How to buy a new car Part Of Buying a Car In this series Buying a Car Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by providing you with interactive tools and financial calculators that provide original and reliable content. We also allow you to conduct research and compare information at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website are provided by companies who pay us. This compensation could affect how and where products appear on the site, such as, for example, the order in which they may be listed within the categories of listing in the event that they are not permitted by law for our loan products, such as mortgages and home equity, and other products for home loans. However, this compensation will have no impact on the content we publish or the reviews you see on this site. We do not include the universe of companies or financial deals that could be available to you. Caiaimage/Martin Barraud/Getty Images
5 min read Published 21st October 2022
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in understanding the ways and pitfalls of taking out loans to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers gain the confidence to control their finances through providing clear, well-researched information that breaks down complex topics into manageable bites. The Bankrate promise
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You have money questions. Bankrate can help. Our experts have been helping you manage your finances for more than four decades. We continually strive to provide our readers with the professional guidance and tools required to make it through life's financial journey. Bankrate follows a strict standard of conduct, so you can rest assured that our information is trustworthy and accurate. Our award-winning editors and journalists provide honest and trustworthy content that will help you make the right financial decisions. Our content produced by our editorial team is objective, factual and uninfluenced through our sponsors. We're open about how we are capable of bringing high-quality content, competitive rates and helpful tools to you , by describing how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products or services, or when you click on certain links posted on our website. This compensation could influence the manner, place and when products appear within listing categories, except where prohibited by law. We also offer mortgage, home equity and other home lending products. Other factors, like our own website rules and whether or not a product is offered in the area you reside in or is within your personal credit score can also impact how and where products appear on this website. We strive to provide the most diverse selection of products, Bankrate does not include details about every financial or credit product or service. If you've spent the past couple of months dreaming about a new ride in your driveway, you're likely looking at various models, looking at deals, and evaluating what add-ons you can pay for. The purchase of a car is an expensive purchase so you'll need to think about costs of financing, the options for financing and negotiation tactics before heading to the dealer. 7 steps to buy the perfect car. When you're ready, adhere to these steps to maximize your car buying experience. You'll walk away with the car you've always wanted at the cost that won't be a burden on your budget. 1. Find out what you can afford You may have your heart set on a specific vehicle, but you will not be able to drive it home unless you . Consider the monthly payment along with other . A good guideline is to spend no more that 20 per cent of the household's monthly earnings on a new vehicle. This figure should include your monthly car loan payments and all other expenses, like maintenance, fuel, repairs and registration fees. The monthly payment, by itself, suggests that you should make sure that you are not paying less than 15% of your income. Utilize this calculator to obtain an accurate estimate of what you can expect to pay each month and the interest over the duration of your loan. It's equally important since it determines the interest rate you receive. 2. Decide if you'd like to lease or purchase the vehicle Do you plan to drive the car so long as the wheels remain on? If so, purchasing is the way to go as you'll be able to trade or sell the car when you need to get a new set of wheels. If you're looking for an upgrade each three years . leasing can help you find a better car at a lower cost, since they typically have lower down payment requirements , and a more affordable monthly payment. But you won't own the car outright and will need to check out for specific lease terms, such as mileage restrictions and wear-and-tear charges, to avoid expensive penalties. Look at the cars that are that are on your radar, and then weigh the one of them. Bankrate's website can provide you with an estimate of the potential savings from buying or leasing to help you make an informed choice. Think about certified used
Pre-owned certified options are an excellent option to get buying a new car with a cheaper bill. You'll get reassurance of the warranty of the manufacturer that you wouldn't get from a private dealer.
3. Research After you set your budget and have determined the right kind of ownership to suit your driving habits, start looking into the cars that have been awe-inspiring to you. The first step is to visit the websites of automakers and independent information websites to evaluate the features that are most important to you. Take note of the MSRPs (manufacturer's suggested retail prices) and the invoice price. Then check your local listing of inventories to find out what's available in your local area. Additionally, research discounts. Numerous automakers offer discounts to military members, students, and even members of specific credit unions. Discounts can be stacked and combined with any cash-back incentives on the vehicle that should be taken after you have negotiated the price. Check the automaker's website for such incentives prior to stepping in. 4. Calculate the real cost costs of owning a car are significantly more than the initial payment. Use websites like or to get a general estimate of the cost of fuel, insurance repairs and maintenance expenses in your area -- though these numbers will depend on the driving habits you follow. For even better accuracy you can calculate your own cost to calculate the cost of fuel based on the amount of miles you travel each year and request a quote for the cars you are considering. You'll need to inform an insurance agent the exact model, trim level, engine, and other add-ons for an accurate estimate. It's crucial to note that fees, like taxes on sales, registration fees and other documentation costs are not included in the price offered by dealers. Bankrate's tip
Request a detailed price breakdown of the quote to know the charges to expect.
Bankrate tip: Think about the cost of fees like sales tax, registration fees and other documentation fees that are not included on the price offered by dealers. Request a detailed price breakdown of the quote to know the charges to expect for 5. Lock in your financing before going to the dealer Dealers don't just want to sell you a car- they want to manage the car loan as well. Dealers typically receive a flat fee or a commission on the car loans they facilitate regardless of whether the loan is either from a manufacturer or local lender. Instead of having your dealer handle the task, you can have them look it up you can inquire at credit unions and banks and before heading to the dealership, you can check with banks and credit unions before heading to the. Being preapproved by the credit union, bank or an online lender doesn't mean you need to accept the deal however it could assist you in determining which option for financing is the least expensive. It can also potentially give you the ability to negotiate if you give the preapproval to your lender and they promise to beat out the rate to earn your business. To obtain a preapproval form you'll need to supply your employment, personal and income information to the lender. They may also inquire about any outstanding debt obligations you currently have to determine the amount the auto loan you can manage to pay for. 6. Test drive Most car owners maintain their new cars for around six years, so take your time with the test drive. Be sure you truly enjoy the car, particularly in the event that you frequently drive to work or travel. Don't be afraid to ask for an extended time behind the steering wheel. Take time when it's parked, adjusting the seats, play around with the controls and determine whether passengers will be comfortable, and whether your normal goods would be a good fit. 7. Negotiate When you're ready to sit down and talk about pricing, be prepared with the research you've done. Check out if other dealers are offering better deals on your vehicle and seek price matches from the sales representative. If you're interested , save that discussion for after you negotiate the sale price of your new car. Having those conversations separately can help you negotiate an even better price for your current vehicle and you'll do better if you've done research on the value of your current vehicle online. Before signing the contract in its entirety, examine all the terms carefully. Examine any proposed fees and check that everything you negotiated verbally is also spelled out in writing. You should also be prepared to say no to the nice extras may not be necessary, or even to the whole deal in the event that it isn't working your way and the person selling it refuses to budge. The current state of the car market . Buying a new car requires some additional considerations. New vehicle average transaction prices (ATPs) hit record highs, above $48,000, for the fifth straight month in August of 2022 according to . The price hikes you'll likely encounter are caused by a simple problem of demand versus supply. With less vehicles available on car lots, due to lingering supply chain issues, and drivers using vehicles, the prices are rising. In addition to the demand and supply, choices of reducing inflation has made the cost to borrow higher too. This increase is reflected clearly in the amount of money that people are financing, a median of $40,290 in the second quarter of 2022 versus $35,587 in 2021, according to . This means you need to be prepared to pay some more money on your new car. The next step in buying a new car can be a thrilling procedure, and there's nothing more satisfying than leaving the car dealership knowing you got the best price. But before you start your search for the perfect ride be sure that the finances of your family are on track and your credit score is at level. It's equally important to assess your budget to figure out what car you are able to afford. Once you have ironed out all financial aspects, shop around to find the most affordable financing to make a decision with confidence. Ahead of time, a dealership visit can assist you in finding the most affordable solution which fits within your budget. Find out more
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The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the details of taking out loans to purchase cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are committed to helping readers gain the confidence to control their finances through providing clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.
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