(MONEY Magazine) – From sweaters to sweatpants, cold remedies to cold cream, Americans in the 1990s are demanding--and receiving--discounts. Now, at last, consumers are getting big breaks on new cars too. After watching prices rise faster than salaries for nearly a generation, Americans are seeing not only smaller price hikes but also the first widespread retail price cuts in more than 10 years. And there are more to come. Automotive analyst Lincoln Merrihew of DRI/McGraw-Hill predicts that manufacturers will be offering a steady stream of consumer rebates and dealer incentives throughout the year to protect their market shares and to keep 1997 sales of cars and light trucks at least flat with last year's total of 15.1 million.

In our opinion, the best of this year's discounted wheels are the eight pictured on the previous pages and profiled in the box below. The winners of MONEY's first-ever Best Deals on Wheels survey, they represent the bargains that car buyers like you are really scoring in showrooms across the country. They offer solid proof that great prices aren't confined to the also-rans of the model-year. Compared with the competition, all our selections provide as much or more room, power, safety equipment and other options--and they are delivering it at prices up to 15% below the manufacturer's suggested retail.

In one way, however, the 1997 model-year is like every other. As always, the best cars at the best prices will go to consumers who have done their homework. That's where our sixth annual car buying guide can help you. On the 20 pages that follow, we'll give you the techniques and inside information you'll need to secure the best possible deal, whether you buy or lease, and whether you select one of our eight best deals or prefer another of the 500 new models covered in our exclusive cost ratings that begin on page 142.

As you face off with a new-car dealer across the bargaining table, keep in mind that you have some powerful economic forces on your side this year. One of them is the strong dollar. Up about 48% against the yen since its low two years ago, the muscular greenback has allowed Japanese manufacturers to sell cars for fewer dollars without losing profits. As a result, Japanese automakers didn't raise prices at all for their average 1997 models. Detroit, in turn, moderated its average price increase to 1.7% from 2.5% in the 1996 model-year, according to figures compiled by industry publication Automotive News. (Even so, the average U.S. model still has a $1,000 advantage in list price, though the gap has narrowed from $1,400 last year.) And in the most competitive model categories, U.S. automakers have had no choice but to match the Japanese makers' price cuts. Among the most notable:

--Toyota, eager to challenge Ford Taurus and Honda Accord in the perennial race for the top-selling car model, cut retail prices on its popular Camry by $610 on the base model, $1,745 on the top end.

--Toyota subsidiary Lexus dropped the price of its luxury 1997 model ES 300 by 7.7%, to $29,900.

--Infiniti, owned by Nissan, lopped $1,450 off the sticker price on its Q45 Touring Edition, to $47,900.

--Ford's Lincoln sliced 10.8% off its '96 Continental and 6% off its '96 Mark VIII sticker prices; both now list for $37,280.

--General Motors' Cadillac division lowered the price of its Seville by 6.9%, to $39,995.

New-car prices have been further squeezed by the growth of a serious new competitor: the used car. Over the past decade, improved manufacturing quality and more effective corrosion-resistant materials have made used cars a reasonable alternative to new ones. So has the rise of leasing, which now accounts for about 35% of all new-car and -truck transactions, up sharply from 20% four years ago. Because lessees must keep their vehicles in good condition to avoid financial penalties, off-lease cars tend to be well maintained and low in mileage. The result: A steady stream of attractive merchandise is flooding the used-car market as leases written two and three years ago expire. A record 2.8 million cars will be turned in from leases this year, estimates Art Spinella of CNW Marketing/Research in Bandon, Ore., an automotive industry research firm that follows leasing closely.

The rise of used-car superstores, such as AutoNation USA and CarMax, has further legitimized the secondhand vehicle. All such stores use fixed, no-dicker prices, and the values are often excellent--as Michael Murrell, 41, maintenance director for an aircraft sales and leasing company, and his wife Amanda, 35, a medical assistant and nursing student, found. They shopped at the AutoNation superstore near their North Miami home last November to buy both the 1993 GMC Jimmy sport utility pictured on page 140 and a 1993 Chevrolet Cavalier station wagon that Amanda drives to school and work. Murrell paid AutoNation $13,800 for his Jimmy--5.5% less than the average $14,600 retail value listed in used-car price guides.

What's more, manufacturers are increasingly helping their own dealers compete with the superstores. One way is through "certified" used-car programs. Certified used cars carry a fresh 12-month or 12,000-mile warranty, a feature not usually available from the superstores. Certification began with luxury brands such as Mercedes-Benz, Lexus and Jaguar, along with the lower-priced but consumer-friendly Saturn. Now, however, General Motors expects to have 1,500 of its non-Saturn dealers signed up for a certification program by the end of this year. Toyota began its program last year, and Ford is starting a national program this spring.

In another twist, superstore empire builders are expanding into new--as well as used--cars. AutoNation owner Republic Industries (headed by Blockbuster Entertainment founder Wayne Huizenga) has been buying new-car dealerships this year and converting them to the no-haggle sales system. Ford, which in the past resisted allowing its dealerships to be owned by corporations, has okayed sales to Republic, as has General Motors. Consultant Bob Fitzharris of the research firm J.D. Power & Associates predicts, "Superstores are going to change the way people buy cars."

Maybe so. For now, however, it's a trade-off. One-price shoppers get the more mellow car buying experience, but hagglers get the best deals. To be sure you wind up with the car or truck you want at a good price, follow these steps:

--Narrow your choice to just a few models before you go near a showroom. Don't let a salesman discuss price with you until you are sure what models you are looking for. Check out your choices at no-pressure venues like local auto shows. Though it sounds obvious, also think carefully about whom and what you have to haul around. Do you need a van or a sport utility, or will a less expensive large sedan meet your needs? Before heading for the used-car superstore, Michael Murrell of North Miami had figured out that he needed a commodious sport utility to accommodate his wife and two children and to pull his 17-foot boat on a trailer.

--Do your homework. The bad old days when dealers and car salesmen had all the information are over. You can make yourself a formidable negotiator by carefully researching prices of specific models, especially the dealer cost, or invoice price. That--and not the artificially high sticker price--should be your starting point in every new-car transaction. Always bargain up from the invoice, not down from the retail price.

Start your research with our car-cost ratings, which begin on page 142. There you will find the retail price and dealer's cost for 500 models, including the stripped-down standard-equipment version and the car as it is typically equipped. Aim to pay roughly 3% to 4% over invoice on vehicles with retail prices of less than $20,000, and 5% to 6% on more expensive cars. For sport utilities, vans and pickups, make your target 4% over dealer cost.

If you are handy with a computer keyboard, troll the Internet for updates on new-car prices, including dealer's cost. IntelliChoice Inc., which supplies the data for our tables, maintains one of the most useful Websites (www.intellichoice.com). In addition to free price updates on new and used cars, IntelliChoice tracks most current manufacturer-sponsored leases and highlights the most attractive deals as so-called gold star leases (you'll find five such deals in the box opposite). After you've browsed the free information, you can download detailed reports on any model that interests you. The reports cost $4.95.

Edmund, publisher of the popular Edmund's New Car Prices & Reviews and Edmund's New Truck Prices & Reviews, also has an excellent free Website (www.edmund.com). For those who prefer to get their information from books, Edmund still produces printed price guides that sell on newsstands for $7.99. For used-car data, pick up Edmund's Used Cars Prices & Ratings or ask your credit union, bank loan officer or auto insurance agent to show you the NADA (National Auto Dealers Association) Official Used Car Guide, which prints both wholesale (or trade-in) prices and the average dealer's retail price for vehicles up to seven years old.

--Watch for rebates and dealer incentives. Consumer rebates or dealer incentives, which are essentially rebates from the manufacturer to the dealer, can sharply lower the price of a car. (While dealers don't share their incentives directly with customers, the rebates allow them to cut the price they charge you without lowering their profits.) Sponsored by the car makers, these deals often signal that the car is in oversupply, which means that the dealer may be willing to make unusually large concessions on top of the rebates. To find out about both kinds of kickback programs, check large libraries for copies of the weekly auto industry trade newspaper Automotive News. Inside the back page, you will find a list of current consumer rebates and dealer incentives. If you have trouble finding Automotive News, get CarDeals, a newsletter published by the nonprofit Center for the Study of Services in Washington, D.C. It gives you a similar and even more detailed list of incentives ($7 an issue; 800-475-7283).

--If possible, sell your old car yourself instead of trading it in. Negotiating for a new or used car is confusing enough without simultaneously having to keep track of whether you are getting a good deal on your trade-in. Selling your old car to a private buyer is considerably more hassle--but it could bring you as much as 20% more than the trade-in price. More important, it will help keep your head clear to negotiate the lowest possible price on your new car. If selling through the classified ads seems like too much hassle, take your old car for bids at the used-car departments of several dealers--but not the ones where you plan to shop for your new vehicle. You'll almost always get more money for your old car by selling it to a different dealer.

--Shop for money before you shop for a car. For similar reasons, don't let a new-car salesman confuse the picture by throwing financing into the negotiations. Instead, come to the showroom with a pre-approved loan from a bank or credit union in your pocket. That way, you can focus only on getting the best possible price.

Start with your own bank's loan rate (recent average 9.1%) as a reference point, and then shop for lower interest rates. You can get quotations from banks in all major cities from the Website of Bank Rate Monitor (www.bankrate.com). Eager banks may also advertise low-rate loans in the weekly automotive or business section of your local paper.

If you belong to a credit union through your employer or other organization, don't forget to try there. Credit union auto loans typically cost one-half to one percentage point less than competing bank loans.

--Hire help, and lower your hassle. A survey of recent new-car buyers conducted by the Dohring Co. of Glendale, Calif. found that 25% said that they had avoided negotiations altogether, and another 16% said they had negotiated but disliked the process. If you are among the 41% that would rather not dicker--or if you simply don't have the time--you might consider hiring help in the form of a buyer's service.

Some 30 such services exist across the country. They will search out the lowest price available on the model you want at a dealership near you for fees ranging from $175 to $575. Just be sure the service you hire works only for fees from potential buyers. Some car brokers take payments from dealers in return for bringing customers in the door. You don't need that kind of conflict of interest. Members of the National Association of Buyers' Agents (NABA), chaired by Linda Lee Goldberg of CarSource (see below), must all submit references from customers and dealers to prove that they work for fees only. To check whether a buying service you are considering is a member, call 800-517-2277.

The three buyer's services that helped us identify our best deals all work for fees only. Auto Advisor in Seattle (800-326-1976) will find you the model you want within four weeks for $359; if you need delivery in two weeks or sooner, the price rises to $500. At CarSource in Larkspur, Calif. (800-517-2277), the fee depends on the price of the car; with a $15,000 sticker price, you will pay $375, while a $30,000 model will cost you $475. As full-time professional negotiators who deal with car dealers constantly, these services are likely to get a lower price than all but the most able amateur shoppers--even after their fees. In deciding whether to do the negotiating yourself or hire someone to help you, you must determine your own best balance of cost savings, time savings and peace of mind.

CarBargains in Washington, D.C. (800-475-7283) works slightly differently: For a fee of $150, CarBargains obtains in writing at least five below-sticker bids from dealers located near you (usually expressed as dollars over the invoice price). Unlike full-service buyers' agents, CarBargains requires you to talk to the dealerships to find the color and options you want and to close the deal. But you have the advantage of walking into the showroom with the dealer's best price--or close to it--already in your pocket. That's the position of strength from which you want to deal. In this year's market, a position of strength is practically a consumer's right.

Reporter associates: Luis Fernando Llosa and Diane Kelley Giles