Knowing what you want-or need-before you start making the rounds at dealerships can save both time and money. It's human nature to go looking for a practical family vehicle like a minivan, but be distracted in the showroom by a flashy sport sedan that costs more. Whatever the model, if emotion drives you to an impulsive purchase, you are likely to pay more and suffer regret later.

Automotive sales have been sluggish this year, with new-car sales up only 3 percent so far versus last year's figures according to Automotive News. Truck sales, however, are down 11.1 percent so far in 2006. Total vehicle sales at dealerships fell 2 percent in 2005 according to the National Automotive Dealer Association. Still, with so many brands and types of vehicles to choose from, consumers have more possibilities than ever so automakers have to fight for every sale.

Record-high incentives certainly help move the metal. Not only are automakers offering traditional incentives in the form of cute-rate financing and/or cash rebates, they're getting creative and luring customers with employee pricing programs and free gas cards. Many manufacturers are expected to continue offering tempting incentives on some or all of their models during the months ahead.

Getting Started
To get the right vehicle at the best price, it's more important than ever to do your homework before starting to shop. Begin with the basics.

Decide how much you can afford and how much you are willing to pay before you shop for a vehicle. If, like most consumers, you have to borrow money, shop for a loan before you shop for a vehicle. Consult the Monthly Payment Table to calculate what you'll have to pay each month. The Table lists how much you'd have to pay for each $1000 borrowed, based on the interest rate and term of the loan. For instance, if you borrow $10,000 for 4 years at 8 percent interest, your monthly payments would be $24.41 times 10, or $244.10. Borrowing that same amount at 8 percent for 3 years would raise the monthly payments to $313.40 ($31.34 times 10).

Keep in mind, too, that you'll probably need a down payment of about 20 percent (in the example above, about $2000), unless your trade-in is worth that much. The total of your loan, down payment, trade-in, and any factory rebate will have to cover the price of the car, as well as fees and sales tax. Your bank or credit union can discuss loan options and help you set a realistic price range that fits your means and budget. (See "Shop for Financing")

Buying a new car is a financial stretch for many consumers and out of reach for quite a few. Many have turned to used cars and others to leasing, hoping to avoid a hefty down payment and lower their monthly payment. (See "Lease or Buy-Which Is Better?")

As greater numbers of consumers wind up in bankruptcy or with insurmountable credit problems, even buying a used car becomes difficult. Credit-challenged customers are consigned to the rank of subprime buyers, who are obligated to pay interest rates far higher than the norm--assuming they can get credit at all.

More Facts Result in a Better Choice
Before visiting a dealership at all, gather as much additional information as you possibly can on the vehicles in your price range. Consumer Guide's Car & Truck Test offers prices, evaluations, and other valuable data for virtually all makes and models. Additionally, automakers' brochures and Internet sites can offer other pertinent details, such as exterior-color and interior-trim availability.

It's always a good idea to visit an auto show, if one is held in your area, because they present a rare opportunity to compare many makes and models side by side. If possible, rent or borrow the particular vehicle you're considering, so you can take an extended test drive.

Perhaps the right car for you is a truck. SUVs, minivans, and pickups are considered "light trucks," which account for more than half of new-vehicle sales. However, some of these vehicles are tall and/or long, so make sure the one you want will fit in your garage. In addition, shorter riders may have trouble entering and exiting tall trucks. Look over the specifications for the vehicle that interests you, and compare it to similar models.

Most trucks and SUVs offer four-wheel-drive systems, as do some cars and minivans. To help determine what kind of 4WD system is right for you, consult our four-wheel-drive report.

Whichever type of vehicle you choose, select a model with options that suit your needs, not just your desires.

Optional Equipment Choices
Some features may come as stand-alone options only. Or they may be included as part of higher trim levels and/or bundled with other items in specially discounted packages. Generally, it's best to choose the trim level that includes most or all of the features you desire, instead of equipping the base model with individual, costly options. On the other hand, if you wind up with added features you may not otherwise want, taking the higher trim level can be a lesser value.

Not all features may be available with all trim levels in a given vehicle line, and some features may only be ordered as part of an option package.

Be a Smart Shopper
Informed shoppers have an edge when negotiating price. To get the best deal, plan your moves and take your time.

Know what you want, but be flexible. Narrow your list to two or three models that best suit your needs and pocketbook.
Total the list and invoice prices for the models you're considering, including any options or option packages that you want, and add the delivery charge to both columns. If a manufacturer's rebate is advertised for a vehicle, deduct it from both the list and invoice totals. Your "target total" is the invoice price, though the final transaction will nearly always end up somewhere between the two figures. The final price will depend upon your knowledge of the vehicle, your ability to negotiate, and the salesperson's resolve.
Research your present vehicle's fair-market trade-in value ahead of time by checking published guides or consulting a local lending institution. A vehicle's trade-in value is expressed as its "wholesale" value (as opposed to the "retail" value, which would be a dealer's asking price if the car were placed on a lot). Some dealerships can provide access to trade-in values at Black Book Online, a web-based service from the Black Book, which is one of the price guides most often used by dealers.
You might want to "shop" your car or truck to a few dealerships' used-car departments. Ask each manager what the dealer would pay for your vehicle in an outright sale, and get the bids in writing. Keep in mind, however, that you can usually get more money for your car if you sell it yourself to a private party. Also, if a dealership isn't particularly interested in the vehicle that you have, the price offered is sure to be low.
Shop competing dealers to compare prices on the same vehicle, with the same or similar features. You're not likely to get the dealer's "best" price for a vehicle just by asking (you'll usually have to dicker to obtain it). Still, this can give you an idea of how willing the dealer is to negotiate. Never put a deposit on a car just to get a price quote.
Don't allow the salesperson to "steer" you toward a more expensive vehicle or a version that includes features you don't want.
Ask if the dealer has the vehicle in stock, exactly as you want it equipped. If not, ask if they can obtain one from a dealer in another area. Don't give the impression that you're "in love" with a particular vehicle, though. A well-trained salesperson can use your emotions to gain the upper hand in price negotiations.
Size up supply and demand for the car you want. A good deal on a slow-selling model might be below dealer invoice price, while a popular car can still command full suggested retail price or even more. Dealer inventories often tell the story. If you see large numbers of a certain model on the lot, it's probably not a hot seller.
If you have a trade-in, don't acknowledge this fact until you've secured a firm selling price on the new vehicle from a salesperson. This way, he or she won't be able to "inflate" the trade-in value by manipulating the selling price of the new vehicle. (Such "adjustments" can sometimes work to your advantage if you need a larger down payment to qualify for financing, but you need to be on your guard).
Never give your trade-in's keys to the salesperson. Your old car could wind up being held hostage while he or she pressures you to sign a sales contract on the spot.
Test-drive the exact car you've decided upon-before you buy. Think you want manual shift and a sport suspension? A 15-minute test drive might convince you to go with an automatic transmission and a softer suspension that produces a smoother ride.

Rebates and Incentives
Rebates and incentives are legitimate money-savers, and are likely to be available on plenty of models this year.

These incentives are placed on certain models for a specified period of time. They come three ways:

Cash rebates direct to the customer.
Low interest rates on loans (including zero-percent financing).
Cash incentives to the dealer to sell a particular car.

In each case, the manufacturer--not the dealer--is the source of this "generosity." Rebates are intended to spur sales of specific models that are already on dealers' lots, so they won't apply to a car you have "built to order." In fact, not many people order vehicles anymore, and many dealers aren't eager to complicate their lives by getting into custom-ordered models.

Cash rebates are often advertised. These consist of a check made out from the automaker to the buyer, and they can usually be applied to your down payment. As an alternative, you might qualify for a low-interest loan. Rates typically range from 0.9 to 7.9 percent APR (annual percentage rate), but they can be as low as zero-percent for shorter-term loans.

Only the best credit risks qualify for the lowest rates. If you have weak credit, or little credit history, the rate you'll be offered will be higher--often a lot higher.

Do the math to determine which is best: the low-interest loan or the cash in hand. Cash might sound good, but in some cases you could save more money in the long term with the low-interest loan.

Dealer incentives are trickier to learn about, but they're reported in trade magazines, such as Automotive News, and by some newspapers. We also publish them on-line in our new-car reports. Basically, a manufacturer is offering dealers specific amounts of cash to sell certain cars. Unless you want one of those particular models, these incentives won't apply to your purchase.

Remember that incentives come from the manufacturer, not the dealer. Don't allow a salesperson to use them as a means of "giving you a deal" on the final sale price.

Dealing with Dealers
Even if there are no rebates or incentives on a car, the dealer could probably sell it at invoice cost and still make a profit. It works like this: Many manufacturers refund to dealers a small percentage of the invoice price, such as 2 or 3 percent. These "holdbacks" are distributed to dealers as a lump sum several times a year.

Some dealers still cling to traditional hard-sell methods. Others take a kinder, gentler approach. If a specific dealer or salesperson makes you uncomfortable, look elsewhere. Buying a car should be a pleasant experience, so find a dealer that makes it one. Plenty of dealers these days are concerned about generating satisfied customers who may come back again later for another purchase.

Even at dealerships where the atmosphere is congenial, the salesperson's job is to make as much money as possible on each sale. Your quest as a consumer is to get the lowest possible price on the car you want. You need to find a happy medium between getting a good deal and allowing the salesperson a reasonable profit. Dealers are businesses, after all. If they don't make profits, they won't be around long.

When you're at the dealership, keep these tips in mind:

Dealers can make up to twice as much by selling financing, insurance, and add-ons than they make selling the vehicle itself. Popular moneymakers include rustproofing, paint sealant, "protection packages," anti-theft setups, powerful audio systems, and extended-service contracts. Dealers typically pay little for these and mark them up sharply. You can usually buy them elsewhere for less money--provided you need them at all, which is often not the case.
For a good deal, find a good dealer. Price is important, but it shouldn't be your only consideration. A dealership with a reputation for providing good service and giving customers the benefit of the doubt may deserve to charge more.
Ask friends and neighbors about their experiences with dealers. Your local Better Business Bureau can provide a Reliability Report, stating whether complaints have been filed against a specific dealership. Look for a pattern of complaints or for signs that problems remain unresolved. You don't want to do business with a poorly run dealership.
Notice how you're greeted when you arrive at a dealership, and whether the same salesperson stays with a customer through the entire transaction. Some pass customers off to a "closer" who specializes in high-pressure tactics.
Beware of dealers who slap a second price sticker onto every car, listing high-profit extras you may not want.
Look for salespeople who exhibit real product knowledge, don't just rattle off a set speech, and are neither pushy nor overly friendly. If you feel bulldozed or intimidated, shop elsewhere. You should expect--and get--professional treatment.
Some salespeople still treat female customers in a condescending manner. If you come across one, walk away and shop elsewhere.
Check out the service department of the dealership. Ask some people who are having their cars serviced if they've been happy with their buying experience and treatment after the sale.
Special-ordering the exact car and equipment you desire is usually possible only on domestic models. Dealers can search other dealers for the model you want and can sometimes install options once the car arrives. However, they seldom can--or will--order from the factory.
Dealers might add a separate charge for advertising. Challenge this extra fee.

Negotiating Step-by-Step
Once you're ready to negotiate in earnest with a salesperson, you'll probably be brought to a "closing room" off of the sales floor. If there's a choice, though, ask to stay in one of the cubicles in the showroom. Staying out in the open is generally less intimidating when you face an intense salesperson.

Start by making the first offer, which should be at or a little above the vehicle's invoice price, as stated earlier. Tell the salesperson how you arrived at this price. Explain that if he or she can meet it or come close, you'll close the deal on the spot.

Typically, the salesperson will respond with a counteroffer that will be slightly less than the vehicle's retail price. Next, raise your initial offer by incremental amounts of, say, one or two hundred dollars at a time. With each new figure, the salesperson will likely lower his or her price in the same manner.

At some point, the salesperson may leave to "present your offer to the sales manager" (though he may not actually do so). He or she will probably return with another bid. If it's close to your last offer, try standing firm; but if it's considerably higher, continue the negotiating process.

If the salesperson goes to "see the manager" a second time, his or her next counteroffer will probably be the dealership's lowest price on that day for that model. At this point, decide whether to accept the offer, leave and try another dealer, or keep negotiating.

Once you've reached an agreeable offer, bring up the subject of your trade-in and negotiate that price separately.

Getting the absolute lowest figure isn't always worth the aggravation, and can lead to hostility that may be troublesome later. If you show a little willingness to accept a close offer, you may be treated more courteously when you have to return to the dealership. That's human nature. Paying a few dollars more than rock-bottom isn't a tragedy when you're talking about a purchase that runs to many thousands of dollars.

Modern Ways To Shop
Do you hate to haggle? Here's how to minimize--or even skip--that sometimes-uncomfortable part of the new-car buying process. Alternative choices range from auto brokers and buyers' agents to buying clubs and online services. They operate differently, but these options usually offer a low-price, no-haggle approach to obtaining a new car or truck.

An auto broker works with a network of dealers to shop on behalf of the buyer for the best price on a new vehicle. A broker looks for a vehicle that comes closest to your color and equipment requirements while netting that dealership's lowest-price offer, which may be within a few hundred dollars of a car or truck's invoice price. A broker will also inform the buyer of any factory rebates or other promotions. Most brokers can assist with financing, trade-ins, and paperwork; and facilitate the final payment. Once the deal is finalized, the car can usually be picked up at the selling dealership or, for an extra fee, the broker will have it drop-shipped to a local dealer or even driven right to your front door. Note, however, that some states ban auto brokers.

Buying services work similarly to auto brokers, selling certain vehicles at deep discounts. Some operate through credit unions; others are affiliated with warehouse-club chains like Sam's Club and Costco. Many clubs will locate a participating dealer in your area that has the vehicle you're looking for and is willing to sell it to you at a predetermined price.

Buyers' agents generally charge a flat fee to the shopper, but get no reimbursement from dealers or other organizations. They simply act on your behalf, using their own resources and negotiating skills to get the vehicle you want at the lowest possible price.

Shoppers are Surfing the Web for Top Deals
Technology has already transformed the car buying process. Most of today's new-car buyers spend at least part of the shopping process on the computer, taking trips to "virtual showrooms" and gleaning valuable information from a variety of Internet sites.

Nearly every automaker has a Web site brimming with product information. Some entertain and inform. Many sites let you "build" your vehicle of choice, get retail prices, apply for a loan, and make an appointment with a dealership. Others are little more than online sales brochures.

More than 94 percent of the nation's 21,640 new-car dealers have a Web site, according to the National Automobile Dealers Association. On most, consumers can browse new- and used-vehicle inventories.

Generally, online buying sites enter into financial agreements with a number of auto dealers around the country that pay a fee to be a part of the service. Web sites transmit purchase requests to their participating dealers who respond with prices for that particular model. This means that if you use an alternate buying service, you'll probably still need to go to a dealership for a test drive, to complete the transaction (which may include the usual sales pitch for rustproofing, service contracts, option packages, and other add-ons), and to take delivery.

Some people do purchase vehicles directly over the Internet, without setting foot in a dealership, but they're comparative rarities. Analysts don't foresee this trend growing substantially--especially since a test-drive is essential. If you've already driven the type of car that interests you, however, it is possible to arrange all details of a deal without ever leaving the computer.

Web shopping is convenient, but research shows the price you receive over the Internet may not be the lowest available. Shop around--online and/or in person--to get the best deal.

Remember, much of the preliminary work of buying a new car can be done online, but there is no replacement for spending time walking dealer lots. While a resource like the Internet or a book like those published by Consumer Guide can prepare you for shopping, they are not substitutes for touching and driving a vehicle you are considering.

Federal Taxes and Incentives
Uncle Sam has ways of encouraging you to save fuel. A federal gas-guzzler tax is levied on cars that average less than 21.5 mpg in combined city/highway driving based on the EPA's fuel economy estimates. The worst guzzlers, those that average less than 12.5 mpg, are assessed $7700. This tax does not apply to light trucks, including SUVs and vans.

On the other hand, buyers of "hybrid-powered" vehicles are eligible for a federal tax credit of up to $3400. This credit is new for the 2006 tax year and depends on a variety of factors like when you purchased your hybrid, how much fuel it uses, and how much fuel it saves within the vehicle class.

Before You Sign the Contract
Buying a new set of wheels is a big event. Rushing to complete the deal may be tempting, but it invites a dealer to take advantage of you. Make sure you understand every charge you're being assessed.

Before you sign anything, read the entire contract. Be certain you understand exactly what you're buying. The salesperson will likely pressure you to sign the legally binding contract on the spot. You may be in a hurry because you're eager to drive off in your new car, but once you sign that document, it's difficult, if not impossible, to get it changed. A little time spent reading now can save you a sizable amount of money later.

If in doubt, take the contract home. Go over it at your own pace, and contact the dealer if you have any questions. If a dealer doesn't want you to take the contract home, get a written purchase agreement that spells out all the details. Once you're satisfied with that agreement, it can be written into a contract. If a dealer won't provide either, it's probably best to walk away from the deal.

Here's what a contract should spell out:

Sale price: The amount you've agreed to pay for the car and optional equipment, plus any dealer-installed accessories.
Down payment: How much you have to pay immediately, either in cash or combined with a trade-in and/or rebate.
Trade-in value: The amount of money you're getting for your old car or truck, to be applied to the new-vehicle purchase.
Destination charge: Sometimes called freight, this is the cost of shipping the car to the dealer. Every vehicle has a specific, non-negotiable destination charge.
Sales tax: Check with your state or local government to determine how tax is assessed in your area. Most states levy sales tax on the full purchase price of the new vehicle. In some states, sales tax is calculated on the net price after trade-in value has been deducted.
Total cost: Be sure the all-important "bottom line" is filled in, so you know your total price including options, accessories, destination charge, dealer prep, and taxes. If a dealer leaves this portion of the contract blank, you can end up paying more than you had expected.
Loans: Federal regulations require lenders to disclose all charges. Be sure you know how much you're borrowing, the interest rate, your monthly payment, the length of the loan (in months), and the total amount you will pay over the life of the loan.
Don't be swayed by low monthly payments if they result in paying a higher total price than is warranted. Too many shoppers think of little beyond the monthly payment, and are easy prey for salespeople who adjust figures to fit that requirement, but which wind up with a far greater total price paid by the end of the contract term.

Is a Pre-Owned Vehicle Best for You?
One way to avoid the high cost of a new car or truck is to buy a used model instead. Almost 20 million used vehicles were sold at new-car dealerships during 2005 according to the National Automobile Dealers Association. Millions more vehicles changed hands in private transactions and at independent used-car dealers.

Buying a secondhand vehicle always carries some risk, and only some of them include a warranty. To counteract that concern, almost all automakers have certification programs that operate through their dealers. Programs vary, but only vehicles up to a certain age with less than a specified number of miles on the odometer are certifiable. Each is given a thorough inspection at the dealership, according to manufacturer directives. Additional warranty coverage is included. Certified used cars cost more, but many consumers are willing to pay extra for the added peace of mind they provide.

The Bottom Line
No matter what type of vehicle you are planning on buying, take the time to compare ownership costs. Consider factors such as insurance premiums, resale values, and fuel economy--including whether the vehicle requires costlier premium gasoline. Compare financing rates from local lenders to find the best deals on new-car loans. The difference in such costs can add hundreds--even thousands--of dollars to your final purchase price in the long run.