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Water and wet sand paper is what is needed. The paper is designed to sand by keeping the surface wet. Just make sure to keep the water and paper clean. If you are wetsanding say clear to level it and buff it out, If you get some dirt under the paper, it will create too deep of scratches then can be either hard or extra work to get out. I like to use a garden hose to keep the surface wet when doing this instead of a bucket of water, but be prepared to get some wet shoes. You don't have dust flying in the air like you do when dry sanding.
Also make sure you use a block with the sandpaper wrapped around it so you have level sanding instead of valleys and ridges caused by variable hand pressure. Flat 2x3x1/4 rubber block is my fav or you can cut a piece of 1X1 wood a couple of inches long and use that. You CAN NOT use enough water to ensure you do not ball up the fine sandings and damage your work. Use progressively finer wet/dry as you work. I normally start with 600 and go up from there to 1000 and sometimes 1500 depending on the area I am working. (Edges are great for finer paper due to the thiness of the paint on them).
I've done some bodywork over the years, and had some Pros give advice on how to make it easier.
Some guys add a little bit of dish detergent to the bucket of water to help prevent the paper from 'balling' up.
Some use a hand spray bottle for more control and less of a mess.(they also add the dish detergent into the spray bottle)
Becareful when wet sanding on body fillers as they are porous and absorb water. Need to let dry good before applying any paint.
I usually dry sand these areas.
Change the sand paper often as the cutting effect diminishes, especially if sanding a lot of metal area.
I use various sizes of rubber sanding pads (3 M brand) I get from the local parts store that sells auto paint supplies.
Wet sanding can be messy as you should
probably use a hose for water supply
and this necesssitates some sort of
drain system if your in a shop. As
a result some big shops may have a
dry sanding rule only [they will have
a vacuum system].
If your using wet or dry sandpaper the
equivelant grit is higher if you wet sand i.e.
a 400 cut would be effectively 600..I am not
exactly sure.. but it kind of makes sense.