A new car is a major purchase that will affect your daily life—and your finances—for years to come. If this is your first car shopping experience, you may be especially worried that you’ll be taken for a ride. Thankfully, with the help of this step-by-step guide on how to buy a new car, you’ll soon be able to walk into any showroom with some research and some smart financial tricks up your sleeve.

Step 1: Assess your budget

The first step before any major purchase is to see how it will fit into your budget. Take a detailed look at your income and expenses to determine what kind of monthly payment you can comfortably afford while leaving room for savings and emergency expenditures. A worksheet can help with this process by providing a complete overview of all the expenses you are likely to encounter.

Step 2: Research vehicles and features that fit your needs 

You may already have an idea of what your basic vehicle requirements are. For example, four-wheel drive for snowy weather, lots of storage space for your outdoor gear, great gas mileage for your long commute, or room for a car seat or two. Once you narrow down those must-haves and come up with some models that meet your needs, take a look at things like reliability, safety ratings, and optional features. 

Another important decision to make is whether you want a new vehicle or a used one. There are positive and negative factors to consider for both new and used vehicles. For example, new cars will depreciate quickly but usually, come with excellent warranties to eliminate maintenance costs. Used cars may require some repairs, but will hold their value. Weigh the pros and cons to find the best option to suit your preferences.

Step 3: Secure preapproval for an auto loan

Don’t wait until you’re at the dealership to work on financing! Being pre-approved for an auto loan before you start shopping has many benefits. You’ll find out how much you can afford ahead of time and you can shop around for the best interest rate and loan terms. Additionally, you wield more power during the purchasing process when you secure pre-approval. The dealership will need to work to fit YOUR terms rather than the other way around.

Getting the right loan with a low APR and affordable monthly payment can help you avoid refinancing pains later. Avoid being stuck with unfavorable loan conditions by having all the loan details ahead of your purchase date.

Step 4: Start shopping

Most dealerships are pretty good about updating their inventory online, so much of the shopping process can be done online. You can search for any specific models you’re interested in, or browse through a dealership’s website to see if it’s worth a trip to the lot. When you spot a vehicle that you’re interested in, take it for a long test drive to ensure it meets your needs as far as passengers, storage, gas mileage, and capabilities. 

As you narrow in on a few options, consider the total cost of the car—not just the sticker price. Insurance, fees, fuel requirements, and maintenance costs are a few expenses you’ll encounter that aren’t included in a vehicle’s purchase price.

Step 5: Get a killer deal

There are a few tried-and-true strategies to buy a car with confidence.  First, negotiate around the price of the vehicle, not the payment amount. Negotiating around the payment amount gives the finance department the opportunity to make some slick moves in their favor. For example, the dealership can increase the purchase price of the vehicle but extend the repayment period so that your payment goes down, but you end up paying the dealership MORE. 

Secondly, say NO to dealer add-ons like window tints and interior protectants. These things can be taken care of outside the dealership at a lower cost.

Lastly, double-check all numbers with utmost scrutiny and assess warranty options carefully. If you have a question about a fee or loan term, ask. If numbers don’t appear to add up correctly, get clarification. 

Step 6: Take delivery

Before assuming ownership, check the vehicle inside and out to ensure everything is clean and damage-free. The car should be shiny and the gas tank should be full! Have the salesperson assist you with any challenges, such as how to employ any special driving features, or enabling bluetooth connectivity. 

Sounds like a lot of work? It is! Knowing how to buy a new car will pay off in the end when you leave the dealership with the perfect vehicle to suit your needs AND your budget. Sit back and enjoy the ride!

References: 

• Phillip Reed and Lacie Glover (July 2018). Why — and How — to Get Preapproved for a Car Loan. 
• Sierra Black (November 2009). Are Extended Warranties Ever A Good Deal? 
• Phillip Reed (October 2018). What Car Payment Can You Afford? How to Budget for Your Ride.