How to drive a hard car bargain

In the market for a new car this year? You may be able to get a great deal.

With car sales expected to remain down, many dealerships will be desperate for any sale they can get, said Danny Chan, CEO of AutoBrag.com, a car-shopping comparison Web site that compiles price data from no-haggle dealerships.

"Dealerships are hungry," Chan said.

J.D. Power and Associates is predicting that fewer than 15 million new cars will be sold this year, said Bob Schnorbus, the firm's chief economist. More than 16 million were sold in 2007. Economic conditions and low consumer confidence have caused many Americans to put car purchases on hold.

"Everyone is kind of in a holding pattern," said Philip Reed, Edmunds.com consumer advice editor. "Consumers, when they don't know what to do, tend to do nothing."

But even though dealers might be hungry to make a deal, don't expect that they'll give in to your lowball offers without a fight, Schnorbus said.

In response to the cutback in demand, manufacturers have curtailed production to reduce supply — a factor working against bargain hunters, Schnorbus said. Dealers are also cutting their orders to manufacturers, to reduce the expenses of carrying a large inventory.

Meanwhile, underwriting standards for car loans have gotten stricter.

And don't count on huge incentives to ease the sticker shock either, Schnorbus said. "I don't think that the auto companies are mentally or financially able to go back to wild incentive days."

That said, they may be willing to accept better deals and lower margins on car sales, while heavily promoting their service departments. But consumers had better do their homework before entering the showroom and be prepared to shop around.

"Buyers are in a reasonably good position to negotiate," Schnorbus said. "Competitive pressures over the last five years have made vehicles more affordable than they have been in decades."

Here are five tips on how to get a good deal on your new set of wheels:

1. HIT THE INTERNET

The Web has a wealth of automobile information that can help consumers know how much they should be paying for a car and what deals they can get.

AutoBrag.com tells consumers how much cars are selling for at actual no-haggle dealerships, and shoppers can use those quotes during their negotiation. At Edmunds.com, shoppers have access to information including the automobile's invoice price, the latest incentive offers and Edmunds' True Market Value calculation on each car. Ordering new-car pricing data at ConsumerReports.com is another approach.

Another way to use the Web: When you know what you want, e-mail a dealership's Internet sales manager (or pick up the phone) and make a deal based on online pricing data, said Jim Camp, a negotiation expert and author of the book "Start with No." Going straight to a manager cuts down on negotiation time and the number of people you have to talk with.

Deals can also be found by expanding your online search to dealers beyond your immediate area, Camp said. Even if the best deal is states away and the automobile needs to be transported to you, it may be worth the hassle.

2. KNOW WHAT YOU CAN AFFORD AND YOUR LOAN OPTIONS

Before negotiating, it's important to know exactly how much you can afford. But don't max out your budget, said Michael Royce, a former car salesman turned consumer advocate and owner of the site BeatTheCarSalesman.com. Sometimes people forget about the other expenses that come with a car, including insurance, so it helps to have a cushion.

Experts also advise not extending the term beyond five years to bring monthly payments down. More manufacturers and dealers are now offering 7-year car loans; for a $20,000 car, such a loan would rack up an additional $5,335 in interest, according to a calculation from LeaseTrader.com.

And investigate loan options before hitting the showroom. Often, credit unions offer favorable automobile financing, Chan said. If opting for dealer financing, make sure you know what interest rate you should be paying before signing, he said.

3. CONSIDER OLDER

MODEL YEARS

When the 2009 models come out and 2008 cars are still on the lot, the older new cars can be bought at a decent discount for good reason — their age will cause them to depreciate faster.

Two months before the release of the 2009 Toyota Camry, the 2008 model was being sold to consumers for an average of 5.3 percent below the manufacturer's suggested retail price (MSRP), Chan said. But by February 2008, when the new model was released, the 2008 model was being sold for an average 10.4 percent below MSRP.

For many people, it's even a better idea to buy a newer used car, Royce said. Given the shakiness of the economy, there could be more one- or two-year-old cars on the market because their owners have found they can't afford them; a buyer can benefit from the depreciation hit a car takes in that time. Research used-car prices online, too, at sites mentioned above, and also Kelley Blue Book (www.kbb.com).

4. NEGOTIATE BEFORE INCENTIVES

Get down to a good price before adding an incentive, even if adding a manufacturer's rebate pushes the price below invoice, Reed said.

In fact, keep each step of negotiation separate — negotiating the price before the financing and before the trade-in value, for example, Royce said. You'll often get the most for your vehicle if you sell it yourself. But if you decide to trade in your old vehicle, use the Internet to learn what it's worth.

5. DON'T CAVE TO PRESSURE

It's a buyer's market, so don't be intimidated. Do be aggressive in your negotiating, experts said. With fewer shoppers, remember that each customer coming in is more important to a dealer, Royce said.

If the salesmen won't budge and you can't get the price you want, be prepared to walk away and try another dealership, Chan said.

He also recommends not paying for extras such as paint protection; dealers often put a huge markup on this extra — among many others — and if you want such a thing you'd be better off having it done somewhere else.