Buying a New Car Guide

woman with car

Buying a new car can be exciting, but it's also a complicated process. Understanding the basic procedure of this important transaction can help you make sure you end up with a car you love and can afford.

Steps to Buying a New Car

Like any major decision, there are a number of steps involved in choosing and purchasing your next new car.

Know Your Budget

Before you head out to the car dealership or even start pricing cars on the Internet, take some time to set a budget. Use a car payment calculator to see how much car your pocketbook can handle. Remember that a vehicle costs more than just the payment itself, though. The average annual cost of a car includes many other expenses like insurance, maintenance and repairs, fuel costs, and more.

It's also important to remember that the cost of a car does not include tax, title, or licensing fees (TT&L) or a dealer's documentary fee. A documentary or "doc" fee is what dealers charge to detail the vehicle and gas it up, typically a few hundred dollars. Your TT&L will depend on what the vehicle sales tax is in your state, plus licensing fees, but it will probably cost several hundred dollars. In most cases, you can roll these expenses into your vehicle loan.

Set Your Priorities

After you've determined what you can afford, you can begin narrowing down your choices. While a gas-sipping hybrid may be ideal for one buyer, it may not meet the needs of another. There's no ideal car that fits every shopper. The perfect car for you is the one that fits your budget and meets your needs. Think about what's important to you, and ask yourself these and other questions:

Research Your Options

Once you know what you need and what you can afford, it's time to make comparisons between vehicles. It's easiest to start your comparison within a certain class. For instance, you can easily compare hatchbacks or small SUVs, but it's a little less helpful to compare one against the other. If you can't decide on a vehicle class, try making a list of your priorities and comparing that to the cars in each group.

You can also visit Edmunds, an automobile research website, to learn about how vehicles compare with one another and how they fit within your budget. You can choose the features and packages you want in your new car and see how those will affect the bottom line.

Take a Test Drive

Before you can decide on the vehicle for you and begin negotiating a good price, it's essential that you see how you feel behind the wheel of that car. Stop by a nearby dealership and take the car for a test drive. The dealer will want to begin working with you, but it's best to wait a little while before you decide. This lets you call around to several dealerships to find the best price.

Negotiate to Get the Lowest Price

Now that you've decided on your new car, you're well on your way to driving it. However, there are a few steps to get though before you can make that dream come true. The first thing you need to do is learn how to get the best price on a new car.

Cars have an MSRP, or manufacturer's suggested retail price, that is typically considerably higher than the price you'll pay. There's also the invoice price, which is what the dealer paid for the car. In most cases, your purchase price will be somewhere in between these two. Sometimes, you can even buy a car below invoice price. Strategies like shopping at certain times of the day or month, offering a fair price, and knowing when to walk away can help ensure you end up with a great deal.

Choose the Best Financing

You can finance a new car through the dealership's finance resources or through your bank or credit union.

Some ways to get a good deal on financing include the following:

  • If the dealership offers you a zero percent financing rate, take it. If not, ask them for a buyer's order showing sales price, rebates, and all other fees. You can take it to your bank or credit union. Banks and credit unions will often offer you a lower interest rate than a dealer.
  • Don't feel forced to accept financing at the dealership. Choose the best financing for your needs.
  • If you choose to finance through the dealership, expect them to bump up your interest rate. For example, if they offer you six percent, the true interest rate offered was most likely five percent, so they are making money on the difference. To avoid the bump up, ask to see the loan call sheet that is emailed or faxed to the dealership. The loan call sheet will show you the exact interest rate the finance company offered. If it is five percent, ask for five percent.

Think Twice About Last Minute Extras

Just as your finalizing your new car deal, the dealer will likely present several options for you to consider. These may include things like car protection plans or extended warranties, exterior and interior treatments for your vehicle, and gap insurance to cover you if you get in an accident soon after purchasing the car. According to MSN Autos, it's usually best to avoid these extras. At the very least, take some time to think about your options before signing up for these expensive additions.

Get the Most out of Vehicle Delivery

Before you drive that new car off the dealership's lot, ask the salesperson for a free vehicle delivery. Most salespeople do this automatically; however, if you're not offered one, ask for one. The vehicle delivery process is where you'll find out about the car's options, what all the knobs and switches do, and how to work the stereo system. During the vehicle delivery, the salesperson should also go over the manufacturer's warranty and owner's manual. This is your time to ask questions about your new vehicle to ensure you understand how everything works.

Take the Mystery out of the Process

Follow these steps to take the mystery out of the process of buying a new car. Use common sense, research your options, finance intelligently, and buy a new car you'll enjoy for many years to come.

Buying a New Car Guide