It's surprising how many people walk into a dealership and pay the quoted price for a new car without attempting to negotiate. If you're one of those people, dealers will love to see you coming. They expect you to negotiate and will gladly pocket the profit when you don't.

There are two main keys to negotiating a price on a new car. The first is to keep the purchase, your trade-in, and the financing as three totally separate transactions. The second is to start with the invoice price (the dealer's cost) instead of trying to chip away at the manufacturer's suggested retail price (MSRP). Starting at the invoice price, subtract any manufacturer's rebates that you found on Edmunds.com to get the real dealer's cost (include rebates the dealer receives from the manufacturer but doesn't pass on to you). Make an offer of 5 percent above that and don't allow yourself to be pressured into paying more.

Manufacturer's Rebates

Manufacturers often offer rebates, sometimes to buyers and sometimes to dealers. If you don't know about a rebate to the dealer, you could end up paying more for the car than you should, even if you're paying only 5 percent over the invoice price. You may also be able to get good deals at the end of the model year, when dealers are trying to get the current year's models off the lot to make room for next year's models.

The Dealer's Real Cost

The MSRP is just that: a suggestion. Dealers don't expect you to pay it but will gladly take your money if you don't try to negotiate. The invoice price is the manufacturer's initial price to the dealer, not the final price. Dealers receive rebates, allowances, discounts, and incentive awards that reduce the cost of the cars they sell. If the salesperson shows you the actual invoice price and tells you he's not making any money on the deal, he's not being entirely up-front with you. You need to know the dealer's real cost, not what the salesperson tells you or shows you on an invoice fabricated in the back office.

Don't Pay for More than What You Want

If you can't find a car with the options you want, try calling around to other dealerships. If you still can't find what you want without extra options that you don't really care about, consider ordering a car. You'll have to wait longer, but why pay for features you don't need or want just because the car is sitting on the lot? On the other hand, if the dealer is willing to negotiate a good deal because it wants to move cars off the lot, it may be worthwhile to buy a car with extra features. The only way you'll know whether or not it's a good deal is to know the dealer's cost on the car and each option.

Check Prices

Once you've determined what car you want to buy, call around to several dealers and ask for their best price. Compare their estimates to information found on Web sites such as Edmunds.com or Autobytel.com. Armed with this information and the true dealer's cost of the car and each option, you're ready to head to the dealership to begin your negotiations. The more information you're armed with and the more you appear to know about how new-car pricing and selling works, the better off you'll be.