Negotiate--Even for a New Car
If you are going to buy a new car, log on to one of the automobile Internet sites to get a dealer's cost for the car you want. The dealer's cost, or invoice price, is the price that the manufacturer charges the dealer for the car. Expect that the dealer will not sell the car for less than his cost. A fair deal for you is to buy from the dealer at his cost plus 2 percent (Expect to pay $20,400 for a car that cost the dealer $20,000). If a car is very popular, you may have to pay more. However, if a car is not selling well, you may be able to get it for less. Factor in any manufacturer rebates or holdbacks-they give the dealer more room to negotiate.

Learning the Terms
Negotiations often have a vocabulary of their own. Here are some terms you may hear when you're discussing price.

The invoice price is the manufacturer's initial charge to the dealer. This is usually higher than the dealer's final cost because dealers receive rebates, allowances, discounts, and incentive awards. The invoice price should include freight (also known as destination and delivery). If you're buying a car based on the invoice price and if freight is already included, make sure freight isn't added again to the sales contract.

The base price is the cost of the car without options; it includes standard equipment and the factory warranty. This price is printed on the Monroney sticker.

The Monroney sticker shows the base price, the manufacturer's-installed options with the MSRP, the manufacturer's transportation charge, and the fuel economy (mileage). Affixed to the car window, the Monroney sticker is required by federal law and may be removed only by the purchaser. (It is named after the congressman who sponsored the legislation requiring its presence on new cars.)

The dealer sticker price, usually on a separate sticker, is the Monroney sticker price plus the suggested retail price of dealer-installed options, such as additional dealer markup or additional dealer profit, dealer preparation, and undercoating.

Rebates are now being offered to active military personnel, in addition to other manufacturer rebates (including young-driver and loyalty rebates).

Choosing the Car
With the price you are willing to pay fixed in your mind, it's time to visit a couple of the new car dealers that carry the car you would like to buy. Let the salesperson know that you are serious about buying a car and are shopping for the best deal. Test-drive the car you're interested in and check the options to see if they are important to you. Ask the salesperson for his best price—in writing.

Go to another dealer and repeat the process to get another price. Compare the prices and factor in another important consideration—the reputation of each dealer for customer service. Once you've struck the deal, you'll become a customer of the service department.

Buying a used car
A used car could be your best value. Get the price for a car or cars you like within your budget.

The majority of cars sold are used cars, and there are many places to shop. You can check the prices of cars that interest you on the Internet. All of the car manufacturers have Web sites. There are many car sites that will provide you with very helpful information about and comparisons of all makes and models of used cars, as well as current prices. Three of these sites are:

1. Edmunds
2. National Automobile Dealers' Association site
3. Automobile Association of America

These organizations publish the same information in printed form, as guides. You can find them at your local bookstore or library.

With so much information available, you can determine the reliability of the makes and models and the availability and the cost of the cars sold in your area. Compare these best deals to the new cars you have considered.

Check out new-car dealers, used-car deals, and the classified ads to see what cars are available. Check online for reliability ratings. Request service records from the owner or dealer. Ask what work or repairs have been done on the car and ask to see the receipts. If the car is under warranty, be sure to get that in writing.

Unless the car is certified by the dealer or is still under the manufacturer's warranty, take it to a mechanic for a full inspection. When you're satisfied that the car has no hidden problems, make an offer based on the fair market value. The dealer or car owner will have a lot of room to negotiate with you. Always be willing to walk away if you feel uncomfortable. The instant you are not ready to walk away, you are no longer negotiating, and you are no longer in conrol.

If You Have a Trade-In
There is one simple rule about trade-ins: don't discuss it until you've agreed upon a price for the new car. Use either the Edmunds or Kelley Blue Book site to check the value of your car. If your new-car dealer offers you a price close to the value of your trade-in, you'll appreciate the ease of accepting his offer. If the dealer doesn't see a profit in buying and selling your car, you won't be offered much for it, so you might want to skip the trade-in option and sell your car elsewhere.

Car Comparison Worksheet

Use this worksheet to figure out the cost of cars you are considering.

Information Sources
¹Check automobile prices at Edmunds, Kelley Blue Book, or NADA.
²Learn current automobile loan rates at BankRate.com or CNN.com.
³Compare car insurance rates at Insure.com.
⁴Get maintenance estimates at AAA or from Consumer Reports.

Considering a Service Contract
Service contracts provide for the repair of certain parts or problems. These contracts are offered by manufacturers, dealers, or independent companies and might provide coverage beyond the manufacturer's warranty. Remember that a warranty is included in the price of the car, while a service contract costs extra. Before deciding to purchase a service contract, read it carefully and consider these questions:

• What's the difference between the warranty coverage and the service contract?
• What repairs are covered?
• Is routine maintenance covered?
• Who pays for the labor? The parts?
• Who performs the repairs? Can repairs be made elsewhere?
• How long does the service contract last?
• What are the cancellation and refund policies?

Check with your auto insurance carrier to see if they sell extended warranties; most of the time these are less expensive and have nationwide coverage.