The battle to get the price on your new vehicle starts long before you step in the showroom. Contrary to what your brother-in-law says, or your "friend in the business," buying a car for the best possible price takes time and research. What should you do before you even think of dropping by the local dealer? TheCarConnection.com recommends at least seven things before you sign on the dotted line:
Avoid six-year loans. These have become popular tools to get people into cars they might not otherwise be able to afford by lowering the monthly payment. However, stretching out the payments does not make the car more affordable in reality. The principal balance remains the same, and when you add in the interest/financing costs (and the depreciation in value over time of the car), people taking out six-year loans often end up "upside down" - owing substantially more on the loan than the car is worth. If you can't afford a car without buying into a six-year loan, buy a less expensive car.
Never talk monthly payment. Some people make the mistake of going into a dealership and telling the salesman they want to pay "no more than X dollars per month" - and the salesman is only too happy to oblige (see above). By focusing on the small picture (the monthly payment) you can easily lose track of the big picture (the total sale price plus finance charges). Focus on getting the best price for the car and the lowest possible financing first; worry about how much that works out to per month second.
Shop financing before you shop for the car. Even a great deal on a new car can be ruined if you buy into less-than-great financing. Before you start shopping for the car, you should look into how you'll pay for it. Many people have access to credit unions, which can offer more attractive rates than banks or the automakers' captive finance arms (GMAC, Ford Motor Credit, etc.). Never, ever go see the finance guy at the dealer without having looked into your options beforehand. Many people don't realize it, but you can haggle the financing just as you haggle the price of the car itself. Show the dealer's finance guy what your credit union (or bank) is offering and see if he'll beat it. If not, go with your best offer. A few calls now can save you a lot of grief later on.
Get an insurance quote before you commit to buy. This is another area where unforeseen "peripheral costs" can turn around and bite you. It can cost a great deal more to insure a high-performance sports car or expensive luxury sedan than an ordinary family-type car - especially if you have a ticket or two on your driving record. And in every case, it will add to the bottom line if you're trading in an eight-year-old beater for a brand-new anything. Since insurance costs can be as high as $1000 annually or more, it's important that you factor these outlays into the total cost of ownership before you commit to buying. Ditto annual fuel bills. Take the EPA estimates you find on the car's window sticker and fold that into your calculations as well. If the combined monthly outlay exceeds your comfort level, you'd be wise to look into a less expensive model.
Look into depreciation rates. If you plan to sell or trade your new car down the road, how well it holds its value should be an important consideration taken into account before you buy the thing in the first place. Some makes/models are absolute disasters, losing half their original value in three or four years. Some do much better; the industry average is roughly 20 percent annually. If you plan on driving it until the wheels fall off, higher-than-average depreciation won't matter much (and you can actually score a great deal on such a car new or slightly used, for that very reason). But if you want the car to have decent trade-in value five or six years from now, it will matter a great deal indeed. Researching online and consulting used car pricing guides will give you a very good idea about which brands and individual models tend to hold their value well. Or not so well.
Know your trade-in. Don't just focus on getting the best possible price on your next new car; be equally sure you know the fair market value of your current car - so that you don't get taken on the trade-in. Consult used car pricing guides (National Automobile Dealers Association, Kelly Blue Book, etc.) to find out the retail/wholesale price range for your vehicle. You want to get as close to the retail value (and as far from wholesale) as possible. It's also a smart move to thoroughly clean the car up, inside and out - to make it as presentable as possible. Bringing a dirty, sad-looking trade only gives the dealer ammunition to nitpick it to death - and throw a lowball offer your way.
Take it for a real test drive. Not just a quickie around the block - as many people make the mistake of doing. A short drive will not tell you how the seat will feel after a couple of hours on the road. And you won't know the car has inadequate power for safe merging/passing unless you take the time to do some freeway driving. Family members who will be spending time in the car should also get the chance to try the car out with you. Otherwise, you'll be living with their complaints (and maybe a sore backside if the seats turn out to be too hard) for the next several years. Insist on an at least an afternoon's test drive before you buy. Most dealers will accommodate this entirely reasonable request. If not, better to walk away and try someplace else. Otherwise, you're buying a pig in a poke.