Buying a new car can be exciting and a bit stressful. Knowing how to maneuver through the process of finding and buying a new car can make the experience both enjoyable and financially sound. In this episode we walk you through 7 steps to buying a new car that will ensure you make a great purchase.
1. Research Vehicles and Features
- Start by figuring out what type of vehicle you need and want and how much you’re willing to spend.
- Use apps or websites such as Edmunds.com and Consumerreports.org/cars to learn about the vehicles you’re considering.
- Expert and owner reviews.
- Vehicle Invoice Prices.
- Features, add on, etc.
- Automaker’s websites are useful for seeing more photos and learning more about the features and options.
- Once you have a short list (2-3), it’s time to figure out how you’ll pay for the car.
- If you’re paying cash you can skip this step.
- Get pre-approved for a loan.
- Let’s you know how much you can borrow, and you’ll have an interest rate you can compare to the dealers, which you can use to negotiate a better rate.
- We suggest credit unions, or online lenders to find the best rate.
- We recommend a minimum of 20% down payment with a term of no more than 5 years (60 months) to keep you from being upside down after the purchase.
- Have your salary and employer information as well as the balances of other debts you owe available before applying.
- To avoid multiple hard inquiries on your credit report, be ready to shop within a couple of weeks of approval.
- Get quotes from your insurance agent on how much your insurance price will be.
3. Plan Your Trade-In or Sell Your Old Car
- You can skip this step if you don't have a trade-in or an old car to sell.
- Whether you’re going to trade your old vehicle or sell it yourself, it's important to get your current car's trade-in or sell value.
- Knowing the trade in value before you go to the dealership will help set your expectations for what the car is worth and gives you a reference point for any offers you'll receive.
- The best way to get the value of your trade-in is to use the Edmunds or Kelly Blue Book sites or apps.
- Be honest about the condition of your car. Most cars fall into the "good" or "fair" category. Very few cars are "excellent," no matter how much their owners babied them.
- When you're done appraising, you'll see three figures.
- The trade-in value is what the dealer may offer you — that's a figure to keep in mind when you're at the dealership.
- The private-party value is what you might expect to get if you sell the car yourself.
- The dealer retail value is a little different: It's what you might expect to pay for the car if you were to buy a similar used car at a dealership.
- Armed with this information you can decide which way to go; sell yourself or trade-in your old car.
4. Locate and Test-Drive the Car
- Once you’ve settled on a few car candidates, you should see them in person before making a decision.
- Verify that the car you want is still in stock. It might have been sold recently, and what’s available on the lot may not fit your criteria.
- Ask the salesperson if there are any dealer-installed options. Many new vehicles are sold with add-ons such as all-weather floor mats or theft protection packages. These can easily add $1,000 to the sale price.
- Don't just show up at the dealer on a busy weekend or late at night. Waits may be long and you may not get the salesperson's full attention.
- Schedule an appointment for a test drive. Having an appointment means the car will be waiting for you when you arrive.
- Don't just drive around the block. Take the time to see how you and your family fit in the car and see how it handles on a variety of roads.
- Don't feel obligated to buy the car the same day. Feel free to take a night to think it over.
5. Check Sale Price and Warranties
Once you have a target car, it's time to focus on getting a price. We recommend using one of these two ways to get the purchase price of your new car:
- Call, text or email the internet sales department of three dealerships that have the car you want.
- Ask each for the total selling price, including any additional accessories that may have already been installed on the car. The best price will be obvious.
- You also can take that quote and ask the other dealerships to beat it.
- Add sales taxes that will need to be paid (you can find the rate by googling your state and new car tax).
- Don’t forget to add in the cost of insurance.
- Add the cost of gasoline if you're buying a vehicle that gets less or more miles per gallon than your current car.
6. Review the Deal and Dealer Financing
- At this point you’re pre approved for financing. See if there's a chance that you can get a better interest rate at the dealership by having them run a credit inquiry or by providing them your credit score to determine the interest rate they can offer you. If it’s less, go for it.
- Dealers will try to sell you on add-ons during the financing portion of your deal. Most of these add-ons come at inflated prices and you don’t need them or can get them from other retailers.
- An extended warranty is the only item I’d consider but the cost is going to be high so choose wisely.
7. Close the Deal
- If the price, financing and fees look right, it's time to say yes to the deal. From here, you can proceed in one of two ways: 1) buy at the dealership or 2) have the car and paperwork delivered to your home.
- Most people tend to wrap up the sale at the dealership. Once you've agreed on a price, the salesperson will take you to the finance and insurance office. Here, you'll sign the contract and fight off purchasing any of the additional products they will try to add on, such as an extended warranty.
- The alternative is to make the sale contingent on having your new car delivered to your home or office. This is a great time-saver and allows you to close the deal in a relaxed environment.
- Wherever you finalize the deal, review the contract carefully and make sure the numbers match the out-the-door breakdown. Be sure there are no additional charges or fees. A good finance manager will explain each form and what it means. Don't hurry. Buying a car is a serious commitment. And remember: There is no cooling-off period. Once you sign the contract, the car is yours.