10% is the magic number for me.
If i was looking at a £25k car, i'd be pusing for £2,500 off. So i would say £500 is way too low.
Also don't let them throw any insurance products in to muddy the water. Tell them you want to negotiate on the car first. But, say you think you will want GAP, tyre and alloy insurance etc but will only consider it after agreement is reached on the price of the car.
At 10% dicount, they will be making almost nothing on the car, but they can make huge margins on insurance. So if you look like you're going to buy insurance, they will give you the big discount on the car.
Then after you got your 10%, just walk away from the insurance. Get it online for a lot less, or get them to price match the internet price.
116i Sport 5 door Crimson Red 2012 -
120i M-Sport 3 Door Le Mans Blue 2009 - 2012