As good as the deals are on new cars now, they're even sweeter for used cars. As carmakers offer more incentives and new-car dealers trim prices to boost slumping sales, used-car dealers must cut prices to compete.

Because of high gas prices, used pickups and large SUVs are particularly cheap. Also, dealers have a generous supply of 2- and 3-year-old luxury cars that have come off lease or were traded in. These models have seen their steepest depreciation, and many are still under warranty.

Once you decide on the make and model you want, check the Internet price guides to see what others are paying for it. Be aware, however, that each site uses its own methodology. At Kelley Blue Book (kbb.com), the "dealer retail price" is a suggested retail price; prices at NADA Guides (nadaguides.com) are also suggested prices. But at Edmunds.com, the "dealer retail value" is the average price buyers have paid for the model at dealerships. The "private party price" tracks sales between individuals.

Next, go to the online listings to see what's for sale near you. You're looking for the best combination of mileage, equipment and price. Get details on at least five or six cars before you go to the dealer so you have more bargaining clout. If you're shopping for a popular vehicle in a large metro area, searching a 25-mile radius should give you enough options. If the car you're targeting was a low-production model, you may have to extend your search.

Say you're looking for a 2005 BMW 325Ci convertible. Kelley Blue Book's suggested retail price, assuming no added options, is $29,915. Edmunds.com's actual transaction price at the dealer is $27,580, and the private-party price is $26,080. Also check to see what popular options, such as leather, are worth; on the BMW, a leather interior adds about $200.

A recent search on AutoTrader.com turned up 14 listings within a 25-mile radius of Washington, D.C., ranging from $24,900 at an independent used-car dealer to $35,995 at a BMW dealership. The low-price model was no cream puff: It had 55,000 miles on it and leatherette upholstery. But the high-priced model was a certified pre-owned vehicle, fully loaded, with only 20,000 miles. Unless you want a certified model for peace of mind, the best deal would be somewhere in between.

Before you make an offer, buy a vehicle-history report from Carfax ($30 for unlimited reports within a 30-day period; carfax.com). Each report verifies the odometer reading and ownership history (a single owner is best) and lists accidents reported to insurance companies plus any title fraud. Before you seal the deal, get the vehicle inspected by an independent mechanic. A thorough once-over goes for $50 to $100.


Mark Solheim is a senior editor at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com.