The process of buying a car or truck can seem very intimidating, but there are a few simple guidelines to follow that will make the experience much more enjoyable.

Be Prepared

The dealerships have a powerful weapon to maximize their potential profit when selling a car to you: information. They know many details such as all of the available manufacturer incentives and rebates, the true market value for your trade-in, the popularity of the model you are considering, their invoice cost for the new car and, of course, the lowest price they are willing to sell it for. The key is to do some preparation ahead of time, so that you can take the information advantage away from the dealership.

The first step is to determine your budget for the monthly payment, which (along with your down payment and equity in your trade-in) will determine how much car you can afford. Even if you think you have a number in mind, it's a good idea to review your finances before making such a large purchase. On a piece of paper, start to list all of your monthly expenses, including rent/mortgage and utilities, groceries, insurance, credit card payments, entertainment, clothes, student loans, savings and any other regular expenses. Then, add these up and subtract this total from your monthly take-home (after taxes) income. This result is your maximum affordable payment, though it is not advisable to spend up to this limit.

The second aspect of preparation is to know exactly what you are shopping for. As a simple exercise, take a piece of paper and divide it into three sections labeled "Need", "Want" and "Don't Want". Begin to fill in each section with short words or phrases describing features that apply to cars. For example, if you have a large family you might put "room for 7 people" in the "Need" section. The "Want" section is used for features that are nice to have, but are not required for the purchasing decision. The "Don't Want" section helps you eliminate features that don't match what you are looking for, such as "four-wheel drive". Once you are done, you'll now have a clear picture of the kind of car you are looking for, which will make locating that car much simpler.

If you are shopping for a new car, check the manufacturer's website for information on all available incentives and rebates; keep in mind that a low interest APR may be available only to highly qualified customers. Many websites will help you estimate the value of your trade-in, or you can pick up a copy of the Kelly Blue Book at major booksellers. Do some research on dealers around your area so know what kind of inventory is available; popular cars will sell at a premium, while slow-moving models are prime for a good discount.

Take a Test-Drive on One Day, Buy on Another

Buying a car is a highly emotional experience and the test-drive is your first opportunity to decide if you've found the right vehicle for your needs. You will likely get very excited over the idea of driving home in your vehicle, especially if you are buying a brand-new car or are upgrading from an old clunker. Unfortunately, the enthusiasm you feel after getting behind the wheel of your potential new toy often gets you into trouble when it comes time to sit down and negotiate with the dealership.

There is a saying in the dealerships that "the feel of the wheel will seal the deal". This is recognition that most customers will get so excited over the idea of owning the car that they become willing to do almost anything to get it. The most dangerous consequence of this is to spend more money than your original budget had specified, and in fact too many customers end up paying much more than they planned and often regret it later.

The best defense against this scenario is to test-drive the car on one day, but not actually buy it until another. This allows you the opportunity to re-examine your budget and really think about whether what you drove is really what you want to spend your money on.

If the vehicle you are interested in is in danger of being sold quickly and you don't want to risk losing the opportunity to buy it, at least leave the dealership for a few hours to let your emotions calm down before you attempt to negotiate.

Separate the Price, the Trade-In Value, and the Monthly Payments

Often, the first three questions you will be asked by the salesperson are "What kind of monthly payment are you looking for?" "Are you trading in your car?" and "How much cash do you have for a down payment?" Don't make the mistake of revealing this information too early; otherwise, the dealership can easily manipulate the deal in their favor. Politely refuse to answer these questions and instead first focus only on the selling price. Why?

The selling price of the car has absolutely nothing to do with your trade-in's value or the cash you have available for a down payment. You must consider buying the new car as a completely separate transaction as selling your old car; insist that the dealer agrees to a selling price before you allow them to evaluate your trade-in. This way, you can first determine if you are getting a fair price without any confusion about what numbers are going into what.

Once you have their bottom-line price for the new car, explain that you are willing to consider an offer on your trade-in. Allow them to now evaluate your existing car and see what they offer. Ideally, you would have gotten a quote from another dealership first and you can use this as a bargaining tool; remember, most dealerships will buy your used car even if you aren't purchasing something new from them.

At this point, you have the information that you need to determine a monthly payment and there is no ability for the dealership to manipulate the deal. You now have the control over lowering the payment by adding a down payment, if you choose. Insist that the dealer explains how the payment was computed and confirm that these numbers match the selling price and the trade-in value that you were quoted earlier in the process, taking your trade-in's payoff amount if applicable.