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First-time car buyers: Getting the best deal

(MoneyWatch) When you are driving your first new car, you will enjoy it even more if you know you got a good deal. And you can use the money you saved to buy gas.

Let's say you have picked an affordable model that really suits your needs and have taken a test drive, as I outlined inpart 1 of this series. Now you are ready to look for your best deal.

As in picking the car initially, careful research and preparation is all-important. You need to get financing squared away, determine if the manufacturer is offering any rebates or other special incentives or leasing deals and check on the average selling price of the car in your area. Then you can set your target price.

Here are more details on those steps:

Get pre-approved financing. If you have financing in hand, you can focus strictly on negotiating the price without letting sales people introduce the potentially confusing financing issue. Phillip Reed, senior consumer advice editor of automotive site suggests trying Lending or Capital One Auto for pre-approved financing.

And if you belong to a credit union - or can join one - you can often get low-cost financing there. The recent national average interest rate on a four-year new-car loan was 3.19 percent, according to But the actual rate you get will depend on your credit rating and the local market where you live.

If you decide to pursue a good lease deal, this financing step won't be needed. But remember: The low monthly lease payment you see in the ads doesn't include taxes and some other fees.

Check for manufacturer incentives. When you look at a specific model on, a tab next to the photo will show you what rebates, low-rate financing and leasing deals are being offered. You usually can get zero percent or low rate loans only if you have a very high credit rating, but all buyers can get rebates. For instance, the Ford Fusion 2012 mid-size sedan -- with a redesigned 2013 model about to go on sale -- is offering a rebate of up to $2,500. Often, even if you qualify for low-rate loans, it makes more sense to take the rebate and keep your pre-approved financing.

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Set your target price. Sites such as Edmunds and will show you the list price or Manufacturer's Suggested Retail price for the car, the invoice price -- or what the dealer paid -- and the average selling price in your area. (That average is known as True Market Value on Edmunds).

If manufacturer-financed rebates are involved, you often can buy at the invoice price or even below. If not, aim for one to two percent above the invoice number, and in any case not more than the average local price. Make sure you have included all the options you want in comparing prices.

Get competing dealer bids. Since you have already taken a test drive and have approved financing, your goal is to get the best dealership bid without going in and getting ensnared in car salesman games. Phillip Reed of Edmunds suggests contacting the internet department of local dealerships. (Most large dealerships will have an internet tab on their web sites.)

Resist any suggestion that you need to come in and talk about the deal. Tell each dealership you are taking competitive bids and are ready to buy at the best price. Ask to get details of the drive-off price complete with local taxes and any other fees.

Don't give away your savings. When you go to pick up the car, resist all suggestions of add-ons such as extended warranties. Today's new-car warranties are longer than in the past and generally cover expensive engine and transmission repairs for five years or longer. Make sure the contract you are about to sign matches the details you got from the internet department.

If you follow these steps, you can be proud not only of your new car but the price you paid for it.

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