Need versus want
Decide about what do you need not what do you want. Many of us would want to own a convertible or some other exotic car but that is not probably what is needed. Think about primary usage of the car
1. Commuting to office
2. Dropping Kids to School
3. Going out on weekends
4. Using for long drives during vacations.
5. Using for every thing being the first or only car

based on above information you can find out how much miles you will travel per month for example

for a two way commute of 15 miles each you will travel about 15×2 = 30 miles everyday and about 30 x 20 working days = 600 miles every month or 600 x 12 = 7200 miles in a year.

If your car is going to give you a milage of 20 miles a gallon it it will cost you 600/20 = 30 @$3.00 = $90 per month
and if you decide to buy a suv for commuting giving 10 miles / gallon it will cost you $90 x 2 = $180 per month.

based on above example you can select a car suited for your requirements taking in account not only one time buying cost but cost of operation as well.
Resale value
Depreciation

Budget is Important
Make a budget for your car buying . Creating a budget allows you to focus on your your need and give an urge to negotiate the price. You won’t end up buying a luxury suv instead of a car when sales man starts their sales pitch.

Cash or Credit
For dealers cash or credit doesn’t matter much since they are going to get the value of the car either way. However by offering you the credit the financing company can earn some money by way of interest which you have to pay. It makes sense to pay cash only when interest rates are higher . if you have good credit history and you are offered low interest rate for financing the car , keep the money in your bank for your emergency needs.

What is the Invoice Price of a car ?
Invoice price of a car is the price at which the factory sells the car to the dealers. There is some transportation charge which is paid by dealer to deliver cars to their location. Invoice price of a car is not a secret and you can find it on many websites. The invoice price really helps in working out potential price of your new car. In a typical scenario Invoice price plus transportation charges documentation charges registration fees will form the total price of the car. The other expanses can be up to @2000.00 or more so whatever final price comes to you this will be an additional cost on top of that. So your final cost = Negotiated Price + Dealer charges

You may be thinking that if the factory sold the car to a dealer on a invoice price how a dealer can negotiate that price without incurring loss ?

That part is explained by dealer incentives from factory. They get incentive if they sell a number of car per month and it is usually the more they sell more they get. Besides this like other business there are quarterly target and yearly target. So if the dealer lower the cost from invoice price and is able to get the incentive it is profit .

Is there a good time to buy cars ?
There may be times around major holidays when factories and dealers announces major rebates. Plan ahead and try to get the good deals during their promotions.
Earlier we talked about monthly , quarterly targets so towards the end of the month you may get the good deals as dealers may want to meet their target
when new model of a car is due dealer may like to clear their inventory to make space for new cars and you can get some good bargains.
During the holiday season , particularly around Christmas people are busy buying gifts and not the cars so demand is low . Some dealers may offer good discounts during this period.

What is in a Credit Score ?
A lot , if you pay attention to your credit score you can get a feeling about the kind on interest rate you can get for a car loan. Get a copy of credit score and find is your rating very good , good or bad . This will save you the time money and frustration if you leave it to dealer to find your creadit score and offer interest rate based on that. You may be surprised and shocked if the score is not very good.

Financing at dealers or outside ?
It depends who is giving the better rate , it is better if you can get a pre approved loan prior to dealer visit. That way you won’t have to agree to the dealers financing options.

Get multiple quotes from dealers
Get multiple quotes from the dealers in your area to get an estimation of prices and make a decision before buying .
You can get multiple quotes from dealers in your area online such as Yahoo’s auto quote below .