How to Buy a New Car
Buying a new car should be an exciting experience. Unfortunately, many people find buying a new car stressful because they feel like they are going to be “taken” at a dealership or by a slick salesperson. That shouldn’t be the case. Here's some helpful advice to consider when purchasing a new vehicle. Click here to see how much you can afford.
Tip #1: Try to Purchase a Vehicle Before You Need One
You really want to try to avoid having to purchase a vehicle because your current one broke down, or it is beyond fixing. When you are desperate, it usually does not fare well for you. Smart shoppers try to anticipate the need for a new car and begin looking prior to anything happening to their current vehicle.
Tip #2: Get Pre-Approved Before You Do Anything Else
One of the most important things you can do is to find out just how much you can pay for a vehicle. You can get pre-approved online, over the telephone, or at a financial institution’s branch. It is extremely important to place a budget on your purchase prior to going into a dealership or shopping online. Don’t get pushed into buying something you know you cannot afford.
You should also know your credit score prior to talking to a salesperson or broker so you will have an idea of the rate, or Annual Percentage Rate (APR), you can get. Financial service advisors at dealerships are trained to make their loans look great. Get your loan amount and APR from a trusted source prior to entering into a dealership or purchasing a car online. In fact, we would recommend shopping at several lenders for the best deal you can find. Remember, if you purchase a $25,000 car at an APR of 11% for seven years, you may be able to afford the monthly payments, but that is really not a good deal if you can actually obtain an APR of 6% on the exact same loan at a different place.
Tip #3: Be Sure to Know What You Are Buying
Vehicles come with a list of features from which to choose – some are standard and some are optional. Take your time to research what you believe is most important to you and/or your family. Make a list of everything you desire to have in the vehicle; you can call this your “wish list.” Then, overlay that list with what you can afford based on your pre-approval amount. Research your options and try to have a good, solid list of what you can and cannot afford prior to making any type of purchasing decision. You should know the options on the vehicle you desire just as well as the salesperson. That way, you will not be pushed into something you really don’t need.
Tip #4: Watch for Incentives
Many automakers provide incentives to dealerships and consumers on different types of vehicles. Some incentives can be worth thousands of dollars off the price of the vehicle; therefore, use the incentives to your advantage. If you are considering the purchase of one of two similar vehicles, incentives can really make the difference. You can also use the incentives of one automaker in your sales negotiation with another. For example, if you are interested in Vehicle A, you can go to the dealership with an incentive you can receive from a like vehicle, or Vehicle B, and ask what the dealer can do for you.
Tip #5: Be Prepared With the Value of the Vehicle You Plan to Trade-In (If Applicable)
In many instances, you will trade in your old vehicle for a new one. If that is the case, you should know exactly how much your trade-in vehicle is worth prior to going into a dealership or talking to an auto broker. You can find information about the trade-in value of your vehicle using the Kelley Blue Book or the National Automobile Dealer Association’s used car price books; both of these sources can be accessed on the Internet as well. You want to focus on the “wholesale” price if you are planning to trade in your vehicle, as this is the cost the dealership or broker will use as it reflects its profit margin.
Remember, it does you no good to get $1,500 off the price of your new vehicle if you lose that same amount on your trade-in vehicle. Furthermore, if the dealer or broker is not willing to take your trade-in at the value you know it is worth, you may want to stop that particular deal, or you may want to consider selling your vehicle instead of trading it in.
Tip #6: Don't Be Too Anxious
Many times buying a vehicle is an emotional purchase. You see a car you like and you just “have to have it.” Getting excited about your new purchase is fine…when you are home. You need to be as calm and cool as you can be while you are in the middle of negotiating the price for your vehicle. You have to be willing to walk out the door if you feel the price is not right, or if the value of your trade-in just isn’t what you want it to be. If you do not feel you can do this, bring someone with you who can.
Tip #7: Be Smart When it Comes to the Extended Warranty
Don’t just take the extended warranty at the dealership because the finance person says it is something you need. Take the time to compare extended warranty products prior to talking with a salesperson or broker. For example, some financial institutions offer Mechanical Breakdown Insurance, which is usually less expensive than the dealer’s extended warranty, with the same type of coverage. Make sure you know what the warranty will cover; read through everything you can. Also, you may want to steer clear of specialty extras, such as rust-proofing and road safety kits.
Tip #8: Shop at the Right Time of the Year (If You Can)
A great time to purchase a vehicle is at the end of December because all of the previous year vehicles are still on the lot and dealerships are just not that busy. Additionally, there are usually annual clearance sales in late summer or early fall, when the older models are sold off.
Are you ready?
Buying a car should be an exciting experience, not a stressful one. You are now armed with the tools you need to make a smart and profitable purchase. The more prepared you are, the better deal you will get.