I’ve never done it before, but it sounds like if you do it right, you’ll get their best offer. It works something like this:

Find another dealership with a similar car, and email them to find out what their best offer would be. Then you send an email to the original dealership and say, “I’ve received such and such offer for this car at this dealership across town, can you do any better?” And repeat with both dealerships until you feel that they’ve come down enough.

These threads say it’s important to use email if possible so you don’t get pressured into a bad offer and you can work quickly if you know what you want.

They also recommend waiting until the end of the month when salesmen need to hit their quota and are more likely to offer you deals.