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 choices by providing you with interactive financial calculators and tools as well as publishing objective and original content. This allows you to conduct research and compare information at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this website are provided by companies who pay us. This compensation can affect the way and when products are featured on this site, including for instance, the order in which they may be listed within the categories of listing and other categories, unless prohibited by law. Our loan products, such as mortgages and home equity, and other products for home loans. This compensation, however, does affect the content we publish or the reviews you see on this site. We do not contain the entire universe of businesses or financial offers that may be open to you. Caiaimage/Martin Barraud/Getty Images
5 min read Published 21st October 2022
Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is an expert in navigating the ways and pitfalls of borrowing money to buy an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping their readers gain the confidence to control their finances with concise, well-researched and researched information that breaks down complex topics into manageable bites. The Bankrate promise
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If you have questions about money. Bankrate has answers. Our experts have been helping you manage your money for more than four decades. We continually strive to provide consumers with the expert advice and tools needed to make it through life's financial journey. Bankrate follows a strict , so you can trust that our information is trustworthy and precise. Our award-winning editors and journalists create honest and accurate information to assist you in making the right financial choices. The content we create by our editorial staff is factual, objective and uninfluenced by our advertisers. We're transparent about how we are able to bring quality information, competitive rates and helpful tools to you , by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for the placement of sponsored products or services, or through you clicking specific links on our website. Therefore, this compensation may impact how, where and in what order products appear within listing categories and categories, unless it is prohibited by law for our mortgage home equity, mortgage and other home loan products. Other factors, like our own proprietary website rules and whether or not a product is available in your area or at your personal credit score could also affect the way and place products are listed on this site. Although we try to offer an array of offers, Bankrate does not include details about every credit or financial product or service. If you've been spending the last few months dreaming of a new ride in your driveway, you're likely considering different models, comparing deals and looking at what accessories you are able to afford. 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 dealership. 7 steps to buying a new car When you're ready to buy, follow these steps to maximize your car buying experience. You'll walk away with the car of your dreams at a price that won't be a burden on your budget. 1. Determine your budget might have your eye on a particular car, but you won't be able take it home until you . Think about the monthly payments together with other . One good general rule of thumb is to spend no more then 20 percent of your household's monthly earnings on a new vehicle. This amount should comprise the monthly car loan payments as well as all other expenses, like maintenance, fuel repair, registration and maintenance fees. For the monthly payment alone it is recommended to aim for no greater than 15 per cent of the income. You can use this to determine an accurate estimate of what you will be expected to pay each month and the interest over the duration that you will be paying for the loan. It's equally important since it determines the rate of interest you pay. 2. Choose whether to lease or purchase the vehicle Do you want to drive your car for as long as the wheels remain on? If so, buying is the best option and you'll be able to trade or sell the vehicle whenever you'd like new wheels. But, if you're looking to get a new car every three years . Leases can let you obtain a higher-end car for your money as they usually offer lower down payment requirements and a more affordable monthly payment. However, you will not have the vehicle for a long time and you'll have to search out for lease terms that are specific to your needs like mileage limitations and wear-and-tear fees, to avoid expensive fines. Consider the vehicles on your radar and weigh the ones you like. Bankrate's website can help you estimate potential savings from buying or leasing so you can make an informed decision. Think about certified used
Pre-owned certified options are the perfect way to save money on an upgrade to a brand new vehicle and lower costs. You'll be able to rely on the warranty of the manufacturer which you won't receive from a private dealer.
3. Research After you set your budget and determine the appropriate kind of ownership to suit your driving style, begin investigating the vehicles that been awe-inspiring to you. The first step is to visit automaker websites as well as independent auto information websites to evaluate the features that matter to you. Note MSRPs (manufacturer's proposed retail price) and invoice prices. Check local inventory listings to see what's available in your local area. Also research any possible discounts. A lot of automakers offer discounts for students, military members and even members of certain credit unions. Discounts can be stacked together with cash-back rebates offered on the vehicle, which should be deducted after you negotiate the price. Check the automaker's website for such incentives prior to stepping to. 4. Calculate the real cost price of owning a car is far more than your initial payment. Use websites like or to get an estimation of insurance, gas repairs and maintenance expenses within your local area, however, these figures will vary based on the driving habits you follow. For greater accuracy make your own calculations for fuel based on the amount of miles you take in each year and request a quote for the cars you're thinking of buying. It is essential to provide your insurance company the exact model of the car, trim level, engine, and any add-ons in order to receive an accurate estimate. It's crucial to note that fees, like taxes on sales, registration fees and documentation fees are not included in the price that dealers advertise. Bankrate tip
Request a detailed price breakdown so you can know what charges to expect.
Bankrate tip: Think about the cost of fees like sales tax, registration fees and documentation fees not included in the price offered by dealers. Ask for a complete breakdown of the quote so that you know what charges to expect for five. Lock in your financing before going to the dealer Dealers don't only want to sell you a vehicle -they also want to coordinate the car loan as well. Dealers typically receive an uncapped fee or commission for the car loans they facilitate regardless of whether the loan is from the manufacturer or a local lender. Instead of having the dealer handle the task, you can have them look it up you can inquire at credit unions and banks prior to going to the dealership. Preapproval from an institution like a credit union, bank or online lender doesn't mean you have to accept the deal, but it can help you determine which financing option is cheapest. It may also grant you the ability to negotiate if you present the preapproval for your lender and they offer to beat out the cost to gain your business. In order to obtain a preapproval letter, you'll need to provide your employment, personal and income details with the lender. They might also ask about any other debts you're currently facing to figure out how much of an auto loan you can afford. 6. Test drive Most car shoppers keep their new vehicles for about 6 years, so make sure you take your time with the test drive. You must ensure that you love the car, especially in the event that you frequently drive to work or for travel. Don't hesitate to ask for additional time at the steering wheel. Take time when it's parked, adjusting the seats, play around with the controls, and decide if passengers would be comfortable and if your usual items would fit in the. 7. Negotiate Once it's time to meet and discuss about pricing, prepare with the information you've gathered. See if other dealerships offer better deals on your car and ask for a price match from the sales representative. If you're looking to discuss this, you should do it after you negotiate the sale cost of the new car. Separately discussing these issues can help you negotiate a better deal on your current car, and you'll fare even better if you've done research on your current car's value online. Before you sign the contract in its entirety, go over all the details carefully. Examine any proposed fees and check that everything you agreed to verbally is written down in writing. Be ready to decline the nice extras may not be necessary, or even to the whole deal in the event that it isn't working for you and the salesperson doesn't want to compromise. The current state of the car market Buying a brand new vehicle requires a few additional considerations. New vehicle average transaction prices (ATPs) reached record-breaking levels at over $48,000, for the fifth consecutive month in August of 2022, according to . The price hikes you'll likely be met with are caused by a simple issue of supply versus demand. There are fewer vehicles available in car dealerships because of lingering supply chain problems, and drivers in need of vehicles, costs are rising. In addition to the demand and supply, choices from the to quell inflation has led to the cost of borrowing higher as well. This increase is reflected clearly in the amount drivers are borrowing, an average of $40,290 for the second quarter of 2022 versus 35,587 in 2021 according to . This all means that you'll need to budget some more money on your new car. Next steps Buying a new car is an exciting process, and there is no better feeling than leaving the dealership with the knowledge that you've got the best deal. However, before you begin your look for that perfect car be sure that you have your financials in check, and your credit score is at level. It's equally crucial to review your budget and determine what car you are able to afford. Once you have ironed out all financial aspects look around for the most affordable financing to negotiate without fear. Making your way to the dealership with a plan will help you find the most affordable financing option that works for 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 is a specialist in helping readers with the ways and pitfalls of borrowing money to buy an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers feel confident to manage their finances with clear, well-researched information that break down complex topics into manageable bites.
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