(This is the 7^th post of the 8-part series An investing-friendly car buying guide. This is also somewhat long, but you get your car at the end!)

You have checked the car inside and out, test drove it, got the green signal from your mechanic, and now back to the seller to “seal the deal”. If you are buying from a private owner, the process is easy. The car usually costs less than it would in a dealership, and depending on the urgency of the owner, may cost even less than Edmunds’ TMV. You may try bargaining down further if the car needs some major repair. Get all maintenance records from the owner (to make sure the car was in good hands). Complete the formalities of title transfer etc. and the car is yours.

Dealing with the salesman is harder. But the basics are simple as long as you are prepared. Keep in mind is that it is you, and not him, who is at the wrong end of the checkbook. But this is also a good thing: you have the option to walk away and make sure he knows. Jeff Ostroff suggests you show up carrying a folder, giving the impression of a know-it-all guy with all necessary papers (at the very least your folder should have the TMV estimates and your mechanic’s report).

Being able to pay the entire amount upfront, instead of in loan installments, has two-fold advantage. The obvious one is that you do not have to make the extra interest payment on the loan (which may amount to a lot depending on the loan terms). The other advantage is psychological in that you have the upper hand - the dealer is not about to turn away a $10,000 check at the end of a long day.

The only time paying in installments makes good sense is if the loan carries 0% interest. But this is rare, requires you to have an outstanding credit score, and is offered only during limited days in the year. If you are unable to pay in full, and cannot get a 0% loan either, arrange for the loan from a reputed source before going to the dealership. Do not choose the dealer’s own loan offer - he will bury you under heavy interest. Check out these tips on how to get a good auto loan.

While negotiating always insist on the out-of-the-door price, which includes all applicable fees (including dealer fees, licensing fees) and sales tax. This is the amount you write on your check. You do not want to spend a hard hour negotiating for a price, and then see it blows up by couple of thousands because the dealer added all sorts of hidden fees that were never mentioned before. Refuse any extra offer, such as the dealer’s extended warranty that will cost another few thousands but not worth a dime (more on extended warranty in the next post).

Use all the weapons in your arsenal. Tell him about the scratches and dents you saw on the car, show the TMV printout, and wave your mechanic’s report at his face. Do not be coy about offering him several hundred dollars below his quote. Almost as a rule the dealer will “mark up” the price way over the car’s true value (you already know this from your TMV estimate). But do not make an unreasonably low offer - stay near TMV. (When I bought my 2001 Toyota Camry last year from a local dealer, he quoted $13,500 for it. I stood firm on my offer of $9000 which was reasonable, and got the car.) If your offer is reasonable, he will know it and ultimately relent.

The moment arrives! He makes a last trip to his manager, comes back with a grin and shakes your hand. You write the check, get the title+registration papers and keys, and drive away in your shiny used car!

But wait! One last point - the extended warranty »

See related posts:

1. Researching your car
2. Checking the car out
3. A note on extended warranty