended warranties. They don't affect the resale price of the car at the dealership, so they shouldn't affect your selling price.

Taking Delivery

Make a final inspection of the car. Any dents, dings, and scratches will be yours forever. Talk to the service manager about recommended service and maintenance. Remember, your new car will someday be your used car. Although your next car purchase may seem far in the future, keeping up with service, maintenance, and general care will increase your car's resale value at your next trade-in. Following these steps should make a potential shopping nightmare into a normal business transaction. A successful car buying experience just requires preparation. Know the dealer's actual costs and shop around for your trade-in value, interest rates, and, most importantly, your new car.