Do research before going. Edmunds.com has prices for new and used vehicles or Consumer Reports can give you excellent information on vehicles. For a fee you can get a printout of the vehicle you are looking at along with suggested negotiating amounts. Before purchasing though, test drive a few vehicles until you have decided which model you want and shop around. Also Costco has an auto program for new and used vehicles.
If you're purchasing a used vehicle check on other sales in the area and make a note of prices and mileage. Look up the value on Kelly Blue Book - it will give you the price expected when purchased at a dealership. Beware of bait and switch though. Sometimes a vehicle will be advertised at an extremely low price to get you into the lot and once there, you will probably be steered toward another vehicle with a higher price tag.
If you're trading in your used vehicle, look at Kelly Blue Book for trade in value.
Financing
Don't leave it up to the dealer to offer you financing. You may get a better deal checking on financing with your bank or credit union. The more information you have with you, the better rates you will get. Also check your credit score. I've read that sometimes dealers will add an interest point or two to what the loan company is offering which the dealer receives a portion of (as does the salesperson). By checking with outside loan companies and banks will at least give you an idea of what interest rate to expect.
Add-Ons
There is added incentive for sales of add-ons such as warranty, etc. If you are inclined to purchase a warranty, first check if there is a manufacturer warranty with the vehicle (if a used vehicle has low mileage there may still be a warranty with the vehicle.) You may also be tied in to use a service company of their choice not yours. If you really want a warranty, see if you can add that in as part of the negotiation and at a lower rate but they usually aren't worth the extra money (I was offered one at $700 - a bargain, or so I was told). It would be better to put that $700 into a savings account and use it for any future repairs.
Be prepared
You can usually view the dealer's inventory online.
Make a note of expected costs of the vehicle you are looking at before negotiating:
Advertised vehicle price, taxes (depending on state but probably around 6-7% of sales price) fees for licensing etc. around $400 and down payment (your trade in can be your down payment).
Negotiating
Let them take a look at your trade in and find out what they are willing to pay. Using the range given on Kelley Blue Book you may be able to negotiate a higher price for your trade-in which in turn will lower the sales tax you have to pay and the overall price.
Note: if you are purchasing a used vehicle, ask for two sets of keys/remote as part of the negotiation. You will be shocked to find the keys for newer cars are $200-$300 so having a spare will save you money if you lose your key.
More about sales commissions here and here
Note: Check with your insurance company and find out what the
insurance would be on the newer vehicle. You don’t want to be surprised at the
increase in insurance that might not be in your budget. Call the insurance
company while at the dealership once you purchase the car, they may be able to
send an updated proof of insurance by fax or email so that you are covered when
you leave the lot.
