How to Get a Used Car Bargain Part Three

In Part One of How To Get a Used Car Bargain, we stressed the importance of deciding on your price range and arranging financing before you shop. We also told you how to identify good used cars that you could buy at bargain prices.

In Part Two, we showed you how to shop for used cars by locating several likely candidates you might want to buy. Then we showed you how to test-drive and evaluate the overall condition of these "target cars."

In this final installment, we'll look at how to negotiate for a used car, focusing on purchases that take place at car dealerships. (Negotiating with private-party sellers usually is quick and less stressful.) Then we'll show you how to cover all your bases before you sign on the dotted line.

Step 5: Negotiating for a Used Car

Just the word "negotiating" makes most people cringe. Add in "used cars" and some people run away in terror. But negotiating doesn't have to be a grueling experience. With the right preparation and a few simple rules, negotiating can actually be fun and exciting. If you strike a good deal, it gives you a great sense of satisfaction. And if you use Edmunds' True Market Value^® (TMV^®) pricing, it streamlines the process and allows you to avoid much of the haggling.

Here are three simple rules that should carry you safely through the negotiating process:

• Know the numbers before you begin negotiating.
• Always be ready to walk away from a deal you don't like.
• Make a low (but reasonable) offer and then sweeten the deal by raising it in small increments.

Rule 1: Know the Numbers

By now, you should know the approximate value of the used car you're considering. Before you leave for the car lot, print out the Edmunds.com TMV page for the used car you want to buy.

Just knowing this value will make you a better negotiator. After all, if a dealer is insisting a car is worth $14,000 but your research tells you it's worth only $12,000, you'll negotiate with more conviction.

The dealer will usually try to justify his asking price. But if you have looked up the TMV of the car on Edmunds.com and included all options and allowed for the mileage, you should be very close to the right price.

Rule 2: Always Be Ready To Walk

Don't get your heart too set on one particular vehicle, no matter what the dealer says about the current "sale" going on at the dealership. There's always more where that came from. If a dealer thinks you're in love with the car you just test-drove, you'll be in a weak position to negotiate. But if he thinks you might walk away without buying, you will have more leverage when the negotiating starts.

Open negotiations by saying, "I'm ready to buy today if we can reach an agreement on the price." A dealer is more apt to give you his best price if he feels he might have a solid sale right then and there, as opposed to throwing out a higher price to someone he thinks is just a tire kicker.

Rule 3: Make a Low Offer and Sweeten the Deal Slowly

The best way to explain this rule is to use some real numbers. Let's say the price of your target car is listed in the ad or on the window sticker as $12,700. If you've discovered that the used TMV for that car is actually $12,000 (dealer retail), you can start by offering a bit under TMV: say, $11,700. Don't worry if the salesman acts insulted; it's just part of the negotiation process. Starting lower leaves you some wiggle room to negotiate.

If the salesperson takes your offer to his manager, get up and leave the sales office. Go look at the cars in the showroom. Or go to the restroom. Or say you need to get something out of your car. It shows that you are a little unpredictable and won't be controlled. And it can help you make a good deal more quickly.

When the salesman returns from talking with his manager, one of the ways he may try to "meet" your offered price is by offering you dealer add-ons, like a LoJack contract or an extended service warranty. Unless you know that you wanted these extras in advance, turn them down.

He will also offer you dealer financing. If the rate he offers is better than what you've prearranged, that's great. But make sure you read and understand all the terms and fine print before agreeing.

If the salesperson still refuses your offer, raise your price to the TMV and show a printout of the TMV figure. The salesperson may counter with other valuations, such as citing the Kelley Blue Book price. Keep in mind that Kelley Blue Book shows "listing" prices that are being asked by dealers — not what they are really getting paid for the cars. TMV is a far more accurate reflection of the market value of a car and even most dealers have indicated that TMV is a fair price for both parties.

Be Ready for the Closer

Some dealerships use a "closer" when the initial salesperson can't make a deal. Typically, the closer tries to get a few hundred dollars more for the dealership. Or he tries to get the customer to agree to the last offer that the dealership made.

While the name "closer" sounds frightening, closers are often personable, skilled salespeople. While some may apply pressure, most will attempt to make a deal by reasoning with customers or cajoling them. Stay focused on the price you know to be the right one.

The closer may also bring out what's known as a "four-square" sheet, especially if you have a trade-in. The four-square can be confusing for the customer. But if you sell your current vehicle privately rather than trading it in, secure your own financing and know your ideal down payment and monthly payment, then you won't get caught off-guard by the four-square.

Step 6: Closing the Deal

It's likely that, after you have verbally agreed on a price, the salesperson or closer will extend his hand and say, "Congratulations! We have a deal!" Shake hands and agree to the deal, but keep in mind that nothing is binding until you sign the contract.

Several things need to happen before the deal is finished. First, depending on your state laws, you may need to show proof of insurance. You can arrange this in advance or on the spot by calling your insurance agent (bring their phone number with you to the dealership). Then you need to review and sign the contract and several related documents.

If you decide to accept the dealership's financing, you may get another pitch in the finance and insurance office for products such as an extended warranty. Some people prefer the peace of mind that such a warranty provides. But bear in mind that even extended warranty prices are negotiable, and many used cars still have the remainder of the factory warranty in effect.

Finally, your paperwork will be ready. You'll sign an agreement to furnish an insurance policy and perhaps a "Due Bill." The Due Bill would state what repairs, if any, the dealership had agreed to perform to the car during the negotiation process.

Then there's the actual sales contract. In addition to the purchase price of the car, here are some of the fees you can expect to pay:

• Documentation fee (varies from state to state)
• Smog fee certification, or other minor environmental fees
• Sales tax (varies by state, county and city)
• Motor vehicle registry fees (vary by state)

For more details on closing fees, read What Fees Should You Pay?

Reap the Rewards

Buying a used car requires more research and negotiating than does a new-car purchase. But if you follow these steps, the buying process can be fun. And the best part is that your used car will save you a lot of money in the years to come.