Back to GuidesBuying a new car is one of the most important decisions you will likely ever make, mainly because a car purchase is such a costly decision. The car-buying process can also be lengthy and unpleasant if you are not prepared. Fortunately for you, there are several things you can do and several things you should know before and during the car-buying process.
Things like knowing the trade-in value of your old car, knowing how much you can afford for a new or pre-owned car, knowing your finance options, knowing the total cost of the specific car you want rather than just the sticker price, and knowing what you need are all important in getting you the best price on any vehicle.
This is just the tip of the iceberg. There are so many more things to consider when car shopping and buying, and we are here to help you with ten things to know when buying a car.
1. Understand Your Needs
One of the most underestimated aspects of buying a car is understanding your needs. Most people know what they need to some extent, but often, understanding and knowing turn into two separate things. And many people only consider what they need right now instead of considering long-term implications.
If you want to get the most out of your money, you need to ask yourself a few questions and answer them honestly. Do you really need a new car or will a used car work? Do you need a midsize SUV when a compact SUV will suffice? Do I need all-wheel-drive or will front-wheel-drive work, especially since I live in Phoenix, Arizona?
Remember, there is a difference between a want and a need. Many people can get what they want rather than what they need. Some people choose a combination of wants and needs. Whatever your particular situation may be, you should always answer the wants versus needs questions honestly so that you do not end up with a sports car when you really needed a pickup truck.
2. Know How Much You Can Afford
Everybody knows how much they afford, right? The answer is no. When car shopping, it is easy to look at the MSRP, sticker price, or the most optimum advertised financing deals available and assume that is the total cost of the vehicle purchase.
Taxes, fees, added interest rate costs, fuel costs, potential maintenance costs, and many more things go into the total price of the car. Of course, some things like maintenance and fuel costs will fluctuate, but projected gas mileage figures and resources like edmunds.com and consumer reports can help project what some of those costs will look like down the road.
Also do not forget to have a reasonable idea of what incentives, rebates, or financing deals you may have by exploring your financing options based on your credit score. You can also find a fair price for your potential trade-in on Kelley Blue Book, giving you an idea of a realistic value or down payment option.
3. Compare, Compare, Compare
One of the best and easiest things to do as a prospective car buyer is to know what other vehicles are available on the market. Once you know how much you can afford and what exactly you need, you can start to shop around. The biggest mistake that any car buyer can make is to get set on one vehicle without looking to see what other car dealers have.
Comparing vehicles could save you thousands if a car dealership down the road has a similar vehicle to the dealership into which you are currently looking at a better price. Additionally, do not underestimate the value of working with a dealership that has good reviews. Working with a salesperson who values you as a customer as opposed to one who just wants to sell new cars can change your entire car-buying experience.
4. Know the Vehicle History
As you compare vehicles, one of the steps you should take, in addition to looking at features and pricing, is the vehicle’s history. You can obtain a vehicle history report on almost any vehicle from AutoCheck or Carfax if you have the vehicle’s VIN number.
Many dealerships will even provide a free vehicle history report. If they do not, you have the option to purchase one yourself. It might seem like a tedious and costly detail, but it is well worth it to try and uncover preexisting issues that might otherwise be detrimental to your ownership experience.
This can also help assist when negotiating a fair price. A dealership may mark up a vehicle with an accident in its history because the damage has been covered well. Although something like this may not worry some shoppers, it could raise red flags for others, and depending on the maintenance history – or lack thereof – it could mean major, costly repairs down the road.
5. Get Pre-Approved for a Car Loan
This tip is not so much about how you know, but rather, what you know. However, knowing that you are pre-approved for an auto loan before you start the car-buying process will make everything a tone easier. It works much the same as getting a pre-approved house loan. If you are pre-approved, you do not have to sit at the dealership wondering how long it will take to find a good lender or if you will get a good interest rate.
Getting pre-approved for a car loan does a few more things than just making buying a car easier, though. First, it can allow you to potentially get a car loan from your home bank. This may not mean getting the best loan terms or annual percentage rate, but it does mean getting a loan from people you know and trust rather than from a credit union or bank of whom you have never heard.
It can also help you determine where you stand with your credit score, and therefore, with potential offered incentives and rebates. It is always helpful to know your credit score, but if you do not, a pre-approval will help you find out what it is.
It also helps you stay within your set budget. Many people use loans to buy new cars, and you would not be able to buy a $50,000 car with a $20,000 loan unless you had $30,000 lying around to supplement the deficit.
Lastly, you can shop around for different lenders, just as you are doing with your future car. Dealerships can add to interest rates if you let them look for a lender in your place. To get lower interest rates, and therefore, lower monthly payments, it is best to get pre-approved for the financing options that work for you.
6. Do Some In-Depth Research
It is common to do a little research on some vehicles that catch your eye, but if you think you have done enough, there is always a little room to do some digging. Do not stop at the reviews you find from a test driver on your favorite vehicle review site. Visit sites like Consumer Reports that test cars independently and give unbiased feedback.
Sites like these also have long-term testing and reliability statistics, so that even if you end up purchasing a specific car, you are at least prepared to deal with potential issues it may give you down the road.
YouTube is also a great tool to use. Of course, there is a myriad of channels and mechanics that claim to know what they are talking about, but when you find consistencies between sites and channels, you know that there may be something more to a specific car model than meets the eye. You do not have to be a mechanic yourself to know a good car from a bad car, but you do have to be diligent.
7. Thoroughly Inspect Any Vehicle
With that being said, you also want to test drive each car you are seriously thinking about purchasing. Again, you do not have to be a mechanic to tell whether the transmission is shifting poorly, whether the brakes feel like they are working properly, whether there are squeaks and rattles everywhere, or whether or not the car is in overall good condition.
It is also a good idea to actually have a mechanic inspect the vehicle before you buy it. Most reputable car dealerships will allow you to have an independent mechanic perform a pre-purchase inspection on the car you want. Even though it may cost a little money, it is well worth it. If a dealership or salesman does not allow an inspection, you should reconsider your decision to go any further with that particular vehicle or car dealer.
Even certified pre-owned vehicles can have hidden problems. Many companies advertise that their certified technicians perform 120-point inspections to ensure that a pre-owned vehicle is certified, but rarely do they tell you what the inspection entails. Even if the car in question is a year old, it is always worth it to have your favorite mechanic inspect a used car.
8. Know What to Avoid:
Knowing what to avoid at the dealership is just as important as knowing what to do before you get there or what to look for at the dealership.
Giving Too Much Information to the Salesperson:
Just like you, the salesperson working with you is trying to get the best deal possible – in a way. He or she has to make money somehow, so where they save you some money in the purchase price, they may make up for it by raising the interest rates for your loan. It is always a good idea to give the salesperson the price you want to pay and wait to give him or her the rest of the information you have concerning your plans.
Once the price is more set in stone, you can start discussing what you want or need to get for your current vehicle’s trade-in value, what you need your car payments to look like, and other similar details.
Dealer Extras:
Avoid dealer extras like extended warranties, various protection plans, and other add-ons that tack more onto the vehicle’s purchase price. Most of these extras are available apart from the dealership, some are covered by your own insurance agency, and many are so infrequently used that it is just not worth the extra cost.
Long-Term Loans:
Long-term car loans have become more popular as vehicles have become more expensive. It is one way to get more car than you can really afford, and they can be dangerous to your financial situation. Loan rates over a six or seven-year period, even if they are reasonable, mean thousands more in loan amounts than you would pay for a short-term loan. If you need an auto loan, try to work out a two, three, or four-year loan.
Getting locked into a long-term loan just to get out of your current car is dangerous as well. You may end up earning lower monthly payments this way, but you will have them longer than if you paid the repair bill on your current car or cut your monthly Netflix plan. This is a big part of understanding what you can afford and not stretching yourself too thin.
9. Know When to Walk Away
There is plenty of fish in the sea. In other words, there are very few cars that are truly perfect. There will be another vehicle that suits your needs just as well as the one that the salesperson will not discount an extra $1,000 just to make you happy.
Even with car prices at an all-time high because of continuing supply chain issues, people are still buying cars, and the right one for you is out there. Do not be afraid to walk away from a car that is out of your price range, a car that has that strange squeak that sounds a little too ominous, or even a deal that seems too good to be true.
Salespeople have to deal with people walking away all the time, and part of the reason you compare, shop around, and test drive various deals is to get the one that makes the most sense at the best price for you.
10. Know Your Game Plan and Stick to It
Perhaps the most important thing to know when you are about to buy a new or used car is your game plan. You have done all of the necessary research, you have secured your car loan with your preferred lender, you have compared prices, and you have figured out exactly what you have to spend, and something happens to the one car you had your eyes on. That happens, and you can try again.
Final Thoughts
Buying a car is not unlike finding a job. It takes a little shopping around, it takes knowing your limits, and it takes knowing what you want versus what you need. It can take a long time, and it can be tiring, but if you put in the effort, you will be rewarded by potentially saving thousands of dollars.
Knowing these ten factors will help you make the best decision possible for yourself, but they will also inevitably bring up other things you may have never considered. Ultimately, they will help you get the best deal when you are car shopping for yourself.
