How to Buy a New Car

car with ribbon on it

Buying a new car is a big investment, often second only to purchasing a home. It’s important to make the best choice based on your specific financial situation. If you follow some helpful tips, you will make an informed decision, allowing you to be confident with your selection.

Part 1 of 6: Decide what type of vehicle you want

The first step in a new car purchase is deciding the exact vehicle make, model, year, and trim level you want. You also need to think about what features are most important to you in a vehicle.

vehicle comparison on cars site

Step 1: Search for vehicles. Search for cars that check all your boxes. For instance, if you need seating for six or seven people, you would look at either a mini-van or a larger SUV. You can visit a site such as Cars.com and use its vehicle comparison tool to compare different vehicle makes and models.

Step 2: Narrow down the list. Find the models with the most features that fit your needs. While you may not get everything you want, you should look for something that meets most of the requirements.

KBB review of ford focus

Step 3: Read reviews from trusted sources. There are expert and consumer reviews on the Kelley Blue Book and Edmunds websites that are very helpful. These sites give the pros and cons for each vehicle.

Step 4: Compare different models. Compare two or three models you like best to see which one has the most to offer. Some buyers focus on one aspect of a vehicle, such as the exterior color, while others make another component their top priority, such as safety features.

list of car features

Part 2 of 6: Know what you can afford

laptop with budget calculator on screen

Step 1: Know your budget. Calculate your budget to know how much you can afford in monthly payments.

This is an important step to ensure you don’t overextend yourself financially even if you qualify for higher payments.

  • Tip: You can find a variety of sites online that offer calculators to help you figure out how much your car payments will be, including trade-in value and annual interest rate. Some sites to use include AutoTrader.com, Cars.com, and CarMax.

Part 3 of 6: Find a lender and get pre-approved

After you have determined the budget for your vehicle purchase, it is time to find a lender. Getting a loan amount pre-approved lets you know how much you qualify for so that when you visit the dealership, you have an idea if you can afford a specific vehicle according to how much it costs.

Step 1: Find a lender. Compare rates and terms with several lenders and select the one that offers the best option.

  • Tip: It is also a good idea to know what your credit score is before talking to a lender. Your credit score helps to determine what kind of annual percentage rate, also known as the interest rate, that you qualify for.

A good credit rating means you can get a lower overall rate, paying less money over the duration of the loan.

You can check your credit online for free using Credit Karma.

Step 2: Apply for a loan. Apply for a loan and get a notice of approval. This lets you know what kind of price range you can look at for new vehicles.

Step 3: Know your trade-in value. Figure the value of your trade-in, if you have one. Add that amount to the loan amount you were approved for to see the maximum you can spend on a new car.

You can find out how much your car is worth on the Kelley Blue Book site.

Part 4 of 6: Find a dealer

Once you know what model you want to purchase and how much you can afford, find a dealer for the vehicle type you want to buy. You should also keep in mind the best times to buy a new car to get the best price. Most car dealers are looking to get rid of the previous year's model to make room for the next year closer to the late summer or early fall. Some other good times to buy include at the end of the month or at the end of the year if you are looking to buy cheaper vehicles.

Step 1: Compare dealers. Look up and compare dealers according to their incentives, special offers, and discounts. Select the one that has the best final pricing.

Step 2: Visit the dealership. Go in person to the dealership (or dealerships) you choose and take the car for a test drive.

While test driving the vehicle, assess whether the vehicle is comfortable to drive and a good fit for you and your family.

You should also test it in the driving conditions you expect to encounter on a typical day. For example, if you drive up and down a lot of hills, test drive it on hills to make sure it has the power and handling you need.

  • Tip: One often overlooked area is cargo space. Make sure to pop the trunk or hatch to see how much cargo space the vehicle actually has and if it will be sufficient.

Part 5 of 6: Negotiate pricing

With most new vehicles, you’ll discover room for price negotiation. Take advantage of this fact to get the best deal. You can also research the price of other, comparable vehicles in your area. You can then use that as a bargaining tool to try and get the dealer to reduce the price.

print the list

Step 1: Print the list of prices. With the fair market values you gathered from sites like Kelley Blue Book and Edmunds in mind, it is time to negotiate the price for the vehicle you are interested in. Also, take the prices you found at other area dealers with you so you can bargain with the dealer.

Step 2: Start low. Mention the lowest price to the dealership of your choice and let them know you’ll buy from them if they match the price.

If they initially refuse, tell them you have to think about it and leave. The next day, return and tell them that you do not accept their price. At this time, they may reconsider your offer.

Step 3: Know the fees. Once you get a price that you agree upon, make sure to review the fees and charges, and make sure nothing has been charged twice or listed in error.

  • Tip. Wait until the dealer has agreed to the price of the vehicle before you mention any trade-ins.

Part 6 of 6: Complete the deal

The last part of buying a new car is to sign all of the necessary paperwork. Some additional items that you need to take care of include adding the vehicle to your insurance, registering the vehicle, and paying any taxes.

Step 1: Choose your options. Decide on which options you want, such as an extended warranty or GAP insurance coverage (the difference between the value of the car and the balance still owed in financing).

Keep in mind that this adds to the overall cost of the vehicle, so work that into your initial budget.

Step 2: Sign the paperwork. Read through the bill of sale and contract one more time to make sure everything is correct. Once you are satisfied, sign the paperwork.

Step 3: Organize your insurance. Alert your insurance company to either a change in vehicle or to add it to your current policy.

You also need to purchase GAP insurance to cover you until your vehicle is covered. This is usually offered by the dealership for a small fee.

The dealership should also make you out some temporary tags to display until you can get your vehicle registered and put on a license plate.

dmv registration page

Step 4: Register your vehicle. Register the car and pay sales tax with the state Department of Motor Vehicles. The lender will hold onto the vehicle title until you have paid it off.

Buying a new car is a big decision, and making sure that you get the best price is important. Once you have purchased a new vehicle, it is important that you stick to the maintenance schedule recommended by the manufacturer. This includes having it checked and maintained regularly, either at the dealership, or by a trusted mechanic.

The statements expressed above are only for informational purposes and should be independently verified. Please see our terms of service for more details

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