5 Ways to Get a Better Deal on a New Car

Consumers looking for the best deals in town can skip the liquidators and outlet malls – and head straight to the car lot.

“There’s isn’t a better time out there to buy,” says Jack Nerad, executive editorial director for Kelley Blue Book. “The prices are great, the selection is great, and there are some additional tax incentives out there to sweeten the deal.”

With auto sales falling off a cliff, auto makers are desperate to clear the lots. (U.S. passenger car and light truck sales are down 37% so far this year compared with an already horrendous sales year last year, according to Autodata Corp., a New Jersey-based market researcher.) Not only are they slashing prices, but they're also offering generous incentives and financing options. Tack on the tax incentives being offered to new car buyers in the government's stimulus package and the deals are even harder to resist.

To get the best deal on the lot, follow these tips.

It’s the rare car these days that doesn’t come with a special offer attached, be it cash back or promotional financing. A few even have both. The 2009 Dodge Ram 1500 crew cab pickup, for example, has $2,000 in various cash incentives, which can be combined with 0% financing for up to 48 months. The offer is good through March 2. To find the latest incentives in your zip code by make and model, visit Kelley Blue Book and Edmunds.com.

Not every incentive is advertised. Dealer cash, for example, is money the manufacturer gives to a dealership so they can sweeten a deal and spur sales. Dealers may choose to pass all or part of this cash along to car buyers or decide not to. (Kelley Blue Book and Edmunds.com both detail dealer cash and other unadvertised marketing support as part of their incentives lists.)

“Make sure the dealers know that they’re competing for your business,” says Nerad. Consumers can drive a hard bargain in this economy. And by letting dealers know you’ve also asked for quotes from the competition, they’ll likely do most of the negotiating for you.

In the tightening credit market, excellent credit isn’t enough to secure financing for a vehicle, warns James Brock, a marketing professor at Miami University in Oxford, Ohio. Many cash-strapped lenders are reserving the best rates for those consumers prepared to put at least 10% down. “They figure people who have pretty good credit can usually put their fingers on a few bucks,” he says.

Under the government's economic stimulus plan, consumers who buy a new car before Dec. 31 can deduct state and local sales and excise taxes on an auto purchase of up to $49,500. (Buy a pricier car, and you’re responsible for the taxes on the portion exceeding that cap.) Better still: It’s an above-the-line deduction, meaning you can claim it even if you don’t itemize. A Connecticut resident buying a 2009 Honda Accord for $21,704 could deduct the state’s 6% sales tax, and reduce his adjusted gross income by roughly $1,300.