Most car dealerships can pretty much do whatever you let them get away with, and they have all sorts of interesting tricks to help them do it. For instance, often they won't talk about the bottom-line price of the car you want. Instead, they talk about monthly payment amounts. And yes, a dealership that's giving you a "great deal" on your trade-in is probably raising the back-end price of the car you're buying. In most places (if not all) there are no laws to prevent this. The classic way to avoid this is not to trade in your old car. Instead, sell it yourself. Also, if you arrange your own financing, you're preventing the dealership from playing with the numbers and can talk actual price rather than monthly payments. Even if you can't do these things for various reasons, there are ways to conduct the negotiations to make it seem like you can. When the dealer asks about a trade-in, tell him you're planning on keeping the car. When he asks about financing, tell him you've arranged your own. Dicker on the price of the car you want, and when you're satisfied, THEN ask him what he'd give you on trade-in, just in case you change your mind, and/or ask about financing (because you're always looking ofr a deal, of course). You still have to be very careful, these guys are experts at pushing numbers around until you don't know what's what any more. For the best advice about how to conduct negotiations, go to http://www.edmunds.com/ and click on the "Tips & Advice" tab at the top.

Totally negotiate the final price BEFORE you let them know you are considering a trade in. Keep in mind that you will get more for your car if you sell it yourself.