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Google's system is quite complicated and can be frustrating. By the key to getting your CPC as low as possible is to maximum Click-throughs. For ads that get a very high % of CTs the cost per click will drop and your exposure (ranking) will increase.
I struggled for months until their reps finally gave me a very good explanation how things work. Basically, bid as much as you can afford to get the top spots and keep tweaking until you get a very high CTR (of course, this depends on the keyword). Then you will "own" the top spot and you'll see your CPC drop. I have several keywords at 40%+ CTR and virtually own the very top placement - in blue above the search results.
It's not fair, it's not easy and it is frustrating but if you do things right it should work for you.
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