How to negotiate a car price
Eliminate the car salesman's advantage
Alright, you want to buy a new or used car. You walk into a dealership, and you're already at a disadvantage. Why is this? Well, car salesman are pros at selling cars. Are you a professional car buyer? I didn't think so. They will get you to want what they have, and then they'll try to get you to pay what they want you to pay. If you have a trade in car to offer, they'll get you to value your car less and accept less money than it's worth. Finally, they'll try to screw you over on the financing. Let me explain how you can eliminate these disadvantages and get the car you want for a fair price.
Step 1: Get credit before entering the dealership
You don't to get your car loan financing from the car dealership, and in most cases you probably shouldn't. Go to a bank or credit union and tell them you want to buy a car and you'll need a car loan. Tell them about what you expect to pay and see what rate they'll offer you for a car loan in that amount. This rate is generally going to be lower than the rate the dealership will offer you. Also, but getting a quote for a loan for a specific amount, you can prevent the car salesman from trying to "up-sale" you on a more expensive product. You can't buy a $30,000 car when you're only approved for a $20,000 loan.
Research the car you have and the car you want
Find the Kelly Blue Book (KBB) value of any car you plan on trading in (go by the "good" value if your car is in mint condition, because no dealership will give you "excellent" condition value). Be honest with yourself, is your car really in fantastic condition? If not, lower the grade of the car's condition. Also, if your car does not have a clear title or has a salvage title you have to deduct significantly for that, because the CarFax won't come back clear and dealerships don't like that.
Also find the KBB for the car you plan to buy. Use the excellent or good value. When you actually get a chance to drive the vehicle or take a close look at it you can begin to scrutinize every detail to lower them down from the excellent value. KBB will also be able to tell you the car's invoice price. Make sure to bring that with you, because it takes away a big salesman advantage when they can act like they won't be making any money if they sell you the car at a certain price. You'll know exactly what they're making.
Make car dealerships compete with each other
Here's my favorite trick. Once you know your target car's invoice price, email several different dealerships and ask them if they have any available for X dollars above invoice. Leave your phone number, but if they call you up and offer you a certain car at a certain price, tell them to email that offer to you so you can have the offer in writing before walking in. Print that email and take it with you.
This trick works even though it often means a dealership is selling a car at far less than they normally would. It's a no-effort sale for them, because you set all the terms in the original email. Also, you can take an offer from one dealer and forward it to another to see if they can beat it. You'll be surprised at how often they can. This works especially well with new cars from the previous model year that dealers need to get off their lots. The longer those cars stick around, the closer to invoice they'll be willing to sell it for. By doing this all through email you avoid a common salesman lie: "oh, we've been selling lots of those cars. I can hardly keep them on the lot". They will never tell you that a car isn't selling well and they need to move it fast.
Be a "Debbie Downer"
You might be exciting about the car you're buying, but don't act that way. When you test drive it, scrutinize every detail about the vehicle. If the dashboard buttons are oddly placed, mention it. If the seats aren't comfortable, mention it. They aren't going to change the car for you, but it will weaken their negotiating advantage. Salesmen love excited car buyers, because they make stupid mistakes and end up paying way too much.
Be willing to walk away from a deal
My number one tip for the car buyer is be willing to walk away. If the deal isn't what you hoped for or the salesman has changed something, just tell him you've got to go. I've known people who bring egg timers with them and set them to 10 minutes and tell the dealer if they don't have a deal to agree upon in that time they're walking out. For the less dramatic, you can just warn the dealer that you've got an appointment in a certain amount of time. This takes away a common dealer trick: making you sit around at the dealership all day until you crack and give in. As long as they have your contact info, you can walk away and still end up with the deal you want. They will very often contact you a short time after walking out on a deal and offer you something better to get you to come back in.