Tell the truth and then get on with the real negotiating. We pay cash and so I tell the salesman that up front. Paying cash, by the way, gives you the confident feeling that you have negotiating power that no borrower can have. I am not interested in playing games with a salesperson and if I feel that he/she is toying with me too much, I am out of there ASAP. We live in an urban area where there is more than one dealer selling a particular make of cars so we can be more choosy with dealers.
If you can’t shop multiple dealers for the brand of your choosing, then at least shop competing brands to make sure that the price that you will pay is fair.