How to buy a new car

Contents

  • Step 1: Figure out how much you can afford
  • Step 2: Prequalify for a car loan
  • Step 3: Research cars
  • Step 4: Exchange your current vehicle
  • Step 5: Go for a test drive
  • Step 6: Compare prices
  • Step 7: Seal the deal

How to buy a new car

Buying a brand new car is exciting, but it’s a good idea to prepare, ask questions and understand the process first. We put together some of our best tips to guide you through the seven steps of purchasing a new car.

Step 1: Figure out how much you can afford

The first step is thinking about the cost of a new car. Take a hard look at your budget and ask yourself:

  • How much can I get for my trade-in?
  • Do I have enough for a down payment?
  • How big of a monthly payment can I afford?
  • How’s my credit?
  • How much do I need for taxes and registration?

Unless you’re paying cash, budgeting for a new car revolves around your monthly payment, which is a combination of interest, fees and your actual loan debt. Just remember that when it comes time to buy, you want to pay as little overall as possible. One of the most helpful tools for setting a cap on your new car purchase is getting prequalified for a loan.

Step 2: Prequalify for a car loan

Getting a loan prequalification or preapproval from a bank, credit union or online lender isn’t necessary for buying a new car. However, it has several advantages over dealership financing. Essentially, prequalification lets you shop around to make sure you’re getting a good loan. Potential benefits include:

  • Lower interest rates
  • More leverage when negotiating vehicle pricing
  • More flexibility if you have bad credit

For more information, read our car loans guide. Once you know how much you can afford, you can begin shopping for the right car in earnest.

Prequalification lets you shop around to make sure you’re getting a good loan.”

Step 3: Research cars

It doesn’t matter if you’re visiting a local car dealer or buying a car online — it’s smart to figure out what vehicles you’re interested in before you start shopping. Think about your needs and take a look into these aspects of different vehicles:

  • Performance specs
  • Safety ratings
  • Reliability scores
  • Available features

Once you know what you’re looking for, start checking dealers’ inventories and online car buying sites to find the right car.

Step 4: Exchange your current vehicle

If you’re buying a new car to replace your old vehicle, look into either selling or trading in your existing ride:

  • Selling your car yourself often gets you more money, but it’s a more involved process. Finding a buyer can be difficult, and you may have to wait until after you’ve bought your new vehicle or risk being without a vehicle for a time.
  • Trading in a car at your dealership is much simpler, but you might be stuck accepting whatever trade-in value your dealer offers.

Whichever you choose, research your current car’s value online to find out what it’s worth before you exchange it. If you trade in your vehicle, bring these items with you to the dealership:

  • Driver’s license
  • Car registration
  • Information on your car loan
  • Proof of insurance
  • Car keys

This step is a way to dispose of your old vehicle, but it’s also an important step in funding your new car purchase. Don’t rush the process or accept less for your current vehicle than you think it’s worth.

Step 5: Go for a test drive

Getting a hands-on feel for a new car is crucial to knowing if it’s the right one for you. Is it too low or too high? Is the drive smooth or bumpy? Are the seats comfortable? The only way to answer these subjective questions is often by visiting the seller and taking the car out for a spin yourself.

Here’s a quick checklist of what to evaluate during a test drive:

  • Comfort
  • Ergonomics
  • Acceleration
  • Steering
  • Handling
  • Braking
  • Visibility
  • Noise

Try out all the features you can and take a tour around the vehicle to look for any defects or damage, even on a new car.

Step 6: Compare prices

Whether you’re shopping from dealerships or car buying sites, comparing prices is a safe way to make sure you’re getting a good deal. This can also help you set expectations for car values in your area. While online estimates are a good starting point, your local market may differ.

These comparisons can also help you when it comes time to negotiate car prices. Citing other offers to your salesperson shows them that you know what you’re doing and you’re not willing to pay more than necessary.

This is also when your choice of financing comes back into play. If you choose dealer financing, salespeople like to negotiate your monthly payment rather than the overall price, but this usually leaves you spending as much (if not more) money. Prequalification and preapproval take that trick off the table unless the dealer is willing to give you a better annual percentage rate.

Step 7: Seal the deal

The final stage to buying a new car is signing the purchase agreement, but don’t rush to get through this formality. Before you make it official, verify the terms of the contract you’re about to sign. It can be intimidating, but this last step might matter the most. Whatever’s in your contract often overrides any other info you’ve been given.

As you read this contract, look out for anything that your seller may have snuck in, like unnecessary add-ons. Your new car should come with a manufacturer’s warranty, but many dealerships also offer extended warranty plans. These can be a smart purchase, but vehicle service contracts are often available from third-party sellers for less. Don’t let the salesperson pressure you into paying for anything you don’t want, and remember that you can get an extended warranty later on from a third party instead of signing up for one now.

Once you close the deal with a new car, you still need to make sure it’s registered with the DMV and insured. However, these processes differ by location and insurance provider, so look into your specifics to make sure you’re roadworthy.

Bottom Line

Buying a new car is exciting, but if you want to make a smart purchase, your work starts well before you step onto a dealer’s lot. Compare your options and shop around throughout the process to make sure you’re getting the right car at the right price.

If you decide to purchase a used car, check out our guide to see the steps to getting a used vehicle.

With coronavirus a reality, there are ways to do most of the work from home

As the novel coronavirus spreads, many people are doing what they can to minimize contact with others, buying groceries and other items online. But it’s not very common—and in many states it’s impossible—to buy a car online.

Concierge services for buying used cars, such as Carvana and TRED, allow buyers to handle most aspects of a used-car sale without meeting with the seller. There are also automotive brokers that could possibly buy and deliver a new car to your home in some states—in exchange for a big fee.

But for most consumers looking to purchase a new car, the dealership is the only practical option. Fortunately, the expert buyers at Consumer Reports—who anonymously purchase about 50 cars per year for CR testing—recommend strategies for spending as little time as possible at the dealership.

“If you want to minimize the dealer interaction because of the coronavirus, either you completely postpone your purchase or do everything you can online or on the phone until you’re ready to pick up the vehicle,” says Gabe Shenhar, associate director of CR’s auto testing program. “The dealership can basically become just a venue for the delivery if you hone it down to the bare essentials.”

Here are some strategies for reducing your time at the dealership:

Communicate: Reaching out to a dealer doesn’t have to involve showing up in person. Get in touch by phone, email, or text––whatever works best for you and the dealer.

Do online research: Figure out which model, trim level, and features best suit your needs. Then search online to see which dealerships have vehicles with your preferred specifications.

Test-drive: At some point, before you’re ready to buy, you’ll need to test-drive cars. You can try to set this up ahead of time, over email or the phone, and minimize your time at the dealership. Keep notes regarding what you like and don’t like.

Decline invitations: Say no to invitations to the dealership to see a vehicle you’ve already taken for a test drive.

Negotiate a price: Once you’ve decided on a car, negotiate a price from each dealership—either over the phone or via email—and carefully review the price breakdown. Make sure there are no extras you didn’t want or fees you don’t agree with rolled into the final price.

Stoke competition: If you’ve obtained various prices from different dealers, you can let the dealers know this and put them into competition with one another to get the best deal.

Find out about incentives: Make sure you ask about incentives, such as customer loyalty (owning the same brand of vehicle) or conquest (switching from a competing brand). CR’s car buyers find that these are easy ways to shave a few thousand dollars off the price, even on just-released vehicles.

Have a loan in hand: Secure your financing before you go to the dealership to sign on the dotted line. Getting the dealer to commit to a best price ahead of time will help consumers secure financing at the appropriate level and can help avoid high interest rates sometimes offered at the dealership.

  • Resist pressure: When communicating with the dealer from home, be up front about how much time you will have when you arrive at the dealership, as well as your expectations regarding price. Be ready to walk away if the dealer insists on upselling or adding on extras you don’t want.
    • Drive away: By doing as much as possible remotely, you will be able to show up at the dealer and drive away because your car will be there, waiting for you.

    Not Like Groceries

    Because most states require in-person signatures for automotive sales contracts, a start-to-finish online transaction is rare.

    “The way cars are bought—because there are contracts to sign—it’s generally not something you can buy online and have delivered like you can with a bag of groceries,” says Stephanie Brinley, an analyst with market research firm IHS Markit.

    Mark Schirmer, director of public relations for Cox Automotive, an autos market analysis company based in Atlanta, says that every state has its own regulations regarding car sales contracts, which complicates the process. Even a service like Carvana will involve documents at some point.

    Naturally, if you do go to the dealership, standard coronavirus precautions should apply. Minimize close contact with other people (including refraining from hand shaking), stay at least 6 feet away from anyone who is visibly ill, wash your hands a lot, and avoid touching your face.

    CR Build & Buy Car Buying Service

    When buying a car, in addition to research and reviews, Consumer Reports offers its members access to the Build & Buy Car Buying Service at no additional cost. Through this service, a nationwide network of about 12,000 participating dealers provides up-front pricing information and a certificate to receive guaranteed savings off the manufacturer’s suggested retail price for customers in most states.

    The pricing information and guaranteed savings include eligible incentives. Consumer Reports members have saved an average of $3,101 off the MSRP with the Build & Buy Car Buying Service.

    Consumers still need to go the dealership to finalize any deal through this service.

    Looking to buy a new car? Read the article to learn a few tips on purchasing a car with cash, and why it is the better option compared to financing.

    How to buy a new car

    Looking to buy a new car? Read the article to learn a few tips on purchasing a car with cash, and why it is the better option compared to financing.

    How to buy a new car

    How to buy a new car

    How to buy a new car

    Of late, financing has become a highly prevalent trend in our society. It is an effective substitute for making cash payments, and gives you an option of paying back the entire amount over a period of time by making small payments.

    Car financing is one of the most popular financing options people go for. Auto loans are even endorsed by dealers as they earn commission or kickbacks when you get a loan on their recommendation. Buying a brand new car with your cash is not something dealers are too excited about. But for you, it is the more obvious and logical choice, as you do not have to pay any extra money other than the car cost and there is no financial burden on you as well.

    Hard Cash Vs. Financing

    Would you like to write for us? Well, we’re looking for good writers who want to spread the word. Get in touch with us and we’ll talk.

    This is a valid point of debate in the minds of most people looking to buy a car. Giving this dilemma a cursory thought will convince you that buying a new car with cash is obviously the better choice, as you would not be paying any extra money for buying your car in the form of bank interest. You just pay the amount for the car and your job is done. However, when you analyze the situation in a detailed manner, there is really not much of a difference in either of the two choices.

    Auto loans usually come with a 7% APR, and need to be paid off within 4 to 5 years. If you have cash amount for your car lying with you in the bank, and you have an investment opportunity which could yield you 9% to 10% interest, then smart decision would be investing your money and buying your car through auto financing.

    Cash payment works for people with excess money. Also, another advantage is that there is no psychological burden on you of being under debt or having to pay money every month towards loan payments.

    Buying a New Car With Cash

    Do Your Homework

    Before visiting your car dealer, figure out which car you are interested in. Do some online research, ask friends or family, compare prices, features and go through all available options before you zero-in on the car of your choice. Once you are sure of what you are looking for, car buying becomes easier at the dealer’s office. While you are at the dealership looking at cars, do not let the salesperson know immediately that you are looking for a cash buyout. He will surely probe you about how you wish to pay for the car. You can tell him that you will decide the mode of payment once you like a car. If you have done your research and decided the car you want to buy, test ride it and go through its features.

    Keep it Confidential

    There is a reason behind not letting the dealer know about your cash buying intentions. Dealers earn more money if you let them know about the cash buying, they will know they are not getting any extra income in terms of interest payments or recommendation fees from the auto financier. So dealers will try to cover up this margin in the car price, and you will end up paying more. Play your cards close to your chest, and disclose your secret only after you have negotiated the price.

    Negotiate the Price

    Once everything regarding car selection is done and you know the cost, talk to a senior person in the dealer’s office about your intentions. Tell him you have the money and will purchase a car right away if he gives you a great price. There is a certain amount of discount for cash payments which you need to extract from the dealer. Let him know that you will drive home the car the next day, which gets him the opportunity to clear out one car from his lot quickly.

    To sum it up, buying a car with cash is the better choice, unless you have a better investment option and extra income which will take care of the loan payments. So, keeping that in mind, take your decision wisely.

    Getting a new car should be an exciting experience, and yet plenty of Minnesota drivers still find themselves bogged down in the process and let the stress of getting things right interfere. Luckily enough, learning how to buy a new car is easy when you follow our simple tips.

    Simply read on to find out:

    • When to Buy a New Car
    • How to Find Your New Car
    • How to Afford a New Car

    When to Buy a New Car

    The first thing you’ll need to think about is whether it’s really the right time to move forward and find a new vehicle. Just a few signs it’s time to take the plunge include:

    • Having to frequently make expensive repairs.
    • Feeling unsafe driving your current vehicle.
    • Your needs have changed since you first bought your car.
    • Your vehicle is in danger of failing emissions tests.
    • Your vehicle seems far less efficient than newer models.

    How to Find Your New Car

    So, it could be that you now need a larger vehicle to support a growing family or simply that you’re interested in new technology to make the most of your Wisconsin commutes. Either way, you now need to find the best car to fit your needs by following these steps:

    • Put together a budget to see how much you can spend. Remember to include costs such as insurance and fuel.
    • Consider your needs, then narrow your search to a few models that meet them.
    • Pick a top three, then research things like reliability scores and safety ratings.
    • Test drive your final choices to determine which is going to feel best as you travel across Minnesota streets.
    • Do a local search to find the best price available.

    How to Afford a New Car

    U.S. News recommends ensuring your car payments never push monthly debts over a third of your monthly income, so that’s a good rule of thumb to keep in mind. Remember, you’ll also need to think about things like:

    • New Car Sales Tax
    • Interest Rates
    • Your Current Vehicle’s Trade-in Value

    Learn All About How to Buy a New Car with Morrie’s Auto Group

    It doesn’t matter if you want to talk through financing options or discuss our latest new vehicle specials, one of our team members will always be happy to help you find the right new car at the best price. For any further assistance, feel free to get in touch.

    Financing a vehicle purchase is much more common with the average price of cars being what it is, but there are some who prefer to pay cash for a new vehicle. If you’re wondering how to buy a car with cash, there are some things you should know.

    How to buy a new car

    How to buy a new car

    Financing a vehicle purchase is much more common with the average price of cars being what it is, but there are some who prefer to pay cash for a new vehicle. If you’re wondering how to buy a car with cash, there are some things you should know. Don’t assume a salesperson has your best financial interest in mind. Instead, consider your income, financial goals, assets, and net worth to determine what you can and should spend on a new vehicle.

    Advantages of Paying Cash for a Car

    There are plenty of benefits to paying cash for a new car. Some of these advantages include:

    • Spending less money
    • Having to make wise decisions
    • Being disciplined
    • Having power
    • No monthly payment
    • Fighting depreciation
    • Getting discounts

    Yes, you read that right, you’ll spend less money by paying cash. TheStreet says, you’re likely to be more cautious about how you spend your money, and you won’t have to worry about paying any interest. When you pay with cash, you may not have the luxury of adding on many high-end features.

    This means you’re forced to make wise decisions about which features you actually need to include on your new vehicle. Additionally, the interest savings on a $32,000 loan at six percent interest spread over five years could keep over $5000 in your bank account. Having the financial discipline to save up $30,000 or more isn’t easy, relates DoughRoller. It will push you not to overbuy, as you’re less likely to want all the bells and whistles.

    If you can accomplish this financial goal, it will serve you well when trying to save money for other large purchases in your life. It forces you to prioritize what’s important to you and set obtainable financial goals. Paying with cash gives you, the buyer, a lot of power at the dealership. You can choose to walk away from a deal at any time because you aren’t relying on the dealership for your financing.

    Along with having no interest to worry about, you will have no monthly payment. While you did have to set aside a portion of your money in order to save enough to buy a car with cash, you won’t have spend any of your income on a car payment each month. On the same note, you have to keep in mind a car’s depreciation. When you finance a new vehicle, you’ll immediately be upside down on the value of the car, meaning you’ll owe more than it’s worth.

    It’s possible that you may be eligible for a discount if you pay with cash. Many dealerships appreciate having all their money upfront and not having to deal with monthly payments. You may find that you have more leverage when paying cash because the dealership might be willing to take less money in order to get all of it right away.

    Disadvantages of Paying Cash for a Car

    While there are plenty of great reasons to pay cash for a new vehicle, there are also some disadvantages. The negatives of buying a car with cash include:

    • No negotiation leverage
    • Might be hard to get a loan later
    • Depleting cash reserves
    • You’re already considered a cash buyer

    Although some dealerships give better deals to those paying with cash, many of them prefer you to get a loan through their finance department. According to Jalopnik, this is because dealerships actually make money off of the interest of the loan they provide for you. For instance, a loan provider will tell the dealership that you’ve been approved for a loan at 2.5 percent interest. The dealer then offers you the loan at 3.5 percent interest, legally they can do this and keep the extra interest. This is a fairly common practice.

    It’s not always possible to pay cash for a large purchase. Therefore, at some point, you’ll have to play the credit game. While you don’t want to get in over your head with debt, you also don’t want to avoid credit altogether. So, even if you can pay in full, there are some reasons you might want to get a loan instead. Depleting your cash reserves is one of them. With dealerships offering zero percent interest or very low interest rates, you can get incredibly low monthly payments. This means you can have your savings available for whatever life throws at you.

    You’re probably not going to the dealership with a large amount of money in your wallet. It’s more likely that you’re paying with a cashier’s check. In all honesty, anytime you’re not financing directly through the dealership, you’re considered a cash buyer Autolist tells us. So, even if you bring a check from a credit union or another bank, the dealership will think of you as a cash buyer.

    If you’re buying from a reputable dealership, this won’t matter. They should know that a cash buyer means a quick sale, and they won’t have to worry about the deal falling through once it gets to the finance department.

    Buying a Car with Cash

    Frugal Rules recommends following these steps when you decide to buy a car with cash:

    1. Save your money
    2. Know the car you want
    3. Negotiate a good price

    Although saving money seems obvious, it is definitely a big first step in paying cash for a vehicle. You have to decide how much you can save, how often you can save it, and when you will have enough for the car. Research the car you want before you start saving. This will give you a good idea of how much you need to save and help you set and reach your goal.

    Knowing how to negotiate is another key factor in getting a good deal on a car. How you approach this will depend on whether you’re buying from a dealership or a private seller.

    If you want to buy a car with cash, the information here should help you accomplish this goal. There are advantages and disadvantages to doing this, so ensure you’re making a well-informed decision.

    With new and used car prices soaring due to shortages , you might want to reconsider your plans to buy a car and try again later—at least until the end of summer, or whenever supply picks up again. Otherwise, you’ll really have to do your research to get a good deal, as you’ll be facing higher prices and fewer choices.

    Car shortages have jacked up prices

    Factory shutdowns early in the pandemic have resulted in a microchip shortage that’s slowed down production on new cars, resulting in lowered inventory by 64% at dealerships nationwide , compared to a year ago. You may have noticed fewer cars on dealers’ lots, too—the average number of new cars on lots is trending towards the low-30s, well below historical norms of at least 60, according to Cox Automotive. According to Kelley Blue Book , the average vehicle listing price was $39,833 in April, a 7.9% jump above comparable 2019 numbers.

    The shortages, coupled with increased demand, have affected the used car market, too: The average price is now nearly $24,000, according to the CarGurus’ price index , which is up 27% compared to last May (pickups are most in demand, with prices jumping up by 40.6%).

    Hold off on buying a vehicle right now, unless you really need one

    As Matt DeLorenzo, senior managing editor for Kelley Blue Book, explains :

    Simply put, you can’t buy what’s not there. At this point, shoppers who can wait to buy a car probably should, but for those who can’t afford to wait, it’s more important than ever to shop smart.

    But how long will these prices last? No one knows for sure— auto companies expect the shortage to worsen throughout the summer, after which supply is expected to pick up again. That said, some manufacturers are suggesting a longer timeline, perhaps by early 2023 . Of course, it’s not easy to predict future pricing, either—but it’s reasonable to assume that a shortage is driving up prices and that a shortage won’t last forever.

    Either way, you should make a deal when the time is right for you, based on your circumstances (some people don’t mind overspending, and that’s fine, too). Just make sure you consider your options: For example, if you already lease a car, consider extending the lease if you’re already happy with the car, as you’ll be able to lock in your current monthly rate while buying more time to assess the market. And a trade-in of your current car is another possibility, too, as cashing in on inflated used car prices might make the price of a new car worthwhile.

    This article was co-authored by Hovanes Margarian. Hovanes Margarian is the Founder and the Lead Attorney at The Margarian Law Firm, a boutique automotive litigation law firm in Los Angeles, California. Hovanes specializes in automobile dealer fraud, automobile defects (aka Lemon Law), and consumer class action cases. He holds a BS in Biology from the University of Southern California (USC). Hovanes obtained his Juris Doctor degree from the USC Gould School of Law, where he concentrated his studies in business and corporate law, real estate law, property law, and California civil procedure. Concurrently with attending law school, Hovanes founded a nationwide automobile sales and leasing brokerage which gave him insights into the automotive industry. Hovanes Margarian legal achievements include successful recoveries against almost all automobile manufacturers, major dealerships, and other corporate giants.

    There are 11 references cited in this article, which can be found at the bottom of the page.

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    This article has been viewed 178,322 times.

    Let’s say you’ve decided to invest in the new car or truck. Sure, you can probably get a better deal with a used car, but you’ve probably decided that the risks of driving a second-hand car or even third-hand are not worth saving some extra cash. You’re willing to shell out the extra bucks to get a car fresh off the lot, so you’ll want to make sure you get what you want without getting ripped off.

    Strategy for Negotiating for a New Car

    Visiting dealerships, looking at new cars, test driving cars–these are the fun parts of buying a new car. Now that you’ve decided on the car you want to purchase, it’s time to negotiate to get the lowest price. In partnership with your spouse or significant other, get ready for the dog and pony show that sometimes goes along with buying a new car. In a few steps, you can learn how to buy a new car for the lowest price.

    Step 1

    Go online to research average pricing for the car you want to buy. Sites such as Kelley Blue Book and Auto Trader list pricing for new and used cars, trade in price, private party cost and retail dealer price.

    Step 2

    Educate yourself on dealer cost. New car sticker price (MSRP) is the retail price the dealer wants you to pay. The MSRP is usually thousands more than the dealer paid for the car. Cars Direct and Edmunds will list the dealer’s cost of many cars. Keep this figure in mind when working with the dealership’s sales team. Don’t divulge the figure to them as the dealer may tell you that figure is wrong, however, that is just a sales tactic to throw you off your game.

    Step 3

    Shop at “no haggle” dealerships such as Carmax or a Toyota’s Scion seller where the sticker price is not negotiable. Before you buy, make sure the price they are charging is in-line with your research. This method is less of a headache and eliminates the difficult back and forth between you and the sales team.

    Step 4

    Buy when you are more likely to get a better price–around the end of the month, end of the year, out-of-season, late in the model year, before a body-style change and when incentives are offered. For various reasons, dealers are more likely to make deals when they want to meet sales quotas, get tax write-offs and move cars off the lot.

    Step 5

    Negotiate based on the price of the car, not monthly payments. Monthly payments vary widely by insurance rate and length of loan. The car may end up costing a lot more if you take a longer loan just to get lower monthly payments. Car salesman may try to negotiate using this tactic but it often skews the ultimate cost of the car.

    Step 6

    Offer a fair price for the car. Avoid intimidation and stick firmly to your price. If the salesperson refuses to sell you the car at that price, leave. Often the salesperson will come running after you or call later agreeing to meet your price.

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