How to Buy a Car
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There are few things Americans like more than owning a new car, and few things we like less than buying one.
| How this Guide is Organized | |
| 1 | The Basics |
| 2 | Finding the Best Car for You |
| 3 | Negotiating |
| 4 | Trade Ins |
| 5 | Financing |
| 6 | Car Insurance |
| 7 | Best Car Deals this Month |
If you've ever bought a car, you know the drill: salespeople are throwing around confusing jargon, thousands of dollars are on the line, and you've only got yourself to look out for your best interests.
It doesn't have to be that way. Not only can buying a new car be light on the stress, it can also be an opportunity for you to save some cash and get a car you love. The key is doing the homework for every step of the buying process, from choosing the right car to insuring it. We've broken down the buying process so you know exactly what you need to do, and identified key car-buying mistakes and how you can avoid them. We've also gathered the best car buying tips so you can negotiate like a pro, use the internet to your advantage and ultimately end up a happy car buyer.
How to Buy a Car: The Basics
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You're in Charge. Car dealerships can be confusing, especially when sales people start pulling out paperwork and tossing around language you don't understand. Don't be afraid to take control. If you don't understand something, make the dealer explain it until you do. And if you don't like what you hear, remember that you can always walk away.
Don't Get Emotionally Involved. Sure, your ride says a lot about you, but purchasing it is a business transaction, no more, no less. Stay logical and focused on the car, price and financing you want. If you feel like you're getting flustered, take a break.
Know Your Weak Spots. There are three areas where car buyers can make costly financial mistakes: settling on a price, settling on financing, and negotiating their trade-ins. Once you realize that those are the three areas you need to watch, you can take steps to protect yourself and your wallet. Keep reading to learn how to minimize your risks in these areas.
Let's get shopping.
How to Buy a Car: Finding the Best Car for You
Finding the right car for you is a pretty personal equation, but there are some general things everyone should consider, as well as a couple of tips for getting the most for your money.
Buying TIP: Don't get Cornered! |
| Why will the salespeople at car dealerships want to talk price, financing and trade-ins with you almost as soon as you're in the door? Remember, those are a car buyer's three weak spots. The salespeople are trying to get into them early to maximize their profit. Don't let them -- before you can talk price, financing and trade-ins, you have a lot more research to do. Be sure to check the Latest Car Deals and get competing price quotes from local dealers. |
What Are You Going to Do With It? Before you think about the car you want, think about how you're going to use it. Also, will how you use the car change over its lifetime? Example: if you're eyeing a two-seater roadster, and you're planning on having kids in the next few years, eye something else. Look for cars that will suit your needs over the long haul.
How Much Can You Afford? Set a price range and stick to it. Setting a maximum amount you're willing to spend keeps you from getting in over your head (or getting disappointed when you can't get financing). Setting a minimum amount usually means you'll get a car with the type of refinement and features you want.
A good way to decide the exact amount you can afford is to use a debt-to-income ratio. A good rule of thumb is that your monthly payments on debt (like a car loan or credit card payments) shouldn't exceed 30 percent of your gross pay (that's the amount you make before taxes and other deductions are taken out of your paycheck). So, if you make $2,500 a month, you shouldn't spend more than $750 a month on debt payments. If you pay $200 a month on student loans and $200 a month paying down credit card debt, that leaves $350 you can spend on a car payment. Play with some car loan calculators online (such as bankrate.com) to find the total price of the car you can finance for that amount. Of course, this rule doesn't apply to everyone. If you live in an area with high rent or have other expenses, you'll need to adjust how much you can spend on a car.
Look Beyond the Brand. If you want, you can let your ego go shopping for you. But don't forget that some humble manufacturers actually make very good cars that cost much less than those with more snob appeal. It can pay to look at brands you haven't considered before.
Research, Rinse, Repeat. U.S. News' car rankings provide unbiased reviews and rankings that you can use to decide which cars to test drive. Many car dealers know a lot about their products, and many don't -- so take responsibility for educating yourself about the cars you're considering.
Take 'Er for a Spin. Finally, test drive the cars you're considering -- and we mean really test drive them. The test drive should cover the kind of ground you'll be covering in the car. Also, bring things like car seats or dog kennels that you regularly carry and make sure they fit.
The First Dealership Visit
Notice that you really shouldn't go to the car dealership until you've narrowed your list and are ready to test drive. While you're at the dealership, the salesperson you work with is going to try to sell you a car, even if you say you're just looking. Don't fault them for it -- it's their job. Be polite and firm. Tell them the other cars you're considering and your timeline for buying. Don't talk financing or a trade-ins with them. Simply
say that you're not ready to discuss those things yet, but you'll give them a call when you are. If they ask what they can do to earn your business, be honest. Tell them they can earn your business by treating you with respect and giving you the best price on the car.
Once you've taken all the cars on your short list for a test drive and decided on the one you want, it's time to talk about how much it will cost.
How to Buy a Car: Negotiating
The key to getting a good price on a new car isn't being a master negotiator. It's being an informed
Buying TIP: Settle on Price First |
| A lot of dealers will want to talk financing or your trade-in at the same time they talk price. Don't. Tell the dealer that you want to settle on a price before you talk about anything else. That way, you're only talking about one of your weak spots at a time. |
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Research, Rinse, Repeat. Sound familiar? On U.S. News' automotive site, you can see dealer invoice prices for every car. Once you know what the dealer pays for the car, you can start to pinpoint what they'll want you to pay (hint: more than they paid). Other sites, including Edmunds.com, have programs that report what other people in your area have paid for the car. You can also easily find current offers and incentives from the U.S. News Incentives and Deals Center. Remember, price is one of your weak spots as a car buyer. Doing your research and knowing how much you should be paying closes that weak spot.
Get Multiple Quotes. Nothing will make a dealer drop their price faster than knowing they're competing for your business. Use the U.S. News "Get a Quote" feature to see multiple quotes from dealers in your area.
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~Get A Good Price Without Negotiating~
Negotiating a car's price is extremely stressful. Most consumers aren't used to negotiating and don't like it. If you're really averse to negotiating, there are a couple of ways you can avoid it and still get a decent price on a car:
Go to a No-Haggle Dealership. Some dealerships capitalize on people who don't want to negotiate by offering "no-haggle" prices. The prices are usually a little lower than sticker price, but may be a little more than you'd pay if you negotiated the price yourself. No-haggle dealerships will usually give you a fair deal, but you should still check what other dealerships in the area are offering.
Have Someone Else Negotiate. There's no law that says you have to negotiate a car deal on your own. Many banks and credit unions, as well as some warehouse stores (Like Costco) will negotiate a new car price for you. New car brokers also perform the same service. All you have to do is show up at the dealer to sign some paperwork, and you're on your way. Before going with these services, however, do your research so you're sure that the price you're getting is a good one.
Don't Do It Face to Face. Most dealerships can negotiate the price of the car over e-mail. This is a great way to negotiate without really negotiating. You can take your time, consider the offer and frame a counter offer without having to deal with the stress at the dealership.
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~Negotiate the Deal~
If you want to negotiate a new car price yourself, there are a few things you can keep in mind to make sure you get a good deal and that the experience is pleasant:
Don't Get Emotionally Involved. It's a basic part of car buying, but it bears repeating. This is a business transaction. Keeping your emotions out of it and negotiating by the numbers will make it go much easier.
Set Your Numbers Before You Start. When you head into the dealership to finalize a price, you should already have a couple of numbers in mind. You should know, realistically, what you want to pay for the car, and you should also know what you're willing to pay for the car if you can't get your ideal price. Both of these numbers should be set based on your research.
Time it. Some dealers will try to draw out negotiations. The sales people will leave you multiple times to go talk to the manager and could even set you up for some drawn-out delays. Sitting at the dealership makes you tired and nervous, and the dealer knows it. That's why they're doing it. Before negotiations begin, politely and firmly let the dealer know that you'd like to buy the car from them today, but only if negotiations can be completed in one hour. That lets them know you're serious, and it protects you from dealing with a drawn-out process.
Walk Away. If you don't like how the negotiations are going or the price you're getting, you can always walk away. Remember, you can always get the car somewhere else. Just be polite, tell the dealer you don't feel like you're making any progress, and leave.
Get it in Writing. When you settle on the price, make sure that you understand what it covers. Dealers can tack on extra fees, so be clear that you're negotiating the "out the door price" and that all those fees are included in the number you're talking about. Get that number in writing, and ask the dealer if there's an expiration date on that price, so you know if you have time to go home and think about it.
Now that the price is decided, you need to figure out how you're going to pay it. If you're a trust fund baby, you can skip the next page.Everyone else should check out the next page and learn how to finance a car.
How to Buy a Car: Trade Ins
Many car buyers have an older model to trade in.
If you're buying a new car, you probably have an old one to get rid of. So why not trade it in? In a trade-in,
Buying TIP: Settle on Price First |
| Beware of car dealers that say they'll pay off your trade, "whatever you owe." Because "whatever you owe" will be added to the price of your new car, it can increase the new car's price beyond what you can afford. No matter what the advertising says, you're always the one who pays. |
Know What It's Worth. Walking into a dealership without knowing what your trade-in is worth is an expensive mistake. It's just like negotiating the price on a new car without knowing what you should pay. Check out sites like NADAGuides.com or KBB.com that list used car values. You can also take your car to a used car wholesaler, like Carmax, to get an estimate of its worth. The price the dealer offers you for your trade-in is negotiable. Use your research to make sure you get a fair deal.
Be Honest with Yourself. Sure, the Kelley Blue Book Value may be pretty high on your car, but not if it's held together with duct tape. When researching used car values, be honest about the kind of shape your car is in. If your car is covered in dents or the interior scent is best described as eau de Taco Bell, you're going to need to adjust your expectations of how much the car is worth.
Know What You Owe. In most cases, car buyers took out financing to pay for their cars. That means that you may have to deal with financing when it's time to trade that car in. If you own your old car outright, or owe less than the car is worth, you're in good shape. In both of those cases, the dealer will buy the car from you and apply the money to the cost of the new car, lowering its
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Most buyers have older models to trade |
price. However, if you have negative equity (owe more than the car is worth) and the dealer takes your trade, what you owed on the old car will be applied to the new car, increasing its price.
Keep the Heap. Trading in a car requires a long and tough look at your car and your finances. If you have negative equity, you're going to have to pay to get rid of that car. You should ask yourself if buying a new car makes the most financial sense. Though a new car is always nice, in the long run it may be smarter to keep your old car, pay down the balance of the loan, and buy a new car later.
Get Your Price. When the dealer comes back with an estimate of how much your trade is worth, compare that price to your research. Bring printouts that show where you're coming from. Some dealerships, like Carmax, will give you a written estimate. That's a great negotiating tool, because it shows you can always sell the car somewhere else. You should also listen to how the dealer arrived at their price. Remember to be honest with yourself about the car's condition, but also refer to your research so you get what your car is actually worth.
By now you've gotten a great price on the car, have money to pay for it and have gotten a great deal on your trade. All that's left is making sure you new car is taken care of.
You will also need:
It's a confusing time to be shopping for a new car. While there are some incredible deals to be had, many of those incentives are for cars that don't offer a lot of value in the long term.
The U.S. News