The most important thing to know about negotiating with used car dealers is that they will base their negotiable limits on their perception of you. If they see you as knowledgeable and shrewd, they will know they can not push you around. Likewise, if they perceive you as ignorant and wishy-washy, they will know they can charge you more for a car.

Used car dealers will always try to stretch your limits. If you are willing to pay $10,000 at 8.5% on a car listed for $11,000, they will offer you $10,500 at 9.5%. Know your limits. If your limits are being stretched, simply stand up, say no thank you, and walk out the door. If you buckle on one thing, the dealer will know they can push you around on everything.

Many dealers base their tactics on your ignorance. They will tell you nobody will finance a car that is 10 years old. They will tell you nobody will finance a used car for less than 7%. They will tell you nobody will finance a used car without a down payment. All of these statements are incorrect.

So, how do you become a knowledgeable and shrewd used car buyer? First, know what kind of car you want. Educate yourself on websites like edmunds.com and Kelly Blue Book's website kbb.com. Second, know what your credit score is by running your own credit report before you even start car shopping. The government will give you one free tri-bureau credit report each year at annualcreditreport.com. Third, find out what interest rates are currently available at local credit unions. This doesn't take much time because most credit unions will post their rates on their websites.

Now you are ready to start shopping. At this stage, remember that you are just looking and trying to make comparisons. Shop for cars online before visiting the actual lots. Why? Most dealers advertise the cars they have for sale on their own websites and on generic websites like cars.com and autotrader.com. You can search for exactly what you want online: sort the cars by price, by mileage, by year, by features, etc. Also, many car dealers offer lower prices online than on their lots. If you tell dealers you saw one of their cars listed for X amount online, they must honor that price.

When you are ready to physically visit different car lots, do not let each dealer run your credit. Each time your credit is run, your score goes down. A week or 2 of car shopping can drop your credit score10+ points. Bring the credit report that you printed from annualcreditreport.com with you and specifically ask the dealer what interest rate they can offer you without running your credit. The main goal at this stage of the process is to test drive the car and make sure it is in good condition--it is not time to buy yet. Narrow your search down to your top 2-3 choices.

When you become serious about a car, get the exact Kelly Blue Book value from kbb.com. You will need the car's make, model, features, mileage, and the dealer's zip code to get an accurate value. Blue Book provides three different values: trade-in (the lowest), private party (middle), and retail (the highest). Remember that retail values quoted by Kelly Blue Book are negotiable, not firm, numbers, and they assume that the car is in "excellent condition." Only 5% of used cars are actually in excellent condition. In all likelihood, you should never pay the Kelly Blue Book retail value for a used car. Also, check the trade-in value for the car just to remind yourself what the dealer probably paid for the car--it will be thousands less than the sticker price.

When you become serious about a car, write down everything that needs repair or cleaning (i.e. ashtray missing, rear view mirror loose, trunk dirty, etc). When you start negotiating with the dealer, ask them what on your list are they willing to correct and what are they not. For anything the dealer can not correct, ask for a reasonable reduction in price.

When you are actually on the car lot, be willing to leave any time. Sleeping on a big purchase like a used car is always recommended. Sometimes we get blinders on the car lot, and time is needed to "cool off" and refocus. Also, try to build rapport with the dealer. The sad truth is that the more dealers like you, the more they will be willing to negotiate and please you.

A common tactic used car dealers rely on is telling you that they can not go any lower on the price or they won't make any money. Remember when you looked up the trade-in value for the car? Ask the dealer if the car was a trade-in or purchased at an auction, then ask what they have done to recondition the car (did the dealer put in a new transmission or just inspect and detail it?) If the numbers do not add up, keep negotiating. Dealers will tell you they just can't shave $200 off the price or they will go broke--do not believe it. Chances are that they are still profiting $1,500-$2,000. Even considering their overhead, they are making a nice profit.

One last tactic to consider is after you test drive the car, go home. Call the dealer the next day and let him or her know that you are interested in the car. The dealer will always ask you to come into the dealership to negotiate. The dealer wants home court advantage--don't give it to them. Ask for the price and interest rate you want over the phone. You will have a lot more bargaining power this way. Don't be afraid to let the dealer know what other dealers have offered you (no down payment, 7% interest, a free tank of gas, etc). Make the dealer work on your terms, at your pace.

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