8 Tips for Buying a New Car – Buying a new car can be an exciting yet daunting experience. With so many options, features, and financial considerations, it’s easy to feel overwhelmed. To help you navigate the process with confidence, here are eight essential tips to keep in mind before you drive off the lot.
1. Define Your Needs and Budget
Before you even start browsing, take the time to honestly assess your needs. How many passengers do you typically carry? Do you need significant cargo space? What kind of fuel efficiency is important to you? Consider your daily commute, lifestyle, and plans.
Equally important is establishing a realistic budget. This isn’t just about the sticker price; factor in insurance, registration fees, taxes, fuel costs, and routine maintenance. A general rule of thumb is that your total car expenses (loan payment, insurance, fuel, maintenance) shouldn’t exceed 10-15% of your net income.
2. Do Your Research
The internet is your best friend when buying a car. Research different makes and models that fit your needs and budget. Read professional reviews, compare specifications, and look at owner testimonials. Websites like Edmunds, Kelley Blue Book (KBB), and Consumer Reports offer valuable insights into reliability, safety ratings, and resale value. This research will help you narrow down your choices and identify potential vehicles.
3. Get Preapproved for a Loan
A pre-approved car loan starts you on the right foot. You get an idea of how much you can afford, and you’ll have an interest rate that you can then compare to the dealership’s financing, which might have the lowest annual percentage rate. Look for a loan application on the mobile web pages of your bank, credit union, or other lenders such as Capital One or Nationwide. It’s a good idea to do your research on which lender works best for you.
As you plan your financing, Lifestyle does recommend a loan term that’s no longer than 60 months. We also recommend combining a 10 percent down payment with gap insurance or new-car replacement coverage. That lets you keep more money in your pocket without the risk of being underwater on your car loan.
To begin the loan approval process, have at hand your employer and salary information, and balances of other debts you may have. Make sure you will be ready to shop within about two weeks of seeking pre-approval. This will reduce the number of “hard” inquiries to your credit history.
4. Test Drive Thoroughly
Now, you have assigned several car candidates. You should see it in person before making a decision. Hundreds of dealers across the country are registering their car inventory, and in many cases, you can sort by color, trim level, and features. This is a better way to shop than to set up a car on a car maker’s website and hope you’ll find one with a series of real-world options. All the lists you find on the page are original cars with various options. Most will have a locked price that should be comparable to what others pay.
If you found the vehicle on another site, call the dealership’s internet sales department to request more information. In either case, keep these do’s and don’ts in mind:
To verify that the car you want is still in stock. It might have been sold recently, and online inventories can take a while to catch up.
Do ask the salesperson if there are any dealer-installed options. Many new vehicles are sold with add-ons such as nitrogen in the tires, all-weather floor mats, or theft protection packages. These can easily add $1,000 to the sale price.
Don’t just show up at the dealer on a busy weekend or late at night. Waits may be long, and you may not get the salesperson’s full attention.
To schedule an appointment for a test drive. Early in the week and the morning are good times. Having an appointment means the car will be waiting for you when you arrive.
Don’t just drive around the block. Take the time to see how you and your family fit in the car and see how it handles on a variety of roads.
Ask yourself the following questions: Are the controls easy to use? Is there enough cargo space? Will a child seat fit? (Bring it with you and test it.)
Don’t feel obligated to buy the car the same day. Feel free to take a night to think it over.
5. Negotiate the Out-the-Door Price, Not Just the Monthly Payment
Dealerships often try to focus on the monthly payment, but this can obscure the true cost of the car. Always negotiate the “out-the-door” price, which includes all fees, taxes, and the vehicle price itself. Be firm and don’t be afraid to walk away if you don’t feel you’re getting a fair deal. Remember that dealerships have a profit margin, and there’s usually room for negotiation.
6. Beware of Add-On Fees and Extended Warranties
Dealerships will often try to upsell you on various add-ons like rustproofing, paint protection, fabric guard, or extended warranties. While some might seem appealing, many are overpriced and offer little real value. Do your research on these products before you go in, and be prepared to politely decline anything you don’t genuinely need or that you can get cheaper elsewhere.
7. Understand the Trade-In Value (If Applicable)
If you’re trading in your old car, research its market value beforehand using resources like KBB or Edmunds. Get an appraisal from a few different sources, including independent dealerships or online car buying services, so you have a realistic expectation. Don’t mention your trade-in until you’ve agreed on the price of the new car. This prevents the dealership from manipulating the numbers to make it seem like you’re getting a better deal on one while losing out on the other.
8. Read the Contract Carefully Before Signing
This is perhaps the most critical step. Before you sign any documents, read the entire contract thoroughly. Verify that all the agreed-upon terms, including the price, interest rate, fees, and any included features, are accurately reflected. Don’t rush, and if you have any questions or see discrepancies, ask for clarification or corrections. Once you sign, it’s legally binding.
By following these eight tips, you can transform the potentially stressful experience of buying a new car into a confident and well-informed decision. Happy driving!
Frequently Asked Questions (FAQ) About Buying a New Car
1. When is the best time to buy a new car?
While there’s no single “best” time, certain periods can offer better deals. End of the month, end of the quarter, and especially end of the year (November/December) are often good times, as dealerships are trying to meet sales quotas. Holidays like Memorial Day, Labor Day, and Black Friday also frequently feature sales events.
2. Should I buy or lease a new car?
The choice between buying and leasing depends on your lifestyle and financial situation.
- Buying: You own the car, build equity, and have no mileage restrictions. It’s usually better if you plan to keep the car for a long time.
- Leasing: You essentially rent the car for a set period, with lower monthly payments and the option to get a new car every few years. It’s good if you like having the latest models and don’t drive excessive miles. However, you don’t own the car at the end of the lease.
3. How much of a down payment should I make on a new car?
While not always required, a down payment is highly recommended. A common recommendation is to put down at least 10-20% of the car’s price. A larger down payment can reduce your monthly payments, lower the total interest paid over the life of the loan, and help you avoid being “upside down” on your loan (owing more than the car is worth).
4. Is it better to get a loan from the dealership or a bank/credit union?
Generally, it’s advisable to get pre-approved for a loan from your bank or credit union before visiting the dealership. This gives you leverage and a clear understanding of the best interest rates you qualify for. While dealerships can sometimes offer competitive rates, having your financing ready ensures you have a strong benchmark and aren’t solely reliant on their offers.
5. How much should I negotiate off the sticker price?
There’s no hard and fast rule, as it depends on the car’s popularity, the dealership’s inventory, and current promotions. However, many experts suggest aiming for 5-10% below the MSRP (Manufacturer’s Suggested Retail Price) as a starting point for negotiation. Focus on the “out-the-door” price, not just the MSRP.
6. What is “negative equity” or being “upside down” on a car loan?
You have negative equity when you owe more on your car loan than the car is currently worth. This can happen if you make a small down payment, have a long loan term, or if the car depreciates quickly. It becomes an issue if you need to sell or trade in the car, as you’ll have to pay the difference.
7. Should I buy an extended warranty?
Extended warranties are often a profit center for dealerships. While they can offer peace of mind, they are frequently overpriced. Research third-party warranty providers and compare costs and coverage. Consider the reliability history of the specific car model you’re buying. For very reliable cars, an extended warranty might not be necessary.
8. What documents should I bring when buying a new car?
You’ll typically need:
- Your driver’s license.
- Proof of insurance (or be ready to get it).
- Proof of income or employment (for loan applications).
- Proof of residency (utility bill, etc.).
- Pre-approval letter for a loan (if applicable).
- Title and registration for your trade-in (if applicable).
- Any recent pay stubs or financial statements that support your loan application?