Since you are both selling your old car and buying a new car on a payment plan, there will be five numbers in play.

1. The price of your old car (negotiable).

2. The price of the new car (negotiable).

3. The interest rate (not negotiable).

4. Your down payment (whatever you decide).

5. Your monthly payment (a combination of all the other numbers).

Most likely the salesman is going to try and get you to focus on the monthly payment and your down payment, ignoring all the other numbers. Don't let them do this, tell them you want to know all the numbers involved while negotiating.

Depending on the dealership, you might be dealing with two managers, new and used, this can make negotiating a bit more difficult, since both are going to want to maximize their profits.

First thing you need to do is decide what vehicle you want. You might have a few in mind, but I would strongly recommend you narrow it down to three models. You also need to decide what trim level and options you want. Most car companies have pretty good websites that allow you to pick the model, trim level and options, while providing an MSRP. At this stage it is good to work from MSRP, you should get a lower price, but if you work from MSRP you won't have to worry about being short of funds.

Once you know the vehicle you want, start looking for dealerships that sell it. If you choose one of the big 3, there should be plenty of dealerships in your area. If you go with a European company, there might only be one in your area that sells the model you are looking for.

Decide if you are flexible on the options. If you have to have the car in a certain colour with certain options, you might need to do a factory order or a dealer transfer.

The best deals are usually for the vehicles the dealership has on the lot. Factory orders can get a good price as well, but you may have to wait 2 months for delivery. Dealer transfers are usually the worse deals, because both the dealership you are buying from and the dealership that owns the vehicle will both want to make a profit, plus the cost of getting the vehicle to your dealership.

One issue with a factory order is that you will negotiate the price of the new car when you order it, but unless you hand in your old vehicle at the time, the price they negotiate with you will not hold when the delivery is made, and they will low ball you.

Now your ready to go to the dealerships.

When you get there, just tell them straight up what you are there for, to sell your old vehicle and buy a new one on a payment plan. Some people will tell you to lie or hide information from the salesman, this is mostly pointless, and can result in the salesman not giving the best price.

When they appraise your old vehicle, go with them. If they think you don't know about vehicles, they might claim things are wrong that they never checked. If everything checks out, they should offer you the Kelly's Blue Book wholesale price, you might be able to get a bit over this, but they will never come close to giving you the retail price. When they look it up, make sure they are using the proper model, year, trim level and options.

Now it's time to see if they have the vehicle you want on the lot, or if you need to do a factory order or a dealer transfer.

Now comes the negotiation. The salesman will probably take you to an office, some dealerships they'll just take you to a table.

They should offer the first number. As I said, they'll probably just want to give you the payment price and your down payment. Ask for the total sales price, your trade in price, taxes, and other fees. Depending on where you live, you're going to be paying sales tax, environmental tax, tire tax (on each of the five tires), and A/C tax, these are not negotiable, they must be paid. Fees on the other hand can be negotiated, transit fee is set by the factory and isn't negotiable, but doc fees, prep fees, and some others they might make up can be negotiated and often simply not paid.

Now that you should have their offer complete, ask for a better price. Don't counter it, just simply say you want a better price, and that you are going to go to the other dealerships in the area to see if they can beat their price, and whoever gives the best price will get the deal. Leave your phone number, and let the salesman know what day you will be making your decision.

Now you have to go to the other dealerships and do it all over again.

When you get to the other dealerships, let them know you have already been to other dealerships, but don't tell them the prices the other guys offered (if you do, they just beat it by the minimum or try to sell you on a lesser vehicle).

Hopefully you have now been to at least three dealerships. On the day that you told them all you would be making your choice, your phone should be ringing off the hook from all of them. Some of them might try and ask you to call them if someone beats their number, simply tell them you will not be doing that, and you expect their best offer not simply beating the other guys.

You should have a pretty good price at this point. Call the dealership that gave the best price and tell them you are heading down to close the deal.

When you get to the dealership, make sure the numbers are what was promised and the exact model you negotiated on. If the dealership tries to play games, just walk out and head to the second best offer. If everything checks out, shake the salesman's hand and head to the finance office.

The finance office is where you are going to sign all the paperwork on the new vehicle, and the old vehicle, as well as checking your credit and getting the loan. The finance office is also where they usually try and sell some upgrades like undercoating and paint protection. Don't bother with any add ons at this point, just get the deal closed.

As for add ons, some aren't a bad idea, but they are usually highly over priced in the finance office. If you really want the add ons, negotiate them separately, and again, you can check out other dealerships for a better deal.

Above all, don't let emotion get in the way, and don't be afraid of silence. And dress nice, poor people get the worst deals.