At the core, most dealers aren't out to rip you off.
But they employ experienced and aggressive salespeople who have a bag of tricks designed to maximize the salesperson's cut and the dealer's profit.
The single transaction strategy: Many people view buying a car as one transaction.
It's not, and dealers know this. It's really three transactions rolled into one -- the new-car price, the trade-in value, and the financing. The dealer sees all three as ways to make money.
Treat each of these as separate transactions, and negotiate each one. If you get a new car for $200 over invoice, but receive only $1,000 for a trade-in car that's worth $2,500, you haven't done as well as you could.
The payment ploy: A dealer might say, "We can get you into this car for only $389 a month.'' Probably true, but how? In some cases, the dealer may have factored in a large down payment, or may have stretched the term of the loan out to 60 or 72 months.
Focus on the price of the car rather than the monthly payment. Never answer the question, "How much can you pay each month?'' Stick to saying, "I can afford to pay X-dollars for the car.
The rollover ruse: Often, it's tempting to want to trade up to a more expensive car -- even before you've finished paying off the car you're currently driving.
One way that some car buyers do this is by "rolling over" the remaining payments on your current car into a new car loan or lease. While this isn't illegal, it's risky. Why? You'll end up owing more on the second car than it's worth.
In the parlance of the automobile world, you'll be "upside down" in the vehicle.
If it's totaled in an accident, or if you decide down the road to trade it in, you'll end up writing out a big check to cover the remaining amount of the loan.