Part One: Identifying Your Target Cars & Arranging Financing
Edmunds Editors Philip Reed and John DiPietro recently shopped for the best used family sedan they could buy in the $11,000 to $13,000 range. Their findings were the basis for this three part series.

When you go car shopping, the first question you are likely to run into is this: Should you buy a new or a used car?

New cars are a shock to your budget, but they will probably be trouble-free for several years.

Used cars cost less, but how can you be certain you're not buying someone else's problems?

Here at Edmunds, we spend much of our time dispensing advice on new car buying. But there is a huge used car market. In 2006, for example, an estimated 44 million used cars will be sold as compared to an estimated 17 million new cars. While the average sale price of a used car is estimated at about $13,900, the average price of a new car is estimated at roughly $27,800.

It's often said that there is a steep decline in the car's value in just the first year of the car's life — from 20 to 30 percent. In other words, that car that was worth $21,800 when it was new can be purchased only a year later for as little as $15,260. That's a savings between $4,360 and $6,540. This is proof that the consumer pays dearly for that new car smell.

You might be thinking that all of this sounds good in theory. But what's happening in the real world? Well, we decided to find out.

A Test Case
Edmunds editors Phil Reed and John DiPietro decided they would be guinea pigs in the used car buying process. Phil actually needed a car to replace the one he just sold. So he decided to get the best car he could for between $11,000 and $13,000.

True, there are new cars that could be purchased in this price range. But by buying used, Phil felt he could get "more" car for less money. By purchasing a used car, he would be able to get a loaded mid-size model instead of a new, stripped "econobox." Besides that, buying a used car that was still under factory warranty could offset much of the uncertainty of buying a used car.

In this three-part series, we're not only going to give you a system for buying used cars, we're also going to tell you how the Edmunds editors faired when putting this system to a real market test.
(You may also want to read Edmunds.com's 10 Steps to Buying a Used car)

Step 1: Identifying Your Target Cars
John has coined a term he uses to describe good cars that are often overlooked. These are not the "staples" in a given segment and thus can be bought at bargain prices: Dark Horse Cars. While this is a mixed metaphor, it describes a type of car that bargain hunters should be aware of. Dark horse cars are virtually as good as the well-known cars — most notably Toyota and Honda — but you don't have to pay for the name.

In Phil's case, he would have preferred buying a Honda Accord or a Toyota Camry. But by shopping for a Nissan Altima, a Mazda 626 or a Mitsubishi Galant, he hoped to save about 20 percent, while still getting a well-built and reliable car.

In whatever class of vehicle you are shopping for, whether it is SUVs, pickup trucks or economy cars, there are the leading brands for which you will have to pay a premium price. But if you are willing to consider the competitors, you will save yourself a bundle.

Check the "Edmunds Rating"
As you build a list of cars to consider — the dark horse cars — check the Edmunds Rating bar graphs found on the used car pages. This will show how the car is rated in the categories of safety, reliability, performance, comfort and value. The results are then combined to give an overall rating for each car.

Using this method, you should select a list of three target cars to shop for. Write down the Edmunds.com True Market Value® prices for each vehicle with the anticipated mileage. Keep in mind that cars typically have accumulated about 12,000 to 15,000 miles per year. Anything over this mileage reduces the value of the car; anything less increases the car's value. Select the option marked "Appraise this Vehicle" to generate the adjusted True Market Value prices.

In Phil's case, his target cars were all 1999 models: the Altima, the Galant and the 626. The prices of a Galant and a 626 with about 30,000 miles were about $12,200; a similarly configured Altima was about $13,300. These were the dealer retail prices listed on the TMV® pages of the Used Vehicle Appraiser. Phil printed out these pages for John and himself to take with them when they went shopping later in the process.

Step 2: Arranging Financing Before You Shop
If you can pay cash for your car, you can skip this step. If you are like most people and need to borrow money to buy a car, continue reading.
Begin this step by considering what car payment would comfortably fit into your monthly budget. Once you know this figure and how much you can put as a down payment, you will know how much you need to borrow.

Take your estimated car payment and multiply it by the length of the loan (we recommend 36 or 48 month loans for used cars). For example, you want to have a $250 monthly payment: $250 X 48 = $12,000.

Add to this, the amount of your down payment. For example, you have a $2,000 down payment. That would be $12,000 + $2,000 = $14,000. This is the amount of the car you can afford before interest, tax and fees.

Now, compare interest rates at lending institutions for the same term loans
Using our payment calculator plug in the estimated price of the car you can afford and the best interest rate you have found. Adjust the vehicle price, until you reach the monthly payment you want. In this example, with a monthly payment of $256, at 8 percent, you could afford to buy a $12,500 car. Keep in mind this figure does not include tax and fees, which will vary from state to state.

If you arrange financing before you go to the dealership, you are in a much stronger position to negotiate. This important step presents a number of advantages because it:

- Keeps negotiations simple in the dealership
- Allows you to shop competitive interest rates ahead of time
- Removes dependency on dealership financing
- Encourages you to stick to your budgeted amount

While you may sometimes be able to lease a used vehicle, most people go the more traditional route of taking out a bank loan and buying the car. In Phil's case, he decided to borrow from an online lender that takes applications over the Internet. They then call within 15 minutes to let you know if the loan is approved.
Phil had about $4,000 as a down payment, so he applied for a loan of $8,000 at 8.44 percent.

True to the company's promise, a representative from PeopleFirst.com called within 15 minutes to confirm that the loan was approved. A check was express-mailed to his house the next day, a Saturday. The check could be made payable to any new car dealer and was good for 30 days. If, at the end of this period, the check wasn't used, there was no further obligation.
With financing in hand, Phil was ready to move on to the next part of the used car buying phase.

A Preview of Part Two
In the second part of this series, we'll discuss Steps 3 and 4: how to locate your target cars and how to test-drive and evaluate them. Then, in the third and final article, we'll show you how to negotiate effectively and how to close the deal successfully.

Part Two: Locating and Test-Driving Your Target Cars
Edmunds Editors Philip Reed and John DiPietro recently shopped for the best used family sedan they could buy in the $11,000 to $13,000 range. Their findings were the basis for this three-part series.

In the first article, we told you how to identify good used cars that could be bought at bargain prices. We also stressed the importance of arranging financing before going to the dealership or buying from a private party.

In this section, we get to do the fun part of used car shopping: We will locate several likely candidates. Then, we will test-drive and evaluate the mechanical condition of these so-called "target cars."

Step 3: Locate Your Target Cars
Your goal is to locate three cars that seem to fit the criteria you are searching for. Why three cars? If you have a number of cars to choose from, you are in a stronger position when it comes time to bargain. If your top choice falls through, you have a fallback position. You won't be emotionally tied to one car.
Your search should be conducted using a number of different sources:

- Online classified ads such as those on Edmunds.com and AutoTrader.com
- Daily newspaper classified ads
- Weekly shoppers and giveaway papers
- Listings on college and business bulletin boards
- Word of mouth -- ask all your friends if they know of any good used cars for sale

The Internet is a powerful tool for finding a good used car. Once you have configured the car you want through the Edmunds.com used car section, you can type in your zip code and read a list of classified ads of cars for sale in your area. Many of these ads are for cars on dealership lots. Or try using AutoTrader.com, which brings you a mixture of dealer and private party ads.

Private Party Vs. Dealership
Buying a used car from a private party is a very different experience from purchasing through a dealership or a used car lot. Many people are intimidated by the dealership experience, fearing pushy salesmen and professional negotiators. But here are several advantages offered by shopping for a used car at a new car dealership:

- A wide selection -- the dealership might have two or more cars you're considering
- Increased availability -- dealerships have hours that suit your schedule
- Financing -- if your credit is weak, a dealership might still finance your loan
- Potential bargains -- private party prices are usually lower, but there are still bargains on the lot, particularly at the end of the month
- Certified Used Cars - a dealership can sell you a certified used vehicle that has many of the same benefits as buying a new car

On the other hand, buying a used car from a private party offers these advantages:

- Low price -- a dealership marks up used cars to recoup its overhead
- Low-keyed negotiations -- you are dealing with an amateur, not a pro
- Accountability -- the previous owner usually has the car's service records
- Trustworthiness -- a private owner probably won't cover up mechanical problems

While the Internet has come of age and presents a lot of flexibility in searching for a used car, you should still check the newspaper. John and Phil found that there were cars listed in the newspaper that weren't found online. When shopping for a used car, take advantage of every source in finding the right car for you.
In Phil's case, he extensively searched the online ads. Once he had built a list of prospects, he called each source -- private party and dealership -- with a list of questions.

Use the Phone to Prequalify Your Target Cars
There are a number of questions you should ask about each car before you take the time to test-drive it. Some information may already be listed in the ads, but it is important to verify the facts. You might consider creating a form for yourself to keep track of the different cars you call about.

Below is the form that Phil and John used when shopping for a used car. You might want to modify it for your target vehicle. But be sure to take careful notes, because different cars blur together after a few days of shopping.

Used Car Question Sheet
There are many other questions that can be asked about the condition of a used car. But some of these should be saved for the test drive, when you are really serious about buying the car. The questions listed above are the basics.
Once you have found three cars that seem to match your needs, it's time to test-drive them. Phil located a 2000 Mazda 626 with 24,000 miles on a Hertz Car Sales lot that matched his requirements. It was being offered at $12,595. This is well below the Edmunds.com True Market Value®, (TMV®) Dealer Retail price of $13,391). He called and asked the above questions. It sounded like what he was looking for, so he made an appointment to test-drive the car.

Step 4. Test-Driving a Used Car
If you test-drive a car, you are usually pretty serious about buying it. This is well known in the new car buying process where veteran salespeople say, "The feel of the wheel will seal the deal." In other words, if you drive the car, you'll fall in love with it and buy it. But you should not become emotionally attached to the car; your focus is on evaluating the vehicle.

Evaluating cars breaks into two main considerations:
Do you like the car? It could be a good car, but maybe you don't like the color, the interior or the options. It might not have enough legroom or headroom. You might decide you don't like the styling. But once you've decided you like the car, then you need to ask:

Is the car in mechanically sound condition?
In other words, if you go to look at a used car and find you like it and want to buy it, that's the easy part. Now you need to turn off your emotional side and become technical. At this point, a lot of people might throw up their hands in despair and say, "But I don't know anything about cars!" You can work around this problem by exploring the following options.

Certified Used Cars
You might want to consider buying a certified used car that has been inspected and is in good running order. Furthermore, if anything does go wrong with the car within the period of the warranty, it will be fixed for free. This means that if you are considering buying a certified used car, and it appears to be in good condition, you don't have to do any further checking to make sure it will be reliable.

Certified used cars are usually found on new car lots. Take Volkswagen, for example. Its certified used cars are subject to a 112-point inspection. VW then certifies the car with a two-year/24,000-mile limited warranty that even includes a roadside assistance program. At Edmunds, we bought a certified used 1999 Passat GLS. Four months later, it overheated. The repairs (not extensive) were covered by the warranty.

While buying a certified used car removes a lot of the guesswork about the vehicle's mechanical condition, you pay for this service. Certified used cars that sell in the $10,000 to $20,000 range are estimated to be $500 to $1,000 more expensive. So the real bargains actually fall into another class that we will talk about next.

Used Cars Still Under Warranty
Most new cars are sold with a three-year/36,000-mile warranty. Therefore, if you buy a car that is from one to three years old, it will still be under the factory warranty. For example, if you buy a car that is one year old, with only 15,000 miles on it, you have two years and 21,000 miles remaining on the warranty. And if there is anything wrong with the car when you bought it, the problem will be fixed for free.

How can you use this to your advantage? Here's what John and Phil did. They drove to the Hertz used car lot to see the 2000 Mazda 626. The salesman there let them take the car for a test drive unescorted. They drove the car under a variety of situations (a checklist is included below) then parked on a quiet side street. They looked under the hood, poked and pried and inspected the car as thoroughly as they could. It appeared to be well maintained and in excellent condition. Furthermore, if anything were to go wrong, they knew the warranty would pay for their oversight.

Take the Car to a Mechanic
If you are serious about buying a used car and have doubts about its condition, take it to a mechanic you trust. A private party will probably allow you to do this without much resistance. And this option was offered to Phil at the Hertz car lot. However, some new car dealerships may resist letting you take the car off their lot. If it is a certified used car, there is no reason to take it to a mechanic. If it is still under the new car warranty and it appears to be in good condition, you might also decide this is unnecessary.

What can a mechanic find that you can't spot on your own? For one thing, the mechanic will put the car up on a lift. Oil or fluid leaks are easier to spot. The mechanic might also do a compression check that would show engine wear. And finally, the mechanic's expert eye might spot a problem you overlooked.
There is a lot to cover when evaluating and test-driving a used car. A complete list of what to look for is found under this section of our Used Car Buying Tutorial. Here, though, are a few general recommendations.

Look at the Big Picture First
Before you drive the car, do a "walk-around." Look at the Big Picture First: Crouch next to the front bumper and sight along the lines of the car. Make sure there are no ripples in the door panels and that the gaps between the doors and along the hood are even.

Open all the doors and the trunk. Test all the lights, controls, heater and air conditioner. Open the hood and make sure there are no leaks or sprays on the underside of the hood lining that would indicate a burst hose or fluid leak. With the engine running, listen for noises that might indicate a mechanical problem.

Test-Driving Used Cars
Once you get behind the wheel, your first impression will be the way the car feels when you sit in it. Is it a good fit? Are the headroom and legroom sufficient? Are the gauges and controls laid out conveniently?

Before you start driving, adjust the seat, the mirrors and the seatbelt. Ask yourself if it would be a comfortable car to take on a long trip.

Turn off the radio before you begin driving. For now, you want to hear the engine and concentrate on the driving experience.

On the test drive, evaluate these specific points:
- Acceleration from a stop
- Visibility (Check for blind spots)
- Engine noise
- Passing acceleration (Does it downshift quickly?)
- Hill-climbing power
- Braking
- Cornering
- Suspension (How does it ride?)
- Seat comfort and ergonomics
- Rattles and squeaks
- Interior controls
- Audio system
- Cargo space

Should You Buy a Used Rental Car?
As previously mentioned, Phil's search led him to the Hertz used car lot. Conventional wisdom has warned buyers not to purchase used rental cars. It is assumed that these cars have been abused by drivers renting the cars. However, prices at rental car lots are extremely low; the warranties are still in effect; and anecdotal evidence in Edmunds Town Hall reports few problems with such purchases. Furthermore, the Hertz lot was no haggle, or fixed pricing.

Did no haggle really mean they wouldn't negotiate? Phil tried offering $11,800 for the 626 priced at $12,595. The salesman said pricing was set by their corporate office and refused to budge. They made a deal and a purchase order was drawn up. However, Phil's check from PeopleFirst was refused by the salesman. When PeopleFirst was contacted, the representative volunteered to send out a cashier's check immediately. It was decided that the Mazda 626 would be held for Phil for four days until the cashier's check arrived.

However, Phil decided to keep shopping while the financing was arranged.
The next day, Phil saw one of his target cars, a 2000 Mitsubishi Galant ES advertised in the newspaper for $12,500. He called the number and found it was at an Acura dealership in Southern California. They drove there, test-drove the car and Phil discovered he liked it much better than the Mazda 626. Since he already had a deal set up, he had nothing to lose by trying to beat the price and get the Galant.

Preview of Part Three — Negotiating for a Used Car & Closing the Deal
In the final part of this series, we'll look at the most difficult step for many people: negotiating. And you'll see how John and Phil did in this department. Then, when the haggling is done, you need to make sure you cover all the bases before you sign on the dotted line.

Part Three: Negotiating and Closing the Deal
Edmunds.com editors Philip Reed and John DiPietro recently shopped for the best used family sedan they could buy in the $11,000 to $13,000 range. Their findings were the basis for this three-part series.

In the first article, we told you how to identify good used cars that could be bought at bargain prices. We also stressed the importance of arranging financing before going to the dealership or buying from a private party.

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

In this final installment, we'll look at how to negotiate for a used car (you'll get to see how John and Phil handled this phase). Then, when a deal is reached, you'll need to make sure you cover all your bases before you sign on the dotted line.

Negotiating for a Used Car

Negotiating.
The very word makes most people cringe. Add the words used cars, and some people run in terror. But negotiating doesn't have to be a grueling experience. With the right preparation and a few simple rules, negotiating can be fun and exciting. And if you make a good deal, it gives you a great sense of satisfaction.

There are different negotiating styles for different personalities. And if you use Edmunds.com True Market Value® pricing, you can avoid much of the haggling. We'll address this point in more detail later.

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 offer and sweeten the deal by small increments
- Let's look at each step in more detail.

Rule 1: Know the Numbers
By now, you should know the approximate value of the used car you're considering. Just knowing this value will make you a better negotiator. After all, if you know the car is worth only $12,000 and the dealer is insisting it's worth $14,000, it will be difficult for him to convince you to buy it.

Rest assured that the dealer will give you all kinds of reasons to justify his price. The dealership's overhead is expensive, they had to clean or repair the car, your Internet figures are "way off," and the like. 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.

Before you leave for the car lot, you should print out Edmunds.com True Market Value page for the used car you want to buy. If you have been shopping for some time, you will have also gained first-hand knowledge of car prices in your area. Then when you spot the right car, at a good price, you can make a competitive offer.

Rule 2: Always Be Ready to Walk
If a dealer knows you are in love with the car you just test-drove, you will be in a weak position to negotiate. But if he thinks you might walk away without buying, he will treat you carefully. Open negotiations by saying, "I'm ready to buy today if we can reach an agreement on the price." With this phrase, you are striking just the right balance. Why? You are letting the dealer know that you're serious about buying a car, not just "kicking tires." 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 a higher price out to someone whom he feels is just wasting the dealership's time.

There are people who say that the best way to get a good deal on a used car is to walk out three times. We don't believe the process has to be that drawn out. And it doesn't have to be confrontational either. But you do need to let the dealer know that you will walk out if you don't get the price you want.

Jumping ahead a little, here's a simple tip. After you've made your offer to the salesperson, and he's taking your offer to his manager, get up and leave the sales room. It shows that you don't feel under obligation to remain under their control. Go look at the cars in the show room. Or go to the restroom. Or tell them you need to get something out of your car. It's a little show of force that will help you make a good deal.

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 return to the car-buying exploits of Edmunds.com editors John DiPietro and Phil Reed.
John and Phil had located a 2000 Mazda 626 LX for $12,595. When Phil's financing was delayed, they continued shopping and spotted a newspaper ad for a 2000 Mitsubishi Galant ES, with 19,000 miles for $12,500. They were curious to see if they could get the Mitsubishi for a substantially lower price than the Mazda.

Phil called the number listed in the ad and learned the Mitsubishi was at an Acura dealership in Southern California. Although the price was listed as $12,500 he asked the dealer what it was selling for. "We have it listed for $12,995," the dealer said. When Phil said it was listed in the newspaper at $12,500, the dealer corrected himself. "We haven't got the new listings yet," he explained. "Anyway, it's the end of the month. And the car's been on the lot a long time. So come on down and take advantage of me."

Using "CarFax"
A valuable resource when used car shopping is the service known as CarFax. If you enter a car's Vehicle Identification Number (VIN number) you can obtain a report of the car's history. Most significantly, you will find if it has a "salvage title." This means an insurance company, probably because of an accident, considered it a total loss. But you may also learn if there were any recalls and how many owners the car has had.

The CarFax service costs $14.95 for a single car. But you can get an unlimited number of reports during a two-month period for $19.95. Our recommendation is that you initiate this service at the beginning of your car buying process and check every car before you seriously consider buying it.

Phil and John drove to the Acura dealership and test-drove the Mitsubishi. Together, they inspected the car as carefully as possible without taking it to a mechanic. (In part two, we explained that if a car is still under factory warranty, has been well-maintained and has a solid reliability record, it isn't essential to take it to a mechanic before buying it. However, if you have doubts about the car's mechanical condition or don't feel confident evaluating this yourself, have it inspected by a mechanic.)

Making an Opening Offer
When the salesman was out of earshot, Phil and John decided they would try to get the car for $11,800 and open by offering $11,500. When the salesman returned Phil told him he was ready to make an offer on the car. He explained that they had already made a deal on a Mazda 626 LX at another lot. The deal on the Mazda was for $12,595, and he really liked that car. But he said he also liked the Mitsubishi and would buy it if the price were an improvement over the Mazda. Therefore, he said, he was willing to pay $11,500.

The salesman received the offer with a puzzled frown. He asked if the offer was "out the door." Or was it before tax and license? "Before tax and license fees," Phil said. The salesman invited them inside, and they went into a sales room. The salesman pulled out a "four square" worksheet (used by car salesmen to negotiate) and asked a series of questions. Phil had already stated that he was a cash buyer, with no trade-in, so this step was simple.

The salesman began searching for a way to make the deal more attractive to the sales manager. Did Phil want to buy Lo Jack or an extended service warranty? He declined both of these offers.

Finally, John said, "We know this is below your asking price. But take it in to your boss and see what happens." The salesman left. While he was gone John, a rabid car enthusiast, busily inspected the new models on the showroom floor. Phil went to his car to get his cellular phone. The salesman returned moments later with the four square worksheet. Phil's offer of $11,500 was circled with a large question mark beside it. Apparently, this was the manager's way of saying that it was just too low to consider. The salesman once again began explaining that their initial asking price was $12,995. So for them to consider such a low offer was out of the question.

Phil countered by reminding the salesman that they were there because of the advertised price of $12,500. Furthermore, he said, the Mazda really was a great car at $12,595 and he was tempted to return and buy it. However, Phil admitted that the $11,500 offer on the Mitsubishi might have been low so he increased his offer to $11,800. The salesman left to take this new offer to his sales manager.

Don't Be Distracted When Negotiating
Moments later the salesman returned with the news that they would consider selling the car for $12,295 if Phil bought a Lo Jack contract or an extended service warranty. Phil said he wasn't interested in either of these extras and his offer was still $11,800. The salesman said without the extras, they wouldn't be making enough money on the deal to make it worthwhile to sell the Mitsubishi at that price.

So far, Phil and John had been in the salesroom for about 45 minutes. Phil began feeling that they weren't making enough progress on this deal. He said, "I think $11,800 is a realistic price for this car, but apparently I'm wrong. I want to apologize for wasting your time. I guess I'll have to go back and buy that Mazda."
The salesman said he felt they were actually very close to making a deal. They just needed to make the transaction more profitable for the dealership. He once again talked about the service warranty and the Lo Jack. Again, Phil said he didn't want either but he would make a final offer of $12,000. John, tiring of these tactics, nudged the salesman to take the offer to his boss by saying, "Try it out and see what he says."

Be Ready for the Closer
In some dealerships, a closer is brought in when the salesperson can't make a deal. Usually, the closer tries for a few hundred dollars extra in the deal. Or, he tries to get the customer to agree to the last offer by the dealership.

While the name "closer" sounds frightening, closers are often personable, skilled sales people. While some may apply pressure, most will attempt to make a deal by reasoning with a customer or cajoling them. In this case, the closer brought in a Kelley Blue Book print out showing how much the car was worth. He also explained that they wouldn't make much money if they sold the car for $12,000.

Phil was ready to come up another $200 but, unexpectedly, the closer agreed to the offer. Using a blue marker, he wrote on the four square, "My children will go shoeless and hungry, but you can have the car for $12,000." He added, "Sometimes I even draw in little tear drops."

Closing the Deal
At this point the salesperson will probably extend his or her 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. This can often be arranged in advance or on the spot, by calling your insurance agent (bring the number with you to the dealership). Then, you need to review and sign the contract and several related documents. Finally, you may have to deal with last-minute attempts to sell you extra services.

Some people like the peace of mind that an extended warranty provides. However, many used cars still have the factory warranty in effect. In the case of Phil's Mitsubishi, there was still a year and a half on the bumper-to-bumper warranty. Furthermore, a drivetrain warranty is in effect for an additional period. He felt there was no reason to buy an expensive extended warranty.

While Phil and John were waiting for the contracts to be prepared, the general manager of the dealership appeared. "So this is the John and Phil team," she said, laughing. "I just wanted to thank you for helping me lose money on this deal." This comment, and others, showed that the sales staff had negotiated in good humor and with a sense of fair play.

Finally, the paperwork was ready. Phil signed an agreement to furnish an insurance policy and 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. In Phil's cases, no promises for further repairs were made.

Then Phil signed the actual sales contract. Here is a breakdown of the fees:

Sale price of the car $12,000.00
Documentation Fee $ 45.00
Smog Fee Paid to Seller $ 41.75
Smog Fee Certification $ 8.25
Sales Tax $ 966.94
License Fees $ 216.00

Total $13,277.94

Comparing the Real Market to Edmunds and Kelley Blue Book
How does the purchase price of $12,000 compare to the Edmunds.com TMV price? Edmunds' says the car could be sold by a dealer for a TMV price of $13,100 (clean condition) to $13,706 (outstanding condition). Why the disparity? First, we shopped around for two weeks and jumped on this car as soon as the ad ran.

Second, the dealership was located near an affluent area -- not the kind of place a Mitsubishi Galant would be in high demand. And finally, it was late in January when many consumers are dealing with the aftershock of Christmas buying.

However, the Edmunds TMV was much closer to the mark than the Kelley Blue Book. The Blue Book dealer price was listed on their Web site as $16,005. If they tried to sell cars at those prices, Phil felt the salesman's children really would starve.

Use TMV® to Avoid Negotiating
Many car buyers might not want to negotiate as actively as the Edmunds editors. In those cases, the process could be simplified by offering a dealer several hundred dollars below Edmunds TMV price. If the dealer refuses the offer, raise your price to the TMV and show the salesperson a printout of the TMV figure. Dealers have indicated that TMV is a fair price for both parties.

Truthfully, Phil would have paid the dealer's starting price of $12,500 for the Mitsubishi Galant, knowing that Edmunds' TMV price was $13,100. But with two hours' worth of negotiating, he saved $500 -- well worth the time invested.

Reviewing the Process
In retrospect, John and Phil were helped by several factors. In addition to the advice already offered, they felt it is important to give car shoppers the following tips:
Take a friend when you go car shopping. This not only gives you moral support in negotiating, but your friend might stop you from doing something stupid -- like paying too much or getting switched to a vehicle that isn't right for you.

Choose a good dealership. John and Phil wound up at the Acura dealership because when they called ahead and chatted with the sales manager, they felt comfortable with him. When it came time to negotiate, they felt they would be treated fairly, with no high-pressure tactics.

Have a back-up vehicle. Phil knew he could walk away from the Mitsubishi at any time and still have a good deal with the Mazda. Referring to this other car, at another dealership, helped him take a strong stance in negotiating. It also kept him from becoming emotionally dependant on making a deal on the Mitsubishi.

Buying Used Saves Money -- Big Time
Phil's Mitsubishi Galant was originally purchased in early 2000 for over $17,000. About 14 months later, Phil bought the car for $12,000 with 19,983 miles on it. The wear and tear to the car was almost imperceptible. True, there was no new car smell, but it looked and drove like a new car. And Phil was able to save roughly $5,000 -- that's nearly a 30 percent savings off the new car price.

For a small sacrifice in terms of "new car magic," a smart used car purchase will save you a lot of money. And, possibly, it will let you step up to a higher class of car than you could buy new. The next time you get the urge for a new car, consider buying used instead.