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10 Things To Know Before Buying a Car

By Autolist Staff | April 24, 2019

Car buying can be a stressful experience, but there are things you can do to make the process go more smoothly. Before you even step foot on the dealer's lot or take a vehicle out for a test drive, consider doing some research to arm yourself with the important information you need to be a smart shopper.

Here are 10 things to know before buying a car.

1. Check Out Your Credit Report
Buying a car is a big purchase, so financing should be at the top of your to-do list before you even start looking at potential vehicles. If you don't already know your credit score, it helps to find out. The higher the credit score, the better chance you have of negotiating a lower interest rate on an auto loan.

If your credit score is less than satisfactory, review your credit report to find out what might be negatively affecting your score. Determine if there are any immediate actions you can take to raise your credit score quickly. For example, if you discover that you have accounts in collection, negotiate a pay off with the original creditor in exchange for removing the derogatory item from your credit report. If you have a recent late payment that's creating a blemish, simply ask the creditor if it can be removed as a courtesy.

2. Review Your Loan Options
Now that you have your credit in great shape (or at least improving), it's time to think about how to finance your next vehicle.

You can certainly apply for an auto loan at the car dealership, but it helps to know all your options before you step foot on the showroom floor. If you have an existing relationship with a bank or credit union, check out their auto loan interest rates.

If you're approved for a loan before visiting a dealership, it can save you time at the car dealership and also give you an advantage when negotiating the final sale price of the car you choose.

When you do choose a car and you're ready to talk numbers with a car salesman, you can still find out what finance deals they have to offer. Some manufacturers authorize promotional interest rates (sometimes as low as 0.0% to 1.9%) that may beat out any interest rate offered by your lending institution. Depending on what the dealership can offer, you have the option of forgoing the bank loan in favor of financing through the dealership.

3. Discover Your Car's Trade-In Value
If you currently have a car that you plan to trade in, don't wait for the salesman to tell you what it's worth. Do some research on your own to get a good sense of its value.

Use Kelley Blue Book's online tools to input the specific details of your vehicle, including the year, make, model, mileage and condition. If there are minor cosmetic repairs needed, consider making them yourself to increase your old car's net value.

Once you obtain an estimated trade-in value for your vehicle, you can go into the car dealership equipped with the information you need to negotiate and accept an offer that gets you the most money for your old car.

It's also worth noting that if you have the time and inclination, you'll almost always get more money for your old vehicle if you sell it yourself than you will if you trade it in.

4. Determine Your Desired Payment
It's important to understand the factors that impact your auto loan terms and fees so that you can figure out what monthly payment you can afford.

The key pieces of information you need to calculate your monthly payment are the loan amount, the annual percentage rate (APR) and the term.

Using an online auto loan calculator can help you experiment with different numbers to find out what works best for you.

First, enter the APR offered by your lender. Next, decide on the term you want; this might be anywhere from two years to eight or more year. Lastly, estimate a purchase price. Be sure to deduct the value of your current vehicle if you're selling it or trading it in.

You may also want to consider putting a down payment on your new car to arrive at a smaller loan amount.

Once you calculate a monthly payment, decide whether it works with your budget. If you're not comfortable with the number, tweak the loan factors until you reach a payment you can handle. Perhaps you could lower your targeted purchase price, stretch the car loan out for another year (which also means paying more in interest) or put a larger down payment on the new vehicle.

5. Decide on Buying or Leasing
When you arrive at the auto dealership, the car salesman is likely to ask you whether you're interested in buying or leasing a car. This is a decision that you can research and make before you even start car shopping.

Think of buying and leasing as owning versus renting.

If you buy, you're financing the entire cost of the vehicle (minus any trade-in or down payment). If you choose to lease a car, you pay the cost for the length of time that you have it, calculated by subtracting the car's value at the end of your lease from its value when you first took possession of the vehicle.

When making the lease or buy decision, ask yourself some questions. First, how much do you drive? There's usually a limit to how many miles you can put on a leased vehicle before you have to pay additional fees. If you travel a great deal, leasing may not be the best choice for you.

Next, do you keep your car in good shape? With a lease, you may have to pay a penalty for returning a car that's not in good condition.

Finally, is there a possibility of major life changes occurring during the term of your lease? There's often a fee involved in terminating a lease agreement early.

6. Make the New Versus Used Decision
Buying and leasing isn't the only decision you have to make during the car buying process. The next choice you face is whether to get a new car or a used car.

There are advantages and disadvantages to each, so take the time to weigh your options carefully.

A new car has zero miles on the odometer, so it's true that it depreciates as soon as you drive it off the sales lot. On the plus side, loans for new cars typically come with lower interest rates. While the purchase price of a new car is certainly higher than that of a used, the maintenance bills and repair costs are likely to be lower. Finally, the warranty on a new car is almost always better than one on a used vehicle.

If you decide on a used car, you can enjoy the lower purchase price and potential for lower insurance premiums. Registration and license fees may also be less, as some are based on the value of the vehicle you purchase. One downside to purchasing a used car is that you're left with a reduced, or even no, manufacturer's warranty, though you can buy additional warranties. Further, you'll have to do some additional investigation into the history of each used car you consider to make sure you're not buying a lemon.

7. Analyze Models That Meet Your Needs
Now comes the time to narrow your car choices down to the perfect vehicle for you. It's all about assessing your needs.

To determine what factors are most important to you in a car, make a list of what you really want in a car. Is safety a top concern for you? Do you need something with great gas mileage? Do you demand a convertible top? You already know a price range that you're comfortable with, so that can help focus your search.

Next, decide on a body style that fits your priorities. If you need lots of seating, a minivan may be the way to go. Looking for something that will haul a boat or camper? Narrow your search to sport-utility vehicles and pick-up trucks. If a sleek look is your priority, consider looking at coupes and sports cars. Those who desire storage space should focus on hatchbacks and station wagons. Hybrid and electric vehicles appeal to those who rank eco-friendliness as a top priority.

Once you find the body style that suits you, research the car makes and models available. Decide on other factors such as transmission, drivetrain and engine size to zero in on the perfect new car for you. Read car reviews on specific models and years to get all the inside information.

8. Research Dealership Reputations
Now that you've narrowed your car search down to one or a few specific models, it's time for the fun part: test driving. You can shop at one particular dealership or visit several car lots to check out all your options.

Finding a fair and reputable dealership can help you get the best deal possible and avoid headaches. Do some research online to get to know more about the car dealerships in your area. Read reviews from other customers to find out what experiences they've had. Ask your family, friends and neighbors for recommendations. They should be able to direct you to a dealership or even a salesman that provides an excellent customer experience.

A good dealer won't pressure you to buy; instead, they'll take the time to answer your questions and show you the various models. Just remember to be respectful of their time...after all, they are trying to make a living.

9. Dig Into the Car's History
After you test drive a few models and settle on one particular car, don't feel like you have to start discussing the numbers right away. While the particular model might have excellent reviews, you want to make sure this specific car is living up to its name. Looking at the car's history can give you a lot of information, including the number of past owners and any accidents that have been reported.

You can use services like CARFAX and AutoCheck to look up a particular can by its VIN and view the history. Check out the car's repair history to make sure that it's been serviced and maintained properly, such as receiving regular oil changes. As a car buyer, it's also your right to have a mechanic look over the car before you make a purchase. While you will have to pay for the car inspection, a trusted mechanic can point out potential issues that might cost you thousands of dollars down the road.

10. Brush Up on Your Negotiation Skills
Once you're sure of the car you want to buy, it's time to start the negotiations. Do your research ahead of time so you can arrive at the car dealership armed with information and walk away with the best price. Check out other cars with the same year, make, model and similar mileage, and compare the sticker price at other dealerships. Consult market analysis reports to get a fair value, and consider the demand for a vehicle. If demand is low, it's likely that you can get a better deal on the car.

If you already have your own financing lined up, you can still ask the dealer about any low-interest finance options they may be offering. It's also a good idea to inquire about rebates or cash back incentives. When you're ready to haggle, put your emotions aside and remember that you're conducting a business transaction. Focus on the price you want to pay for the car. If the salesman asks for your top dollar, quote a number that's lower so you eventually settle somewhere near your target price. Have a calculator or app ready to crunch the numbers and ensure the price works out to a monthly payment that you're comfortable carrying.

While the thought of car buying may leave you feeling stressed, there's plenty you can do to ease the pressure. With careful preparation and research, you can feel confident that you're making the right decision and getting a great deal. Good luck!

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