Are you in the market for a new car? If your answer is "yes", here is another questions: Do you feel scared walking in to a car dealerships for negotiations?
Some of you might say "not really", but believe me most of us feel overwhelmed just by the thought of dealing with car sales staff at a dealership. Why is it that car buying is a very different experience than anything else? This article is an attempt to help you negotiate the maze that your local dealership will throw at you when you show up to buy a new vehicle.

Our goal is to save you money, not to create a false sense that you will make a great deal after reading this article. Car buying could be a lot of fun and a good experience if you follow certain rules.

First of all let's set up some expectation boundaries. A car dealership is in the business of making money by selling cars. They will always make money regardless how smart you are or how much you know about the car you're buying. Sales staff at car dealership does this for living and they deal with all kind of customers on a daily basis, so experience is always going to be on their side. And let's face it, every car dealership is entitled to run a profitable business and they would not exist if everyone made a great deal and only paid factory price.

So you should know up front that there is always going to be a better price than what would you pay for a car. So don't stress out and try to make the best possible deal at "a point in time".

Now what could go wrong for a customer during a car deal? Well, if you watch reality TV, try to catch a few episodes of a show called "King of Cars". This show is about a Dodge dealership in Las Vegas and how a car dealership operates in general. Even though show is edited before it gets to you, you still get the idea.

Let's discuss some of the tricks of a car buying process and also point out some great tips that could save you money.

1. Do Your Homework - This should start even before you decide that you are going to buy a car. You should consider the reason why you need a new car. If your reason is emotional rather than a necessity, you should do even more homework because a car sales person can read you like a open book.

First of all, decide the make and model of the vehicle you're planning to purchase and leave yourself enough room to accommodate a different alternative if the deal with a certain make and model doesn't work out. If you have to have a certain make and model, collect as much information as you could on the vehicle. One of the example is a 4-cylinder and 6-cylinder model variation. If you're only going to use this vehicle for commuting to work, may be you could go with 4-cylinder model that could save you money on price and gas. So learn about the vehicle in advance. If you have friends and family members who own or have owned the model, ask for their feedback.

2. Know Your Credit Rating- I can not stress enough how important it is to know your credit score when you are shopping for a new or used car. Credit score or FICO score is what most finance companies use to evaluate their risk in providing you with a loan. You interest rate could vary as much as 6-12% based on your FICO score. So make sure you know up front what your score is and what kind of interest rate you should expect to get from a auto dealer.

3. Arrange an Auto Loan - Open an account with your local credit union. Credit unions are non-profit and they can usually offer you a better interest rate than your local bank.
Once you have an account opened, you can apply for an auto loan and get a rate quote. You don't have to have a vehicle picked out at this point. You just need to know the approximate price and use that for loan application. Some credit unions offer rate discounts for direct loan payment from your account. Find out if that's available and sign up for this option as it could save you as much as 0.25% on interest rate. You also need to figure out if you could put down 20% of price or arrange that money yourself. Reason is that credit unions give as much as 0.50% rate discount if loan value is 80% or less of the purchase price.

4. Get a Price Quote - Now let's assume that you have a loan approved and you know exactly what you want or at least have narrowed down to two or three vehicles in particular. Most car companies will allow you to build a vehicle to your specifications on their web sites and price it. So go online and figure out a MSRP price based on your options. Next step is to go to online car research web sites such as edmunds.com or kbb.com to figure out the invoice price of the vehicle. Invoice price is usually the price dealership pays for the vehicle.

Once you know the invoice and MSRP, make a list of the car dealerships in 200 miles radius who carry the vehicle you're interested in. Contact them with your configuration and request a price quote. Best part is that so far you have not met any of these folks in person, so no pressure to make a deal.

5. Negotiate on the price, not on the monthly payment  - If you watch "king of Cars", you'll notice that this is the biggest mistake most people make. They come in with a payment in mind, for example $400/month. They don't say a word on the car price as long as they can get it within their monthly budget. This makes is very simple for a car dealership. If they can't get your payment under $400/month for a 4-year loan, they will just stretch it to a 6-year loan and get you the payment. But you'll be paying lot more money in interest and more than likely will end up with negative equity when you try to sell or trade this vehicle in future. So please don't negotiate on the payment. Negotiate on the price and leave payment to your credit union. If you can't get a loan from a credit union, chances are that you have bad credit and dealership will make lot of money off you by offering you a credit card like interest rate. In short, auto loan from car dealership are rarely cheaper than what you could get elsewhere.

6. Don't start your negotiations with your trade-in - Usually you're better off selling your old vehicle yourself but if you don't want to deal with the hassle, you could definitely trade it it. Just don't tell dealership up front. First negotiate the price on the new vehicle and then bring in the trade-in. Also make sure your trade-in vehicle at least look decent from outside. Wash it and give it a good cleaning before bringing to the car dealership. If you don't value your property, trust me, dealership is not going to value it either. It is also a good idea to do research beforehand on the trade-in price and have some rough idea on how much to expect.

7. Put some Money down - No money down loans are expensive. During negotiations, dealership will also use it as a tool and will remind you every five-minute that there is no down payment and that will rattle you to their advantage. Also, remember that trade-in is not considered "down payment" in my definition. There is no substitute for showing up with some hard cash to have a deal work in your favor.

8. Dealer Installed Options - This is one of the method they use to make lot of money on a car sale. Rust proofing your car, putting a coat of paint protection or all other fancy things they will offer to do to keep your car in great condition for long time. Just say "no". First of all, you don't need them and even if you feel very strongly that you do, you could get them cheaper from independent shops.

9. Showing your weakness and/or urgency - When you go for car shopping, sales person will try everything possible to make you agree to a deal on the same day. There is absolutely no reason to do that. Listen to your car salesperson but take your time and use your judgment on the timing. Sometimes excitement could be overwhelming and people just want to leave in a new car. Resist your temptations and save yourself some money. Another important factor is showing your weakness. If you love a red color car, don't tell your salesperson the moment you see a red one. Remember, car salesperson has good skills to read you and sell you something. If he/she was not good at it, they would not be in the car business. So don't show them your weak side and get pounced on that weakness. Buying a car is an emotional decision for some people and car sales staff feed on these customers.

10. Pay Attention During Test Drive - Why does it matter? If you have already done your research and like a vehicle based on the options and features, why you need test drive? These are good questions, but remember there is no substitute for seeing and feeling something in person. Most of the time, people are already sold on a particular vehicle by the time the arrive at the dealership. If that is the case, sales person is quick to see it and he/she uses test drive as another opportunity to convince you with his sales pitch. Don't let this happen to you. So many people bought a vehicle because someone suggested it to them. You're buying a vehicle for your personal use so make sure you like the feel of the vehicle in motion. What is the point of buying a car if you're going to hate the thought of going to work in it? So make sure you take the test drive seriously. Do not forget to include highway run as part of your test drive. Sometimes a vehicle can feel very solid and stable at 30 mph but it is a totally different story at 70 mph.
Don't let salesperson or anyone else distract you during the test drive. Evaluate the features by putting them to test. Get the feeling how a car response to a sudden braking and steering response. Listen carefully to outside noise coming into passenger compartment. Is it too noisy? Does it get even more noisy during highway runs? These are the kind of questions you are trying to answer during test drive.
Do not show hurry to get back to dealership and if dealership has a set route for test driving, ask them to see if you could check some alternate routes, for example, a route with a rail road crossing. This a good test for a vehicle's suspension and how smooth is the ride.

11. Negotiate For Dealer Install Goodies/Freebies - Sometimes dealers car add some free stuff such as CD changer or spoiler to make a deal more attractive. Most dealerships have monthly sales targets to meet and towards the end of the month, they might be more willing to give you something "extra". You just need to remember to ask for it.
Another good example is floor mats. Almost any dealer would add them for free if you insist but if you forget, they could cost you as much as $150.