How Saturn Cars Work

General Motors' first new nameplate in over 60 years was born in 1982 as Project Saturn. Conceived in part by then-chairman Roger Smith, it was an all-out effort to stem the growing Japanese dominance of the U.S. small-car market that had begun in the early '70s.


Smith realized that although GM was highly successful with traditional American cars, it badly lagged behind Japanese makers for small-car quality, design, and cost. As a result, younger buyers were deserting GM's smaller U.S. products for Hondas, Toyotas, and other Japanese models -- and they weren't coming back.



More Saturn Information

Saturn was conceived as an all-American way to compete in the small-car market. Check out these sites for more on Saturn.

•Saturn New Car Reviews and Prices
•Saturn Used Car Reviews and Prices



More than eight years passed before the first Saturns were sold. For some, that long gestation reinforced doubts that GM could field a competitive, profitable, all-American small car -- especially given recent efforts like the problem-plagued X-body front-drive compacts.

Heady pronouncements along the way didn't help. For example, at the November 1983 unveiling of a full-scale sedan prototype (later dubbed "the little red car"), Smith promised Saturn would be a "a quantum leap ahead of the Japanese, including what they have coming in the future. In Saturn we have GM's answer -- the American answer -- to the Japanese challenge. It's the clean-sheet approach to producing small cars that in time will prove to have historic implications."


Originally, Saturn vehicles were to be sold by Chevrolet, starting with a front-drive four-door sedan somewhat smaller than a contemporary Chevy Cavalier. The projected price was $5000-$7000 and its introduction was vaguely described as sometime in "the late '80s." A two-door coupe and a sport-­utility vehicle (SUV) were to follow later.

By the time Saturn opened for business, however, it was Saturn Corporation, a wholly owned subsidiary charged with pioneering new ideas in everything from styling to service. The most successful innovations would then spread throughout GM itself, or so it was presumed. Saturn was supposed to make money, of course, preferably by stealing sales from the competition, not other GM makes.


In presenting the prototype, GM served notice that Saturns would be different: Body panels would be made of either metal or plastic and attached to a steel "spaceframe" as on Pontiac's then-new Fiero sporty car. The engine would be a brand-new, fuel-injected four-cylinder with an aluminum block and cylinder heads formed by a precision "lost foam" technique. Oil passages would be designed in instead of drilled in after casting to save both time and material. Astonishing EPA-rated fuel economy was promised: 45 mpg city, 60 mpg highway.

Other components need not come from corporate bins, and Saturn was free to devise its own engineering and manufacturing methods. A major goal for this experiment was finding ways to close the cost gap with "Japan, Inc.," then estimated at more than $2000 per car. The resultant savings, Smith said, would finally make GM a small-car power in the U.S. market. In fact, he declared Saturn nothing less than "the key to GM's long-term competitiveness, survival, and success."


As announced in January 1985, Saturn Corporation would have its own plant, its own employees, its own contract with the United Auto Workers union, and a separate dealer network. Initial funding was $150 million, and up to $5 billion was earmarked for future expenditures, including some $3.5 billion for a "greenfield" factory in Spring Hill, Tennessee.

Smith hoped production would start by fall 1987, and vowed to drive the first car off the line himself. Oldsmobile general manager Joseph Sanchez was tapped as Saturn president, but died of a heart attack less than three weeks later. Pontiac general manager Bill Hogland was named to replace him.
Saturn Rethinks Car Manufacturing
Saturn, a division of GM founded in the 1980s, had its own dedicated car factory from the beginning. A prime reason for locating in Tennessee was to distance Saturn from other GM facilities, thus allowing a unique "corporate culture" to flower more easily.

Just as important, tiny Spring Hill (pop­ulation 1400 at the time) was about 35 miles south of Nashville and 30 miles from Smyrna, Tennessee, home of Nissan's North American factory, so vital railroad lines, interstate highways and suppliers were all conveniently close. Groundbreaking took place in April 1986, by which time fledgling Saturn, barely a year old, had its third president: Richard G. "Skip" LeFauve, transferred from GM's Buick-Olds-Cadillac Group after Bill Hoglund, LeFauve's predecessor at Saturn, was named to head that unit.


Saturn's self-proclaimed mission was to "market vehicles developed and manufactured in the United States that are world leaders in quality, cost, and customer enthusiasm through the integration of people, technology, and business systems and to exchange knowledge, technology, and experience throughout General Motors."

That was a tall order for an established car company, but Saturn was starting from scratch. The job was monumental, and ensuing months witnessed delays, cost overruns, and difficulties in signing up dealers that forced pushing back the production start date to summer 1990, shortly before GM Chairman Roger Smith's scheduled retirement. Yearly volume was first set at a half-million units, then reduced to a more manageable 240,000, and GM's total investment was trimmed to about $3.5 billion.


Smith envisioned the Saturn plant as the last word in automated manufacturing, with computer-guided vehicles delivering parts to robots that did most assembly chores. But like so many GM leaders before him, Smith was a financial manager, not an engineer or manufacturing expert, and he didn't really understand "high tech" or its limits.

Spring Hill would use robots for welding, applying adhesives and painting the cars, but the plant wasn't nearly as futuristic as Smith envisioned. The real innovation came in labor/management relations. As LeFauve noted: "People are going to make the difference for Saturn."


The first employees were recruited from other GM operations. There were just 3800 jobs but more than 16,000 applicants, all evidently intrigued by the Saturn experiment and wanting to be part of it. Candidates were invited to Spring Hill for a two-day screening session, and 90 percent of those who came were hired.

The eventual employee roster showed migrants from 46 states with an average of 13 years GM experience. Being so accustomed to GM's old ways, "associates" were required to undergo comprehensive training in the new Saturn way of thinking and working.


UAW members received 350 hours of training on average, though some high-skill positions got twice as much. Base pay for all workers was 80 percent of GM's national average, but there were bonuses for meeting productivity targets and a ­profit-sharing plan -- if Saturn turned a profit.

Saturn's labor agreement had few traditional industry "shop rules" and gave employees more say in how they did their jobs. Workers were organized into teams responsible for monitoring the quality of parts and their own work, and any worker could stop the assembly line to fix safety or quality problems on the spot, a common practice in Japan but unknown in U.S. auto plants.

That allowed doing away with separate quality-control inspection areas. In addition, workers sat alongside managers in meetings, helping to make decisions as "team members," and everyone ate in the same dining room. LeFauve even shared the executive office suite with the UAW's Saturn coordinator.


The team approach also figured in Saturn product development. Designers, factory workers, engineers, and outside suppliers came together for what was called "simultaneous engineering." This was in sharp contrast to the old way of having designers, once finished with their part of the car, "throw it over the wall" to engineers, who did their jobs before tossing the project to manufacturing, and so on down the line.

Just as important, Saturn planners, some of whom already drove imports, put aside personal preferences to focus on what buyers wanted. Said engineering vice-president Jay Wetzel: "Most great cars in history reflect the personality of one person. In our case, that person just happens to be the consumer."
Early Production of Saturn Cars
Despite myriad obstacles and much outside naysaying, Saturn production got under way in time for model-year 1991. Job One, a metallic-red sedan, rolled out the door at 10:57 a.m. on July 30, 1990, with Roger Smith at the wheel in one of his last public appearances as GM chairman. With that, attention turned to the car itself.

Saturn greeted the world with four-door sedans and two-door coupes sharing a basic front-drive platform and major components. Each body style had its own styling, but neither drew rave reviews on that score.




The 1991 Saturn SL2 -- part of Saturn's initial model line -- was a little more
expensive but performed surprisingly well.



The sedan was criticized as looking like a scaled-down Oldsmobile Cutlass Supreme. (Some designers apparently worked on both, with the Saturn finished before the Olds but introduced after it.) The coupe, a swoopy 2+2 with hidden headlamps, was more favorably received, though some said it resembled the Geo Storm, an Isuzu-built hatchback coupe then sold by Chevrolet.

Despite the shared platform, the sedan rode a 102.4-inch wheelbase, the coupe a 99.2-inch span. Respective overall lengths were 176.3 and 175.8 inches, making Saturns a little shorter than Chevy Cavaliers but seven inches longer than a Honda Civic, a key design benchmark.

As promised, body panels bolted to a steel inner skeleton, with fenders, doors, and other vertical panels made of dent- and rust-resistant thermoplastic polymer ­material. Steel was used for hoods, trunklids, and roofs. Galvanized underbody panels and a standard stainless-steel exhaust system helped reduced corrosion worries, too.


Also as promised, the engine was a new inline-four created expressly for Saturn, with an aluminum block and heads cast by the lost-foam technique. There were two versions of this 1.9-liter (116-cubic inch) design, both fuel-injected and mounted transversely per established front-drive small-car practice. The base 85-horsepower unit had a single overhead camshaft (sohc) and throttle-body injection with a central squirter at the intake manifold. A dual-cam (dohc) derivative with multi-point injection (a squirter for each cylinder) delivered 123 bhp.

Each teamed with five-speed manual transmission or optional electronically controlled four-speed automatic. As on some Japanese cars, the automatic had a switch for selecting "normal" or "performance" shift modes; the latter delayed full-throttle upshifts to higher rpm for best acceleration. Alas, no Saturn powertrain delivered anywhere near the economy touted seven years earlier -- 45 mpg city and 60 mpg highway. The best was 27 mpg city and 37 highway for the single-cam/five-speed combination.


Initially, the sedan was offered in price-leader SL and better-equipped SL1 models with the sohc engine and as a dohc-powered SL2 with "Twin Cam" writ large on the rear bumper. The coupe, dubbed SC, was dohc only. Bumpers were black on ­single-cam cars, body-color on the sportier dual-cam models.

Interior design and features mimicked those of targeted competitors. Climate controls and the steering-column stalk switches for lights and wipers might have been lifted from a Civic or Toyota Corolla, and all models came with reclining cloth front bucket seats, tachometer, tilt steering column, trip odometer, split folding rear seatback, and a rear electric defroster -- items found on most all Japanese rivals.

Wheel designs emulated Honda's, including the use of four lug nuts instead of GM's usual five. With all this, some people thought Saturns were Japanese cars, but content was actually 95 percent domestic.


Early road-test verdicts were generally positive. Despite automatic transmission, Consumer Guide®'s test SL2 ran 0-60 mph in 8.8 seconds, surprisingly brisk for an affordable subcompact. A single-cam car took up to two seconds more, but Saturn's slick-shifting manual transmission was a match for Japan's best and a welcome change from previous GM efforts.

All models offered agile handling, a comfortably absorbent ride, good people and cargo space for the exterior size, and, of course, convenient Japanese-style ergonomics. Fuel economy was another asset, but most reviewers judged the engines too loud and rough, especially for a modern four-cylinder under 2.0 liters. Which led to the most-telling judgment of all: Despite all-new engineering and the long gestation, Saturn was not the big breakthrough Roger Smith had promised -- competitive with the Japanese, but not clearly superior.


Where Saturn did have an edge was price. At $7995 to start, the Scrooge-special SL was a whopping $1495 less than the base Civic sedan and $1000 less the cheapest Corolla (though the SL didn't offer an automatic transmission or power steering). Saturn's $275 destination charge was in line with those of Japanese makers and $180 less than Cavalier's.

The SL1, starting $600 above the SL, swiftly became the volume seller. The SL2 listed at an attractive $10,295, but could be optioned up to around $14,600 -- a bit steep for the class, though that included antilock brakes (ABS) with rear discs (an $895 option) and CD player, features Civic and Corolla didn't yet offer. The SC2 topped the line at $11,775 and, like most other small coupes, was a tougher sell than the sedans.
Saturn Emphasizes Customer Service
Saturn sales officially began on October 25, 1990. Advertising never mentioned a GM connection -- arguably wise, considering GM's sullied reputation among the targeted buyers, though also appropriate for Saturn's freewheeling status.

The Saturn plant at Spring Hill, Tenn., was still moving slowly on a single shift to assure the highest possible assembly quality, now a must for even entry-level cars. The first Saturns were sold by some 30 dealers in Tennessee and neighboring states as well as on the West Coast, long an import stronghold. Dealers opened in other areas as production ramped up. By the following spring, Saturn counted 130 "retailers" in 33 states, most of them in 70 major urban markets.

It was in the retail area that Project Saturn had its greatest impact. Saturn carefully selected dealers who agreed to build separate showrooms and service facilities and to operate under strict guidelines for customer treatment. Sales personnel were trained in "consultative selling" to replace hard-sell tactics. A "retail associate" would sit down with customers, discuss their needs, explain their options, and arrange a test drive.

Pricing would be just as buyer-friendly. Federal laws on price-fixing prohibit car companies from forcing dealers to sell at a set price. That's why window stickers carry the legend "manufacturer's suggested retail price." But Saturn strongly urged its dealers to avoid the usual haggling, saying no customer should ever wonder about paying too much. Dealers agreed, and Saturns sold at full retail price -- no more, no less.

With production slowed to solve nagging quality problems, demand quickly exceeded supply during the 1991 model year. A good thing, then, that dealers obeyed another Saturn commandment: Thou shall not gouge. Buyers used to seeing "added dealer profit" signs on popular cars were pleasantly surprised by Saturn's "no ups, no extras" policy.

The red-carpet treatment didn't end there. Buyers were given a tour of their dealer's service area and met the mechanics who would work on their cars. Before driving off, new owners were photographed in their Saturns amid rousing cheers from dealership employees.

Almost all dealers invited owners in for weekend service clinics and even a free lunch. They also followed up with customers on a regular basis after the sale. If for any reason an owner was unhappy with a Saturn, the car could be returned within the first 30 days or 1500 miles for a full refund, no questions asked.

When Saturn announced its first recall in February 1991, dealer technicians drove to where the owners were just to replace a seatback bracket on about 1200 cars. A few months later, Saturn learned a supplier had provided a batch of improperly formulated antifreeze that might cause engine damage. Instead of replacing the antifreeze, Saturn replaced more than 1100 cars.
Saturn Car Company: Buyer Satisfaction
Saturn's extraordinary approach to customer care drew derisive comments from competing dealers, but it worked. With the Spring Hill factory managing only 48,629 units the first model year, dealers sold every one they could get. Most customers were ecstatic. Some even volunteered to help sell Saturns on their days off.


Another key part of Saturn's sales strategy was giving dealers broad "market areas" so they would compete with other brands instead of each other. Thus, a metropolitan region like Chicago might have more than 60 Chevrolet stores but only nine or 10 Saturn dealers. Limiting the number of retail outlets helped Saturn become the industry leader in sales per dealer, and Saturn franchises quickly became both profitable and sought-after.


Saturn Cars Image Gallery



In Saturn's early days, 50 percent of customers bought a Saturn for the buying
experience -- only 25 percent went for products like this 1991 Saturn SC.
See more pictures of Saturn cars.



This new way of doing business got an immediate endorsement in the form of J.D. Power and Associates' 1991 surveys of new-car owners. Respondents ranked Saturn third in both customer satisfaction and sales satisfaction. In its very first year, the "different kind of car company" leapfrogged Honda, Toyota, Nissan, and other rivals in two key measurements: how well customers liked their cars and how well they were treated by dealers. Only Lexus and Infiniti, the new Japanese luxury brands whose cars sold for three and four times as much, ranked higher.

And this was no first-year fluke. Saturn again ranked No. 3 in both Power surveys for the '92 and '93 model years, and was No. 1 in sales satisfaction and third in customer satisfaction for '94 and '95. More impressive still, Saturn would remain tops in sales satisfaction each model year through 2001 except for 1999, when it tied for sixth with Lexus and Germany's BMW at a mere four points behind first-place Cadillac and Jaguar.

These and other accolades buoyed values of used Saturns, which retained a higher percentage of their original price than other cars in their class. Saturn's own research showed that fully 50 percent of its customers bought primarily for the positive shopping experience, versus 25 percent for the product itself. This led one Saturn executive to remark, "We're not trying to sell people a car. We're helping them buy a car."


Other brands scrambled to "Saturnize," hoping to boost their customer satisfaction and sales with it. Struggling Oldsmobile, in fact, soon implemented many of Saturn's policies in the "Oldsmobile Edge" program. Some other dealers switched to "one-price" and "no-haggle" appeals, but many of those also selling other brands eventually returned to high-pressure tactics.

As Saturn President Richard G. "Skip" LeFauve observed, Saturn's success stemmed from many factors, including being true to its mission statement. "You can't just tell your retailers to be nice to people," he said.


For more information on Saturn cars, see:


•Saturn New Car Reviews and Prices
Saturn Car Company's Early Success
Saturn's first big product change occurred late in the 1992 model year: an optional driver-side airbag. The cars had been introduced with motorized shoulder belts to meet the federal require­ment for dual front-seat "passive restraints," but Japanese rivals were rapidly adding airbags and Saturn needed to match them. The motorized belts continued through model-year '94.


The driver-side cushion became an across-the-board standard for 1993, when four-door wagons and optional traction control arrived. The wagon, striding the same wheelbase as the sedan and otherwise identical to it ahead of the rear doors, came in sohc SW1 and dohc SW2 versions.

Also added was a lower-cost coupe, titled SC1, with the single-cam engine and exposed headlamps. The dual-cam coupe retained its hidden-headlamp face as the SC2.

The new traction control was available for just $50 on models ordered with ABS and automatic. There was hardly any hardware involved. Saturn simply wrote new software allowing the ABS computer to counteract wheel slip in three stages: retard spark timing to reduce engine power, shift the transmission to a higher gear, and interrupt fuel flow. Traction control was a Saturn class exclusive and thus a big coup for the brand; even many luxury cars didn't have it yet.


Saturn production finally hit full stride during model-year '93. Spring Hill ran two shifts to crank out some 244,000 cars, almost 75,000 more than the year before. But dealers were still short of stock and asking for more, so a third shift was added and all shifts rescheduled to four days a week, 10 hours a day. That had the plant going six days a week to squeeze out nearly 60,000 additional cars each year.

The cars themselves were little changed for '94, but there was big news on the financial front. In January 1994, Saturn announced its first operating profit, achieved in calendar '93, though the amount wasn't made public. The workforce had grown to 8500 by then, and each employee received a profit-sharing check for about $5100.

Though Saturn was still a long way from paying back GM's initial investment, officials hastened to point out several benefits accruing from the new company. On the technology side were the lost-foam engine casting technique, a new water-borne paint process, and team-oriented assembly systems, all being adopted or studied by other GM operations.

In addition, Saturn's four-cylinder cars were earning valuable corporate average fuel economy (CAFE) credits for GM as a whole to offset sales of gas-guzzling V-8 models, including a fast-rising number of thirsty full-size light trucks.

Most important perhaps, 75 percent of Saturn sales represented "plus business," meaning they came at the expense of non-GM brands. More than half of Saturn owners said they would have bought a Japanese car instead, thus realizing one of Roger Smith's goals -- stealing customers from the likes of Honda, Toyota, and Nissan.


To say thanks, Saturn invited its customers -- all 700,000 of them -- to a "Homecoming" weekend in Spring Hill in late June 1994. It was another extraordinary thing for a car company to do, but even Saturn was surprised when more than 44,000 ­people showed up. All came at their own expense, some driving in from as far away as Alaska and Hawaii.

Drenching rains and muddy fields didn't dampen the family-oriented fun, which included plant tours, picnics, a concert, and sharing the gospel with fellow owners and Spring Hill workers. Two employees from Pennsylvania Saturn retailers got married during the event; Saturn President Skip LeFauve gave the bride away, plus a 1995 Saturn as a wedding present.

Beyond great PR, the Homecoming testified to how well Saturn was making friends and fostering customer loyalty. It was judged a success, despite the soggy weather and other problems, and would be repeated in 1999.

Step 10: Getting ready for the buying cycle.

At this point you should have considered all the cars in the class that interest you. You should have a good idea what you can afford. You should know if you want to buy or lease your next car. You should have test-driven your top choices.

Now it's time to narrow your choices down to one car and make a deal. If you plan on leasing, read "10 Steps to Leasing a New Car". If you are going to buy your next car, read"10 Steps to Buying a New Car" or "10 Steps to Buying a Used Car." In either case, take a moment to congratulate yourself. You have done your homework to find the right car for you. Now you can move forward with confidence.

Step 9: After the test drive.

After the test-drive, you should leave the car lot. Why? You will probably need to drive other types of cars at other dealerships. It's a good idea to do your entire test-driving in one morning or afternoon. Driving the cars back-to-back will help you uncover differences that will lead to an educated purchase decision.

So, how do you get out of the clutches of the salesperson? Generally, Internet salespeople are pretty mellow and won't pressure you to buy on the spot. Besides, you can say you still have other cars to drive and you can't make a decision yet. Most good salespeople will respect that. If they don't, you won't want to deal with them anyway.

Step 8: How to test drive a car.

The test-drive should replicate the conditions the car will be used in after you buy it. If you commute, drive the car in both stop-and-go traffic and at freeway speeds. If you frequently drive into the mountains, try to find some steep grades to climb. Drive over bumps, take tight corners and test the brakes in a safe location. Get in and out of the car several times and be sure to sit in the backseat, especially if you plan on carrying passengers. In short, ask yourself if you can live with this car for a number of years.

While you are evaluating the car, don't be distracted by the salesperson's pitch. Don't drive with the radio on — evaluate that separately. A new car is a big investment; make sure you spend enough time really looking it over. Then consider one last thing: your intuition. If you are uneasy about the car, follow your instincts. A vehicle purchase decision is too important (and expensive) to undertake without total confidence.

Step 7: Schedule an appointment for a test drive.

It's a good idea to make your initial contact with a dealership by phone or e-mail before going there in person. This can give you a sense of the sales style you will be dealing with throughout the buying process. Additionally, if you can establish a rapport with the Internet salesperson, it will boost your confidence before you visit the lot. Call the Internet department (sometimes called the fleet department) and ask if the car you're looking for — in the right color and trim level — is actually on the lot.

Make your initial contact with the Internet manager either via an e-mail message or a phone call. You can also send multiple dealer requests and narrow your search based on the e-mail responses. Call the Internet department and tell the salesperson that you want to set up a test-drive — but that you won't be buying right away. However, assure them that you will buy there if you decide to purchase this particular model, and if they can offer the vehicle at a fair price.

If you deal with a normal car salesperson, he or she will try to start the negotiations at a high price with the expectation of being negotiated down. However, the Internet manager will often quote you a rock-bottom price right away. A few minutes taken to set up an appointment with the Internet manager can save you both time and money.

Step 6: Research options.

In the past, car buyers have been trained to visit local dealerships to find the car they want. In the Internet age, this is a waste of time and money. You can quickly cover more ground by shopping online. Car dealers are waking up to this new breed of shopper and have created Internet departments within their dealerships to serve the educated buyer. The only things you have to do in person are test-drive the car and sign the contract. And in some cases, you can even have the car delivered to you by the salesperson.

On Edmunds you can not only educate yourself about cars, but also find local dealers,check interest rates for buying or leasing and calculate your exact monthly payment. Before ever heading out the door or negotiating with an Internet manager, take the time to research the cars you are considering. Remember: You don't want to make a large purchase like this until you're really ready.

Step 5: Have you considered all of the costs of ownership?

Here is an often-overlooked fact of car ownership: One car might be cheaper to buy, but more expensive to own. Why? Even if two cars cost about the same to buy, one can depreciate at a different rate or cost significantly more to insure or maintain.

Before you commit to one car, you should estimate the long-term ownership costs of the vehicle you are considering. These include depreciation, insurance, maintenance and fuel costs. True Cost to Own ^® presents this information in an easy-to-read table.

Another valuable tool is Edmunds.com's True Market Value (TMV^®) pricing to find out what a fair price is for the car you are considering. TMV is the average price other buyers are paying for the same car in your area.

By using TMV and TCO, you can make a smart decision up front and then save hundreds of dollars over the life of the car.

Step 4: Have you considered all vehicles in that class?

In today's crowded automotive marketplace, many consumers have difficulty keeping up with all of the vehicles available. Use Edmunds.com to research your choices before you hit the showrooms.

On Edmunds you can pick a specific car and bring up a list of similar cars in the same class. If you already have a car you are considering, this will be your starting point. Find the specific car you want on the Web site by searching by make, type, price range or market segment. Once you have chosen your specific car, you will find information on pricing, specifications, features and road tests. You can also Compare Vehicles to select similar cars to review.

If, on the other hand, you have no idea where to begin, you should consult the Best Carssection of the site.

Step 3: Should you lease or buy your next car?

A lease requires little or no money up front and offers lower monthly payments. But when the lease ends, you are left without a car and will need to replace it. Buying a car is more expensive initially and the monthly payments are higher. But at the end of the loan, you will own a car you can still drive or sell.

Advantages of Leasing
You can drive a more expensive car for less money.
You can drive a new car every few years.
There are no trade-in hassles at the end of the lease.

Advantages of Buying
When interest rates are low, it makes more financial sense to own a car rather than lease it.
There are no unexpected mileage penalties for increased driving.
There's more flexibility — you can sell the car whenever you want.

If you are still unsure whether to lease or buy, try letting the numbers help you make the right decision. Go to Edmunds Purchase Calculators to calculate your monthly auto loan payment vs. your monthly lease payment.

Step 2: How much can you afford?

Regardless of whether you decide to buy or lease your next car, establishing a realistic monthly payment that fits into your budget is crucial. How much should this be? A rule of thumb is your total monthly car payments shouldn't exceed 20 percent of your monthly take-home pay.

Check the Edmunds.com Affordability Calculator to help you estimate what your monthly payment will be based on purchase price, down payment, interest rate and length of loan. Run the numbers now and print out the results. It will not only show you what you can afford, it will also help you control the numbers when you negotiate with a car salesman.

Step 1: What kind of car do you need?

If you examine your needs rather than wants, you will quickly discover what the right car is for you. Take a moment to think about what you use your car for. How many people do you need to transport? What type of driving do you do most often? How long is your commute? Is it important that your next vehicle get good gas mileage?

In too many cases people choose a car for its styling or because it is a trendy favorite. If you do, you might either exceed your budget or have to go car shopping again soon. Let your needs, not your wants, drive your decision. Here are a few other questions to keep in mind when you begin your car-buying process:

Do you want a manual or automatic transmission?
Do you really need four-wheel drive? Or all-wheel drive?
What safety features do you want?
Do you require a lot of cargo capacity?
Will you be doing any towing?
Do you have a bad back and need flexible seating positions?
Will the car easily fit in your garage or parking space.

10 Steps to Finding the Right Car for You

The following steps are devoted to helping you select, price, locate and test-drive the vehicle that is best for you. After reading and completing these steps, you will be ready to move on to the 10 Steps articles to buying a new car, buying a used car, or leasing a new car.

Checklist

• Choose the right vehicle for you by making sure the car suits your needs.
• Consider all cars in the class you have chosen and make a target list of three cars.
• Look up the car on Edmunds.com and check its reliability and consumer reviews.
• Check the Edmunds.com TMV price on the car you want to buy (adjusted for mileage, options, color and region).
• Look up the Edmunds.com True Cost to Own for the car you want to buy.
• If you are financing the car, use the payment calculators to determine the monthly payment for the car you want to buy.
• Decide how you are going to finance your car. If you are going through a bank, online lender or credit union, obtain loan approval before you start shopping.
• Search Edmunds Used Vehicle Listings and other online classifieds for the used car you've decided to buy.
• Call the seller and verify the pertinent information. Get the VIN and run a vehicle history report.
• Test-drive the car under your normal driving conditions.
• Take the car to a mechanic if it is not certified by the manufacturer.
• Negotiate your best deal.
• Read the contract carefully before signing and always make sure you get a clean title.
• Contact the Internet department and simultaneously solicit quotes from multiple dealers.
• If you are trading in your old car, check its Edmunds.com TMV and print out this information.
• If you are buying through a dealer over the Internet, ask the salesperson to fax you a worksheet showing all the prices, taxes and fees.
• Bring your worksheet with you to the dealership so you can compare these numbers to the figures on the contract.
• Inspect the car for dents, dings and scratches before taking final delivery.

Step 10: Closing the deal

If you are at a dealership, you still have to go through the finance and insurance (F&I) process. If you are buying a car from a private party, you just have to make sure that payment is made and the title and registration are properly transferred.

In both cases, you also need to make sure you have insurance for the car you just bought before you drive it away. Also, the F&I person will probably try to sell you a number of additional items: an extended warranty, alarms or anti-theft services such as LoJack, prepaid service plans, fabric protection, rust-proofing and emergency roadside kits. Some people want the peace of mind that comes with extended warranties, so this is something you might want to consider (unless your used car is certified or still under the manufacturer's warranty). However, the other items typically sold in the F&I room are expensive and hold little value for you.

The F&I person may seem like a financial advisor, but he or she is really an experienced salesperson. Some F&I people can become very persistent trying to sell these items. Be firm.

Once the contract is ready, review it thoroughly. In most states, it will contain the cost of the vehicle, a documentation fee, a smog fee, a small charge for a smog certificate, sales tax and license fees (also known as DMV fees). Make sure you understand the charges and question the appearance of any significant, sudden additions to the contract.

Finally, if any repair work is required and has been promised by the dealer, get it in writing in a "Due Bill." Make sure the temporary registration has been put in the proper place and you're finally on your way.

When you buy a car from a private party, you will probably be asked to pay with a cashier's check or in cash. But before money changes hands, request the title (sometimes called the pink slip) and have it signed over to you. Rules governing vehicle registration and licensing vary from state to state. Check the registry's Web site in your state.

Once all of the paperwork is complete, it is finally time to relax and begin enjoying your new purchase: a good used car.

Step 9: Negotiating for a used car.

Successful negotiation comes from having solid information. This is particularly true when buying a used car. Before beginning negotiations you should look up the Edmunds.com TMV price and print out the figures.

Dealers have lots of experience negotiating. Most private parties do not. Therefore, buying a used car from a dealer or a private party will be two very different experiences.

Follow these guidelines when negotiating:

• Only enter into negotiations with a salesperson with whom you feel comfortable.
• Make an opening offer that is low, but in the ballpark.
• Decide ahead of time how high you will go and leave when your limit's reached.
• Walk out — this is your strongest negotiating tool.
• Be patient — plan to spend an hour negotiating in a dealership, less for private parties.
• Leave the dealership if you get tired or hungry.
• Don't be distracted by pitches for related items such as extended warranties or anti-theft devices.
• A "closer" (a high-pressure salesman) may try to improve the deal before you reach a final price.

Once you have a deal, make sure the transaction is completed properly. The next section will tell you what to expect and what you need to do.

Step 8: Test-driving a used car.

Test-driving a used car helps you decide if it is the right car for you and also if this particular car is in good condition. Once you get behind the wheel, ask yourself if it is a good fit. Does it offer enough headroom? Legroom? Are the gauges and controls conveniently positioned?

Try to arrange your test-drive so that you start the engine when it is completely cold. Some cars are harder to start when they are dead cold and, when doing so, will reveal chronic problems. Turn off the radio before you begin driving — you want to hear the engine and concentrate on the driving experience.

On the test-drive, evaluate these additional points:

• Acceleration from a stop
• Visibility (Check for blind spots)
• Engine noise
• Passing acceleration (Does it downshift quickly and smoothly?)
• Hill-climbing power
• Braking
• Cornering
• Suspension (How does it ride?)
• Rattles and squeaks
• Cargo space

Take your time and be sure to simulate the conditions of your normal driving patterns. If you do a lot of highway driving, be sure to go on the highway and take the car up to 65 mph. If you go into the mountains, test the car on a steep slope. You don't want to find out — after you've bought the car — that it doesn't perform as needed.

After the test-drive, ask the owner for the service records. See if the car has had the scheduled maintenance performed on time. Avoid buying a car that has been in a serious accident or has had major repairs such as transmission rebuilds, valve jobs or engine overhauls.

If you like the way the car drives, you should still take it to a mechanic for a thorough inspection. A private party will probably allow you to do this without much resistance. But at a dealership, it might be more difficult. If it is a certified used car, there is no reason to take it to a mechanic.

Step 7: Where to shop for your used car.

The three most common places to buy a used car are:

• Private parties
• The used car section of new car dealerships
• Independent used car lots

Of these sources, private parties usually have the most reasonable prices. It is also a more relaxed transaction to buy a used car from a private party than to face a salesman at a dealership.

Still, there are advantages to buying a used car from a new car dealership. Many used cars, on new car lots, are trade-ins. Dealerships usually get these cars at rock-bottom prices. If you make a low offer — but one that gives them some profit — you just might get a great deal. Furthermore, many dealerships offer certified used cars that have been thoroughly inspected and are backed by strong warranties.

Search for your car by using sites such as our Edmunds.com used vehicle listings or online classifieds such as Craigslist. Some sites are very flexible and allow you to search specific criteria such as make, model, options and price range. In some cases you can search the used car inventory of new car dealerships through their Web sites.

While the Internet is an amazing resource, you should still try the conventional sources. Ask friends and relatives if they are selling a used car. Keep your eyes peeled for "For Sale" signs in car windows. Scan the bulletin boards at supermarkets or in local schools and colleges. Finally, don't forget old faithful — newspaper classifieds.

Once you find a prospective car, call the seller before you go to see the vehicle. In this way, you can eliminate cars that have problems such as excessive mileage or a salvage title. Use our Used Car Question Sheet when calling to help prompt you to ask key questions. Verify the asking price in the ad.

While talking to the seller, set up an appointment for a test-drive. If possible, make this appointment during the day so you can see the car in the daylight and more accurately determine its condition. Also, ask for the VIN so you can run a vehicle history report.

Step 6: Set up financing for your used car.

You have three ways to pay for your used car:

Cash. Need we say more? Money talks — you-know-what walks.

Financing through a bank, online lender or credit union — We highly recommend this route because it will usually save money and give you the most control over the transaction.

Financing through the dealer — This can work for some people depending on their credit scores and the interest rates offered. Also, by prearranging financing through an independent source, the dealer may then try to beat the rate with a low-interest loan.

Financing through an independent source (online lender, bank or credit union) offers several advantages:

• Keeps negotiations simple in the dealership
• Allows you to shop competitive interest rates ahead of time
• Removes dependency on dealership financing
• Encourages you to stick to your budgeted amount
• Low-interest loans can be arranged online through .

Step 5: How much can you afford?

The smart shopper will consider how to finance the car at the beginning of the shopping process. This will avoid unpleasant surprises later on and help you make an informed decision that fits your budget.

You should use our Affordability Calculator to help you come up with the figures you need to guide you as you go shopping:

Monthly payment — If you are going to take out a loan, how much can you afford to pay each month?

Down payment — How much cash can you put down to reduce your monthly payments?

Purchase price of the car — Answering the first two questions will help you determine a realistic price range for your used car.

Once you've determined how much you can spend for a down payment, a monthly payment and the purchase price of the car, print out these figures. Later, when you are negotiating for a used car, you might need to check this information to bring yourself back to earth.

Step 4: Research your prospective used car.

You will find all the information you need to make an educated decision about what to buy on the Edmunds.com used car pages. The major topics are accessed by clicking the links to the left of the screen that list such information as prices, standard features, specs and safety, warranties, consumer discussions, photos and video and resale values.

A helpful feature is "Car Ratings" which evaluates the different components of the vehicle. You can also read reviews of the car by current owners. Finally, make sure you use True Cost to Own (TCO)^® to see what other expenses you will incur (TCO data is not available for all cars).

Another essential part of the used car pages is Edmunds.com's True Market Value (TMV^®)pricing, a helpful guideline when car shopping. TMV pricing is based on sales figures of similar cars across the country. We will go into more detail about how to use Edmunds.com's TMV later.

One last vital step to getting a great used car deal: Make sure you run a vehicle history report on any used car you are considering buying. Several companies sell these reports, which are based on the VIN, but AutoCheck and Carfax seem to be the most comprehensive.

These reports can reveal vital information about the used car, including whether it has a salvage title (it has been declared a total loss by the insurance company) or if the odometer has been rolled back. This is also the time to decide if you want a Certified Used Car. If you do, see our article that describes the certified used vehicle programs offered by each manufacturer.

Used car shopping will involve inspecting the vehicle to determine its condition. This process is simplified if you buy a certified used car that has passed a thorough inspection and is backed by a manufacturer's warranty. But while buying a certified used car removes a lot of the guesswork about the vehicle's mechanical condition, you pay for this service.

Most new cars are sold with a three-year/36,000-mile warranty. Therefore, if you buy a car that is from 1-3 years old, with fewer than 36,000 miles on the odometer, it will still be under the factory warranty.

Step 3: Save money by buying second-tier cars.

The value of a used car is based on its condition, mileage, reliability, performance and popularity. Of course you want a car that is reliable and performs well. But do you want the same used car everyone else wants? If so, you will pay a premium for it. In some cases, the only difference is the nameplate.

How much difference in price separates good-but-popular cars from their good-but-overlooked counterparts? Two Edmunds.com editors recently shopped in the family sedan class. They found that 2-year-old Camrys and Accords were about $3,000 more than comparable 626s and Galants. For more on this subject read "How to Get a Used Car Bargain." If you are adventurous and want to shop for a killer deal, read "Used Car Deals: Program Cars, Rental Cars & Salvage Titles."

Step 2: Choosing the right used car

At the beginning of the car-buying process, many people already know the car they want. But it's a good idea to stop right now and test your decision with this question: Will this car fit into my monthly budget? We'll explain how to determine what car you can afford in the next step. For now, make sure your choice isn't obviously exceeding your budget. Ask yourself, does it meet my current needs? For more on this subject, refer to "10 Steps to Finding the Right Car for You."

You may need to expand your horizons when considering what to buy because you won't know what is available in your area until you really start looking. Consider building a target list of three different cars. You might want to think of vehicles in the same class. For example, if you really want a Toyota Camry, you should also be on the lookout for a Honda Accord, Nissan Altima or Chevrolet Malibu. These cars were built for the same market, but they have different features and sometimes lower prices.

Step 1: Starting out — Why buy used?

If you've decided to buy a used car, you've already made a smart decision. You can get a car that's almost as good as a brand-new one without paying for the depreciation that wallops new car buyers as soon as they drive the car off the lot. Even cars that are only a year old are 20-30 percent cheaper than brand-new cars.

But there are other good reasons to buy a used car:

• You'll save money on insurance.
• Bigger bargains are possible for the smart used car shopper.
• Used cars are more reliable today than ever before.
• Some used cars are still under the factory warranty.
• Most new carmakers now sell certified used cars, which include warranties.
• The history of a used car can easily be traced using the vehicle identification number (VIN).
• If you buy from a private party, the negotiation process is less stressful.

10 Steps to Buying a Used Car

The following steps will tell you how to locate, price and negotiate to buy the used car you want. If you still don't know what car to buy, read "10 Steps to Finding the Right Car for You"and then come back after you have decided.

Checklist

• Decide how much money you have to spend on your new car purchase.



• Check to see what incentives and rebates are available on the car you want to buy.



• Print out the Edmunds.com TMV price on the car you want to buy (adjusted for options, color and region).



• Look up the Edmunds.com Cost to Own for the car you want to buy.



• If you are financing the car, use the payment calculators to determine the monthly payment for the car you want to buy (and remember to apply the incentives to the purchase price).



• If you haven't already done so, test-drive all the cars you are considering buying.



• Contact the Internet department and simultaneously solicit quotes from multiple dealers.



• If you are trading in your old car, check its Edmunds.com TMV and print out this information.



• Call the salesman or Internet manager to negotiate the best price of the car you want to buy
.


• Once you've reached a good price, ask the salesperson to fax you a worksheet showing all the prices, taxes and fees.



• Bring your worksheet with you to the dealership so you can compare these numbers to the figures on the contract.



• Inspect the car for dents, dings and scratches before taking final delivery.

Step 10: Inspecting and taking possession of your new car

Most dealerships detail the car and provide the first tank of gas for free. You will have one more chance to inspect the car before you take possession of it. Make sure you walk around the car and look for scratches in the paint and wheels or dents and dings on the body. If you are paying for floor mats make sure they are included. If anything is missing, or if any work needs to be done, ask for a "Due Bill" that puts it in writing. You will then be able to come back and get the work done later.

As you drive away inhaling that new-car smell, there is only one more thing to be done: enjoy your new car.

Step 9: Reviewing and signing the paperwork

Once you have a deal, you can ask the Internet manager or car salesman to deliver the car to you at your home or office. This means you will review the contract and sign it in your space, not the dealership's finance and insurance office (which many buyers find intimidating). Wherever this step takes place, you will be presented with the contract for your new car and a dizzying array of forms to sign. If you are in the F&I office, the finance manager (who is actually an expert salesperson) will try to sell you additional items such as extended service contracts, fabric protection, alarms or a LoJack vehicle locator. In most cases, we recommend turning down these extras — with the possible exception of the extended warranty, which provides peace of mind to some buyers. Additionally, it is worth noting that some states allow up to 60 days after purchase to cancel an extended warranty, but you should check local laws to confirm your options in your area. If the car is delivered to you, the contract is already drawn up, so these extras are not an issue.

To prepare yourself for the kinds of products that might be pushed on you, or inserted into the price without your knowledge, read High-Priced Dealer Add-ons.

If you have already seen a worksheet for the deal you've made, the contract should be a formality. Make sure the numbers match the worksheet and no additional charges or fees have been inserted. You will also be asked to sign various forms that register your new car and transfer ownership of your trade-in. Understand what you are signing and what it means. Ask questions if you don't understand, and don't ever feel like you have to hurry. Buying a car is a serious commitment and you should understand every document involved. Remember, once you have signed the contract you cannot take the car back.

Step 8: Closing the deal

If you feel good about the price you have been quoted, it's time to take a look at the big picture. Many buyers focus on the cost of the car and ignore the related expenses. Besides the cost, you will have to pay sales tax and various fees which vary from state to state. These expenses can be estimated and totaled with the Edmunds.com calculators.

The simplest way to estimate total cost is to ask the salesperson to fax you a worksheet and invoice before you go to the dealership. This way, you'll be able to review the figures in a relaxed environment. Compare the numbers from the dealership to those you have calculated and the TMV prices on Edmunds.com.

In some areas of the country, dealers have costs that don't show up on Edmunds.com invoice prices. This means the Edmunds.com invoice price of the car you are researching might not exactly match the dealer's invoice. Don't panic — and don't begin making accusations. Edmunds.com can't track all regional fees, such as advertising costs. So, as a rule of thumb, consider the charges on the dealer's invoice to be nonnegotiable. However, if extra fees are written into the contract (such as "D&H" or "Administrative Costs") which seem bogus or redundant, ask to have them removed, or say you will take your business to another dealership. For more information about this crucial point in the process read "Invoice Scams and Sudden Extras".

Step 7: Negotiating for your lowest price

alespeople are willing to discuss price over the phone — even by e-mail. The car salesman on the lot will try to get you in his office before he would get down to brass tacks and talk price.

It's quite possible that, in your calls to various Internet departments, the selling price of the car has already come up. Often Internet salespeople will volunteer the selling price of their car since they know this is the make-or-break factor in most buyers' decision making process. If the price they've quoted is at or below Edmunds.com's TMV, then you are already in the right range to buy the car. If you want to try to improve the deal, you have a few options.

Everyone has their own idea of what makes a good deal, but most people just want to know they got a fair price. Here, TMV will be your best guide. If you want to try for a rock-bottom price, start by getting bids from three local dealers. Follow this up by taking the lowest price, calling the two other dealerships and saying, "I've been offered this car at this price. If you beat it I'll buy it from you." They almost certainly will. However, keep in mind that you can't play this game forever. Eventually, they will give you a take-it-or-leave-it price. For more on getting the best price, read Negotiating 101.

Also, be warned that if you ask the dealer to cut his profit, he might try to take it back somewhere else. Remember, a good deal isn't just the lowest selling price. It's the lowest total out-the-door cost on a car that meets your needs. This means that to get a fair deal you have to be alert throughout the entire purchase process, even after you and the salesman agree on a price.

Step 6: If you are trading in your old car...

If you are trading in your old car to a dealer, you will probably not get as much money toward the price of a new car as you would have if you'd sold it yourself to a private party. However, trading in offers some advantages. You can solve all of your car-buying problems in one visit to the dealer. You can unload a hard-to-sell car without running advertisements and dealing with tire-kicking buyers, or long DMV lines. In some states, you will even pay less sales tax on a deal that involves a trade-in.

Begin the process by looking up your car's trade-in value on Edmunds.com. The Edmunds.com True Market Value^® (TMV^®) Used Vehicle Appraiser will also give you trade-in values. After you plug in all of the vehicle's information (mileage, options, condition and colors) you will get a specific trade-in price. This will often be different from the offers you get once you are on the car lot. At a dealership the value assigned to your trade-in varies based on the time of the month, the dealer's specific inventory and the used car manager's mood, but at least TMV will give you a rough idea of what your trade-in is worth.

If it's important to you to get the maximum value for your trade-in, you should visit several dealerships and solicit bids. Tell the salesperson that the sale of a new car will be contingent on the amount he or she will give you for your trade-in. Also, tell them you are visiting several dealerships. With a little legwork, you may be able to boost the price you get for your old car by several hundred dollars or more. Remember, the extra effort you spend in getting competitive bids is far less than what it would take to advertise, show and sell the car yourself.

Step 5: Internet vs. Traditional Car Buying

In recent years, car dealerships have created a new pathway for car buyers, one which we strongly encourage you to use. You can either walk onto the car lot, in the traditional way buyers have done for years, or you can go through the "Internet department." The traditional way means you will deal with a car salesman and negotiate face to face in the dealership's sales office. If you choose the Internet department, you will remain at home as you communicate with the Internet manager by e-mail, fax and phone. The Internet route saves time and hassle and will also save you money.

Still, many people are drawn to the traditional way of car buying since they believe buying a car is just too big of a purchase to do remotely. If you go this route, you should test-drive your car salesman carefully before moving forward. Ask yourself if you feel comfortable dealing with them. Are they impatient and pushy? Or are they relaxed and open? If you asked them about a specific car's availability, did they respond to your needs? Or did they try to steer you toward another car simply because they have too many of that model in stock? Do they return your phone calls? Do they answer your questions in a straightforward manner? Or are they evasive and confusing?

By answering these questions you should have a sense of whether or not you want to buy from this salesperson. If you feel comfortable with the individual when researching by phone, and if the dealership does indeed have the car you're interested in, set up a time to test drive the car, preferably when the dealership will not be very busy, such as a weekday morning. Before heading to the car lot, review all your notes and make sure you bring your car-buying folder. Also bring your checkbook, registration and proof of insurance. Keep in mind that you're bringing these items so you'll be ready to buy a car if you get a fair deal. Don't feel obligated to purchase a car simply because you have all the necessary paperwork with you or because you test drove the car.

Step 4: Finding the exact car you want to buy

You should now have a specific idea of the car you want to buy. This means you know the year, make, model, trim level, options and color. The more flexible you can be about these specifics, the wider the range of the cars you'll find available for sale. Being flexible will give you additional bargaining power. For example, a shopper might be very firm about the make, model and trim level, but could accept a variety of options and colors. If you're a shopper who definitely wants hard-to-find options and a specific color, it will be more difficult to make a great deal. Why? You have no leverage as a negotiator. You have to pay the dealer's price or try to locate another identical vehicle. Obviously, if you do find the exact car you're looking for, there's no need to volunteer this information to the dealership.

In any case, locate the exact car you want by sending e-mails to the Internet managers of dealers in your area. On Edmunds.com, you can simultaneously solicit quotes from multiple dealers. In many cases, you will have to follow up with a phone call. Say something like: "I'm looking for this year's Honda Accord. I'm not fussy about the color except I don't want black or white. I want ABS and side airbags. What is the closest thing you have to that on your lot?" Often the salesperson will have to check his inventory and call you back. After a few phone calls you will have a good idea of how widely available the car is. If there are several dealerships offering the same car, you will be in a better position to make a good deal.

Edmunds.com also makes it possible for you to search the inventory of most dealership lots. Click on "Search New Car Listings" on our home page.

As you make phone calls and exchange e-mails, take careful notes. You should record information about each car you locate, including the color, options, and the dealership name. This will save time as you continue through the shopping process.

Step 3: Pricing the car

Car salesmen will usually point to a car's "sticker price" (MSRP) as the amount you have to pay. However, the price the dealership is willing to sell a car for is often well below the sticker price. How do you know what to pay? Edmunds.com has created a valuable tool for car buyers called True Market Value (TMV®) pricing. Based on actual sales figures, TMV is the average price buyers are paying (also known as the "transaction price") for a certain type of car in your area. The TMV figures, found on Edmunds.com, are adjusted for many factors including options, geographic region and color.

To find the TMV price, begin by looking up the car you want to buy on Edmunds.com. Follow the prompts to arrive at a final TMV price with options for the exact car you are buying. Keep in mind that this price includes the destination charge, which is levied by all manufacturers. (However, the invoice price might vary in certain regions where advertising costs and other fees are included. Edmunds recommends paying the fees listed on the invoice, but questioning any advertising fees that appear on the purchase contract.)

The incentives and rebates you researched and printed in the previous step are automatically factored into the final price. In other words, the incentive is deducted from the TMV price or the lowest negotiated price. If you are going to use low-interest financing, calculate your final buying price, then use our payment calculator to find your monthly payment.

Print these figures — the TMV, the incentives and the monthly payment — and put them in your folder for reference as you continue the car-buying process.

Step 2: Using incentives and rebates

oday's new car market is crowded and competitive. Many new cars are offered for sale with attractive incentives to make you choose a particular model. In some cases, the cars with the best incentives are those that aren't selling very well on their own.

An incentive is anything that gives you an added reason to buy a particular car. Often, however, it comes in the form of a cash rebate or low-interest financing. A car might be selling for $25,000 but the manufacturer is offering $4,000 in customer cash for a final price of $21,000. In another example, a $25,000 car financed for five years at 6 percent would have a monthly payment of about $535. But with zero-percent financing, the payment is roughly $461. That's a huge savings to you.

Check the Edmunds.com Web site for the latest incentives and rebates available for the car you want to buy. You can also watch for TV and newspaper promotions but, remember, the incentives don't apply to all models and are not offered in all regions of the country. Furthermore, your credit must be very good to get the low-interest financing. And finally, keep in mind that there are some hidden incentives paid directly to dealers to push certain cars. Edmunds.com tracks this so-called "dealer cash" as well, and posts the information in the incentives and rebates section of our Web site as "Marketing Support."

Research what incentives, if any, are offered for the car you want to buy. Create a car-buying folder and put this incentives information in it as you move to the next step.

Step 1: Starting out

These steps will help you to locate the specific car you want, and at a price that is fair to both you and the dealer. By now, you should have done plenty of research to determine which is the best car to suit your needs. And, you should have a good idea of what to payfor the car you want. Now you need to narrow the research even more. You will soon be finding the exact car you want to buy — with the options you have chosen — and then you will be determining a target price to pay. If you have done your homework, this will be a fairly easy process with no unexpected surprises.

Buying a car is a big investment, but it can be exciting and rewarding, especially if you feel like you got the right car at a fair price.

10 Steps To Buying a New Car

The following steps will tell you how to locate, price and negotiate to buy the car you want. If you follow our suggestions the car buying process can be fast and enjoyable. But more importantly, you will have the satisfaction of knowing you got the right car for you at an excellent price.

Furthermore, there are other key advantages to following our 10 Steps:

• You'll be able to decipher the complicated pricing system used by dealerships.
• The True Market Value of a car will be revealed.
• You will find available incentives and rebates to reduce the price of the car.
• A non-negotiating system will be presented to eliminate conflict.
• Extra charges in the Finance and Insurance (F&I) office will be eliminated.

In other words, the 10 Steps covers what you need to know and in the order you will encounter it. This quick guide can help you save thousands of dollars. It will also give you a great feeling of empowerment, putting you in charge of the deal-making process.

But first things first: You need to decide what car you want to buy. If you haven't done that yet, please check out our 10 Steps To Finding the Right Car for You, then head back here once you have chosen the car you want to buy.

Glossary to "Confessions"

Car salespeople have their own vocabulary. It describes their customers, the deals they make and the day-to-day life on the lot. Here is a sampling of how they talk when the customer's not around.

Be-backs - A customer who leaves the car lot promising to return later, saying, "I'll be back," or some variation of that statement. "The guy was a be-back. But I think he meant it. I'll see him again."

Boss - The typical way that salespeople address the managers or the GM. "Hey boss! Got a deal for you!"

Bumping - Raising the customer's offer for a car. "If Mr. Customer says he only wants to pay $250 a month, just say, 'Up to -- ?' He'll probably bump himself up to $300 without you doing anything."

Closer - An experienced salesman who is brought in to "close" the customer by making them agree to a deal. "If I worked with a better closer I'd have more units on the board."

Desk - This is the sales manager, not the place he sits. "Ask the desk if these rebates are still in effect."

Demo - This is the test drive. "This guy comes in, demos the car and I think he's ready to buy, right? Then he tells me the car's for his wife and he can't make a decision without her."

F&I - This stands for the Finance and Insurance office where the documents are signed. The F&I salesperson usually will push products such as extended warranties, fabric protection and alarms. "The wait for F&I is two hours. Better stick with your customer so they don't leave."

Full pop lease - This is when a vehicle is leased at 110 percent of the sticker price - the highest amount allowed by most banks. "I got them into a full pop lease. I'll get a nice voucher for that."

GM - The General Manager. The GM is the head honcho at the dealership. He runs the business from day to day. "The guys were standing out on the curb drinking coffee so the GM called them into the tower and read them the riot act."

Green pea - A new salesperson. "The funny thing is, green peas can outsell the veterans. That's because they don't know how hard this job is."

Grinder - A customer who negotiates for hours over a small amount of money. "We were only $500 apart but the guy wouldn't sign. Man, what a grinder."

Lay down - A customer who takes whatever deal the salesperson offers. "I quoted him monthly payments of $575 and he took it! I wish all the customers were lay downs like that."

Mini - The commission on a deal where the car was sold at close to invoice price."Sure, the deal was only a mini. But I qualified for a weekend bonus and made a grand."

Mooch - A customer who wants to buy a car at invoice. "People are spending too much time on the Internet. It's turning them into a bunch of mooches."

Packing payments - Adding extra profit to the cost of a car. "This place I used to work got busted for packing payments. Next job I get is going to be in a no-haggle store."

The Point - The place on the car lot where the "up" man stands looking for customers. "The GM saw me standing on the point with my hands in my pockets. He went ballistic and sent me home for the day."

Pounder - A deal with $1,000 profit in it. "Doctor comes in and buys the top of the line model, fully loaded - and he pays sticker! That'll be a two pounder for me."

Rip their heads off - This describes taking a customer to the cleaners. "I stole their trade in, I sold them the car at a grand over sticker - I mean, I just ripped their heads off."

Roach - A customer with bad credit. Not to be confused with the "roach coach" (see entry below). "The guy looked good. But we ran his credit and he turned out to be a roach. We're talkin' a 400 credit score here."

Roach coach - The food truck that comes around to the dealership every day. "I should've known better than to eat that chili from the roach coach. My stomach's killin' me."

Spiff - A tip, kickback or payment of any kind, usually cash which is handed between salespeople. "I spiffed the F&I guy $20 bucks and he took my customers first."

Strong - This has a special meaning on the car lot. It means holding firm on your price and being a tough negotiator. "When they ask for your price you have to be strong. Hit 'em with high payments, then scrape them off the ceiling and start negotiating." (See also "weak.")

Tower - The office where the sales managers work. This is usually a raised platform allowing the managers to see over the roofs of the cars so they can watch customers and their salespeople. "Attention: All new car salesmen report to the new car tower!"

Turn over - Also known as "turning," this is the practice of passing a customer from one salesman to another. It is thought that this will prevent customers from leaving the car lot. The theory is that the customer might just have bad chemistry with the first salesman and he might like the next salesman. "I turned this guy to my partner and he wound up buying. I'll get half of the commission on the deal."

Up - A customer that walks on the car lot. The term probably comes from the order in which customers are taken, as in: "I'm up next." Many dealerships also have an up system. "We've got ups all over the lot, and you're in the back drinking coffee?!"

Voucher - Car salespeople receive a voucher to let them know what their commission was for selling a car. They don't know until the deal is finalized exactly how much they will receive. "Check out this voucher. I thought I had a pounder. Instead it's a mini."

Weak - This describes being a weak negotiator or coming down too quickly on price."The guy was weak so he only lasted a few months. How are you going to make money in this business if you give away cars.

Final Thoughts

The world of car buying is changing rapidly. Buyers are more informed. Dealers are more sensitive to their customers' satisfaction. But, like in many industries, the old ways die hard. So it is still important to be informed and to make a good decision when shopping for a car for yourself and your family.

Of all the advice I've offered, I'd just like to stress that it's important to remember that buying a car should benefit both you and the dealer. While I have focused on deflecting the sales techniques in the dealership, I don't recommend becoming overly defensive. If you deal fairly with the car salesperson, and you get the same in return, the transaction can be enjoyable — even exciting. It really should be. So, I wish all of you a great shopping experience and many years of driving pleasure in your new car.

7. Always remember that it's your money

Car salespeople are good at making us feel obligated to buy from them. They serve us sodas in the sales room. They run to get the keys for the test drive. They brave their bosses wrath with our lowball offer. So, when it comes time to make a decision we're tempted to think we owe it to the salesperson to buy from them. Yes, we certainly do owe them our business — if the deal is fair. Don't do it just for the salesperson. Do it when the numbers make sense. After all, you may be signing a contract you will have to honor each month with your hard-earned money. How will you feel about it as the years roll by and the car begins to show its age. Thinking about that can be like a bucket of ice-cold water in the face.

6. The deal's not done until you drive off in your new car.

You don't have to be a jerk about it, but you should be on guard throughout the entire car buying process. The biggest place that people err is when they have struck a deal with the salesperson. They breathe a sigh of relief and think the dealing is done. But the buyer needs to stay alert for the F&I process. Extra charges can appear in the contract. There may be a problem with the condition of the car. All these things can be addressed if you have the right attitude. If anything crops up during the F&I process that doesn't jibe with your numbers you can still walk away from the deal.

5. Shop around.

Say for a second you didn't know any of the numbers. Say you were in a jam and had one morning to get a new car. You could probably get a good deal by shopping around. You can do this in person or on the phone — or even with e-mail.

What you do is this. Contact dealer number one. Tell the salesperson, "I'm ready to buy today but I want your best price on the car." When the salesperson gives you his best price, write it down. Or, if you are doing this in person, have him write it on the back of their business card.

Now contact dealer number two and do the same thing. Only, tell them you have already been to dealer number one and you got such and such price. Then, repeat the mantra: "I'm ready to buy today. But I want your best price." Naturally, they will try to undercut the first guy's offer.

Now contact dealer number three and do the same thing. By now you should have three offers. If you want, you can even go back to the first guy and see if he will whittle a few more bucks off his offer. If not, can the dealer throw in something else to make their offer more attractive?

The beauty of this is that the market will define itself in a short period of time. And when you're done, you will be confident that you got the best price possible. Incidentally, dealers hate it when you shop their offer. They hate it because it can get you a very good price.

4. Know the numbers.

Yes, we already covered this under the heading of general concepts. Now let's look at it in a little more detail.

When you visit a dealership, and go into the sales room, the salesman will reach for a 4-square worksheet. They do this to keep track of the numbers in the deal that will affect their profit. Don't you think that if the pros do this, you should do the same thing to protect your money? If you don't, how else will you know what to pay for the car? What to take for the trade-in? What your monthly payment should be?

Using Edmunds.com, find out what the invoice, sticker and Edmunds.com True Market Value^® (TMV) prices are for the car you want to buy. TMV^® is a new concept developed by Edmunds.com. It's a guide that provides you updated weekly pricing on what you should pay for a vehicle — without having to spend hours negotiating with a dealer.

Write these prices down. Then find the approximate price of your trade-in. Then figure out how much money you will have to borrow and how much your monthly payment should be. Consider the difference between paying cash, leasing and financing. Make sure you also find out about holdbacks, rebates and incentives.

Is your head swimming with numbers now? That's pretty normal (unless you're some kind of math whiz). That's why you should write all this down. Then, with the numbers in front of you, get out your calculator and crunch them. When they have been put through the wringer, you will get one gleaming, shiny number which represents what you should pay for the vehicle you want to buy. With that number in mind, set a range. Start low and increase your offer in small increments until they say the magic words, "We've got a deal.

3. Walk away from any deal/salesperson you don't like

If you aren't committed to this rule you will lose money. Car salespeople know that if you leave the car lot to "think it over" you might decide not to buy their car. So they pressure you to "buy today." This isn't good for you. It means you might buy the wrong car. It means you might agree to financing that doesn't fit your budget. It means you will probably pay too much.

If you have serious misgivings about the deal you are making, walk away. Similarly, walk away from any salesperson who seems too aggressive, overbearing, bullying, evasive or unreliable. There are plenty of good salespeople out there. Find one. And deal with that person until you have the car you want, at the best price with the right financing for you.

2. Don't be in a hurry.

This is a tough one because many people live busy lives with tight schedules. Their car breaks down and they have to do something about it this weekend, or on their day off, or at night. They might be overwhelmed by the problem and just throw themselves at the mercy of the car salesperson. Big mistake.

First, if your current car is on its last legs, consider sinking a little money into repairs so you don't have to make a panicked move at the car dealership. Yes, it's tempting to think of getting a new car and leaving the old heap behind. But caving in to this kind of impulse will cost you money.

If you can't fix up your old car, rent a car for a week. And make sure you rent the kind of car you are thinking of buying. There is no better way to test drive a car than to live with it for several days, using it for your daily commute or your typical errands. I guarantee you will learn something significant about the car that will help you make your final decision.

1. Use the Internet.

The Internet is an amazing tool for car shopping. It levels the playing field by giving accurate information to the consumer. It takes the anxiety out of negotiating. It forces dealers to slice profit because they must beg for your business. It allows consumers to comparison shop loans and leases, as well as extended warranties and insurance. It gives the consumer power. Use Edmunds.com to conduct research and our PowerShopper tool to solicit bids. Once you enter the information about the car you are looking for into the PowerShopper interface, the dealers will come to you.

It's likely that you will have to visit a car lot at some point in the car buying process (for the test drive, for example). The following recommendations are general tips that will help you if you insist on face-to-face negotiations with car salespeople when buying a new vehicle.

Car-Buying Recommendations

Now we come to the nuts and bolts of getting a good car at a fair price. This isn't a tutorial, since we have this information already posted on the Edmunds.com Web site. Instead, these are guiding principles to help you navigate the choppy waters of car buying. These are rules I saw being broken all the time by the shoppers that turned up on the car lots where I worked.

Concept 3: Profit Equals Commission

I never really thought of this until I sold cars but... Car salespeople earn their living by inflating the price of the car you are buying. The more they inflate the price, the bigger their commission. This might seem very obvious, but we tend to lose sight of it when the smiling salesperson greets us on the car lot. They make us think they have our best interests in mind. The good salespeople do have our interests in mind. The unscrupulous salespeople are thinking how your purchase increases their commission.

One of the dealerships I worked at had a sliding scale for commissions. The higher the profit, the higher the commission. Naturally, the salespeople tried to hit that point where the commission was bumped to the higher percentage. That might mean moving you into a higher level vehicle. It might mean increasing the profit by financing sleight of hand. In both cases, this smiling salesperson, with the personable air, didn't have your best interests in mind.

I believe in paying a dealer a profit for his car. I also believe in rewarding the salesperson for their expert help. But I don't think this justifies making an unfair profit at my expense.

Concept 2: Self Defense is Simple

OK, that's the bad news. The good news is that it's not that hard to protect yourself from severe economic loss. By doing even an hour's worth of research, by keeping in mind several simple concepts, the average person can be reasonably sure they won't be swindled. By doing an additional hour's research, they can get a pretty good deal. It's not that hard. In fact, some people find that they like the process once they learn how to handle it.

Knowledge is power. That's almost a cliche. But it holds this simple truth: if you know the numbers of the deal it will be hard for the salespeople to overcharge you. It's like going to a store and seeing a nice lamp for $30. Then you go to a second store and see the exact same lamp for $50. Now a salesperson approaches you and tries to talk you into buying their lamp at the higher price. Will you do it? Probably not, because you know the exact same lamp is sitting on the other shelf for $20 less. What can the salesman say to you to convince you that their higher price is justified?

Now let's extend this concept to car buying. If you wander onto a car lot without knowing how much the cars should cost, you have no frame of reference. As your reasoning power is reduced by a combination of breathing new car smell and test driving the car, you will begin to believe the car salesperson when he tells you the car is going to cost a lot but it will be worth it. Remember, the salesperson wants you to be excited about the car because then the rational side of your brain will become disabled. Just ask yourself this: if you buy today, how will you feel when you wake up the next morning? Is this a decision you can live with?

What car buying numbers do you need to know? Find out how much the dealer paid for the car you want to buy. Find out what cars like that are actually selling for. Find out what your trade-in is worth (if you want to trade it in to a dealer). And finally, if you decide to finance the car, find out what your monthly payment should be by shopping for a car loan before going to the dealership.

Car-Buying Concepts Concept 1: The Stakes Are High

This realization hit me very strongly while I was selling cars — people can lose a lot of money by making the wrong choice when buying a car. This is a serious decision for the average household budget. If you are unprepared for the encounter with the salespeople and make a poor decision you can lose money. A lot of money. How?

Well, say Joe Consumer decides it would be nice to have a new car. Without doing any research he heads on down to the car lot and hooks up with a sharp salesperson. Joe Consumer might be talked into buying a car in too high a price bracket. He could also be switched to leasing without his knowledge or consent. And he might also put down too much money. In the F&I Room he might be talked into buying protection packages, road safety kits and extended warranties.

What would these mistakes add up to? Over the course of five years (the length of some lease contracts) this could mean he pays thousands of dollars too much for that car. This might convert into hundreds of dollars too much per month. Many people are on tight budgets. Paying a hundred dollars too much could sink the ship; certainly it would produce stress and prevent a family from saving or investing their money for the other necessities of life.

The monetary loss is only part of the problem here. People become angry, humiliated and resentful once they find out they have been deceived and overcharged. And yet, once they sign the contract, it is difficult — if not impossible — to unwind the deal.

I should add that there are many good dealers who wouldn't cheat or overcharge even a naive customer. But, sadly, there are enough unscrupulous dealers out there to make caution and suspicion necessary. I know that many of the salespeople I worked with would take an extra thousand dollars profit without a thought, then laughingly brag about it to the other salespeople. The management of the dealership rewarded this kind of profit taking and called it superior salesmanship.

Part 9: Lessons from the Lot

In this final installment, I'd like to sum up what I've learned, and offer a few things that can help you the next time you shop for a car. I've decided to divide this chapter into two sections: Car-Buying Concepts and Specific Recommendations. The Concepts are general thoughts underlying the car-buying process. In some cases these are simple, fundamental realizations that you might already know. But it doesn't hurt to revisit them before we move on to the Specific Recommendations.

Part 8: Parting Shots

It was the last day of my career as a car salesman. I was working the evening shift at the no-haggle dealership, on a day in the middle of the week. A typical day. A slow day. I made my sales calls in the "business development center," trying to set up sales appointments I knew I would never keep. My heart wasn't in it and, not surprisingly, I couldn't convince anyone to sell me her "quality used car" for "above market value."

I sat at my desk in the showroom hoping for some diversion to pass the time. I had done that a lot as a car salesman. And on this day, sure enough, something happened to kill a few minutes. It involved a salesman I'd gotten to be friends with, a guy named Craig. He had recently moved from Montana and true to his roots he looked like the Marlboro man — rugged features and a thick graying mustache. Unfortunately, Craig also had bad teeth and was a foot shorter than what I imagined the Marlboro man to be.

Early on, I had been told a good salesman "walks the lot" every day to check on inventory. Craig did this religiously and memorized the location of every car on the lot. If you were in the middle of a sale, and the customer decided he wanted a white coupe instead of a black four-door, you had only to call over to Craig and he would instantly give you the location of the car that would seal the deal. I later realized Craig had another reason for walking the lot. He had a bottle hidden out there somewhere. He'd always return from the lot a touch more animated, a glow in his face.

On one return trip from walking the lot, he went to sit at his desk and missed the center of his chair seat. The chair was on wheels and began sliding backward as he continued downward. Despite his heroic efforts — clawing for handholds on a nearby potted plant — down he went. And all this happened right in front of the boss's office window.

There was silence in the showroom for a few seconds, then high-pitched squeaks of laughter from a saleswoman, named Allie. Her laughter continued until it infected the rest of us. We stumbled outside to recover ourselves and, as Allie lit up a cigarette, she began regaling us with stories of other mishaps involving the parade of salesmen and women who had worked there during her tenure. I felt odd as she talked about past co-workers since I knew I would soon be joining their ranks, disappearing into the anonymous job market.

Allie told us how she had helped a friend named Mark get a job as a salesman there because, "He was an even bigger klutz than me." One day he took a customer's driver's license into the showroom to photocopy before going on a test drive. Turning back to the customer, he walked right through a plate glass door, saying, "Here you go," and handing back the license as if nothing had happened. As he turned away, Allie saw blood spurting from his knee where an artery had been severed. They wrestled him into the break room and a mechanic in the service bay, who had been a medic in Vietnam, staunched the bleeding. They rushed back outside to tend to the customer and discovered he had a long shard of glass protruding from his foot.

Another time, Mark went outside to "lock and block" and never returned. Lock and block is a nightly ritual where the sales staff makes sure all the car doors are locked and the entrance is blocked by parked cars. In this case, the salesman had pulled on a chain link gate to see if it was locked but succeeded in pulling it down on top of himself, pinning him to the ground. When they lifted the gate off him, he had a waffle pattern on his face from the chain link fence.

As we talked, the afternoon turned to night and a chilly wind came up. Allie went inside to make more sales calls and Craig drifted away to do a thorough check of our inventory. I leaned against a car and watched the traffic passing in the street. From where I stood I could see the guys across the street at the Dodge dealership drinking coffee and smoking. It was slow over there too. I began thinking back on my experiences, summarizing what I had learned from my three months as a car salesman.

Of course, I absorbed a lot I couldn't easily describe, bits and pieces of information I knew would come back while I was at Edmunds.com. But how had my view of the big picture changed?

I know for sure I'll never look at car salesmen and women in the same way. I used to hate and fear them, to lump them all in the same category with sweeping generalizations. Now, I had some insight into the waters they swam in. I sympathized with them, I pitied them, and — in some cases — I admired them.

I saw that many car salesmen and women, like myself, were just moving through the dealership experience, on their way from one point in their lives to another. Most of them didn't have college degrees and were trapped in lives that they thought offered few chances for advancement. The car business offered them a way to use a lot of hustle and little book learning to make money. I admired anyone who was trying to improve his (or her) life, particularly through hard work. But making big bucks in the car business wasn't the slam-dunk it was made out to be.

Previously, I had known car salesmen from the outside, as I encountered them while buying a car. Now I had worked alongside them. I had been rejected by customers and bullied by sales managers. I had been excited by a big sale and disappointed when a sure thing fell apart. I saw the same dream they saw: big commissions from easy sales. All you had to do, as my assistant sales manager Michael told me, was get "right in the head."

In the Friday morning sales meetings at my first dealership the managers tried to psyche us up by saying that we could make more money as a car salesman than a doctor. True, some of the successful salesmen made a lot of dough. But the vast majority of car salesmen were eking out a living, thinking that some day, somehow, their luck would change and the money would begin rolling in.

So, you think I'm romanticizing car salesmen? Trying to clean them up and excuse their evil ways? And, you might ask, if the salesmen aren't the bad guys, who is?

Having been a salesman myself, I began to view the managers and dealership owners as the real culprits. While salesmen play people games with the customer, the guys in the tower work the numbers with computers, their eyes fixed on the bottom line. They can see at a glance what kind of profit they are taking from the customer and they do it any way. Furthermore, they bully the sales staff, encouraging them to manipulate, control and intimidate customers while they take the lion's share of the profit.

Sometimes, the profit a salesman generates is not even pocketed by them. One salesman told me the F&I people can work their magic to rob a salesman of his commission. They move front-end profit to the back end where it evaporates from the salesman's voucher and returns, over the years, to the dealer in the form of high interest and steady payouts. I experienced a little taste of this myself. I leased an SUV to a single mother and at sticker price expected a nice commission. But on payday I cashed a $65 check. No explanation. No hint of where my commission had gone.

The management pushes the salesman out the door, lets him meet and greet the customer, then takes the profit. Not only that, but the management also blames the salesman when something goes wrong. I saw this quite clearly when the TV news team did its hidden camera investigation of the dealership (more on this in Part 6). A salesman was made out to be the bad guy. When the camera was turned on the dealership owner he disavowed knowledge of what was happening in his business and promised a complete review of their practices. This, despite the fact that at Friday sales meetings, the owner was cheering the boys on to get more deals at a higher profit.

Profit.

By itself profit is a positive word. But in the car business, the dealership's profit is the consumer's loss. I'm not suggesting that the dealership be run without a profit, but in one case I heard about, the dealership made a 16 percent profit on a $25,000 car. That meant the consumer, the average Joe buying the car, paid about $4,000 too much.

While working as a car salesman I became impressed with the damage a bad car deal can do to the budget of an ordinary person. In one case, I participated in leasing a car to a couple at well over its value. I was haunted by the thought that this nice ordinary couple had trusted me, and I had let them sign a contract that would bind them for five years to a high-interest lease. I consoled myself thinking perhaps another dealer would have inflicted greater damage.

How did the car business get so screwed up? There's nothing else in our society that is sold with the consumer so conspicuously unprepared.

During the sales seminar I took, the instructor attempted to tackle the "Why is it this way?" question. He said that just after World War II there were a lot of people who wanted to buy cars, and there were a lot of people who had money, but there weren't enough cars to go around. So the car salesman didn't really have to "sell." Their job was merely to qualify customers, to find out who was really going to "buy today," so they could move on to the next customer. This set the tone for the business and it is still that way today.