I have found a LS400 1996 for $3750 with 195K miles on it.
http://indianapolis.craigslist.org/cto/2572733580.html
Any advice before buying this car would be seriously helpful?

I have a 1995, same car. Just got it last week...121,500 miles for 3700

Main aim, you need to see service records, especially be sure that the timing belt/water pump has been changed...that was due at 180,000 on your car.

Anything that needs work..talk him down.

Even if the car is 100% up to date service-wise you need to pay less than 3750 in my experience. Great car!

He is the second owner of this car.
He did not changed the timing belt/water pump.
He have changed ATF once only @ 90k miles with dealer.

Any other recommendations?!

You're going to be out of $ 800 to 1600 for the timing belt right away depending on who you have do it. Some folks take their car to an independent mechanic for that work which tends to be cheaper. I usually take my car to Toyota for that and they charge $1100. Lexus charges 1600+ for the same work.

Also, you're probably going to have some suspension work coming up soon and that may be another 1000+. He's not asking a bad price, but see if you can get him to drop a few bucks.