this site also gives many great tips on how to ensure the car your looking at is a good one to buy

Used cars are the cash cow for dealers. Markups of $5,000 are not unusual at all for late-model vehicles in good condition. A new car rarely has that much dealer profit built in, even at MSRP unless you're talking about something fairly high priced.

What the dealer paid for the car isn't necessarily what he has tied up in it. There may be transportation costs getting it to the dealership, cleanup and reconditioning, floorplan financing, etc. Dealers track every penny spent on a vehicle, you can count on that.

While you might start out offering him $1,000 over what he paid for it, he'll likely rebuff a lowball offer like that. What really matters is what the blue book value is. Many used car dealers won't sell anything for much less than blue book but if you're offering $4,000 below blue book retail he probably won't go for it. You'll just have to negotiate with him and see where it goes.