The short of the story is to always do your homework! Once you have settled on the car that you want, there are many sources online or in hardcopy available to get the information you need for negotiating the price that you are willing to pay. Unless the salesperson is someone you have had a longstanding business relationship in terms of auto purchasing, the order to make a sale happen should be:

1. Negotiate price.
2. Negotiate trade-in.
3. Determine finance options.

If you live in the US, pricing information is easier to come by...Kelly Blue Book lists trade-in, private party value, and dealer retail price for used cars (and you can price by condition of the vehicle), as well as MSRPs for new cars and dealer invoice prices. What is great about US sites is that they provide the information for free. Unfortunately, if you live in Canada, only MSRP is readily available; to get the other information requires a paid membership to similar auto information sites. One trick I have come across in determining approximate MSRPs for new cars in Canada is to look at the US pricing, find the percent difference between MSRP and dealer invoice, and apply it to the Canadian price. For used cars, only Canada Black Book is a free service to obtain trade-in values (Red Book and Green Book require paid memberships).

The above should give you a starting point. Now for things to watch out for:

1. 0% (or very low %) financing - if you choose this, you may not get much leverage to negotiate the sale price. Dealers will either give you the cash incentive, or the low interest financing but not both. Also, if you take the dealer's financing, the downpayment you can put on the vehicle is limited. Thus, you are better off speaking to your own financial institute to get a competitive rate. Put together as much money as you can and borrow the rest from your institute. To the dealer, you are just paying cash entirely, and he doesn't need to know that you are financing independently.

2. Ads for low monthly payments - make sure you know exactly how this number is arrived at. Read the fine print in the ad for more information (something many eager buyers forget to do). Take note of the stock number for which the plan applies to; a crafty dealer may tell you the vehicle is no longer available, and will try to put you into a more expensive one. This applies to both financing plans, as well as leases.

3. We'll pay off your outstanding loan - not really...let

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