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How to Buy a Car: 5 Essential Steps

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shopping for red car at dealership

When do you know it’s time for a new set of wheels? Maybe you’ve just passed your driver’s test and you’re ready to start your car buying journey. Or, maybe you’ve had one too many trips to the mechanic, and it’s time to start looking for something new.

If you’re thinking about buying a car, it’s worth knowing that the process has changed in the past 10 years. With sites like CarMax and Vroom, you can find the right car, filter by features, and sort by price range without even leaving the comfort of your sofa.

We love our cars. They help us get from point A to point B. They help us show our personality. They even help us keep our families safe. But every once in a while, you need to upgrade your car to fit your lifestyle. So, where do you start?

1. Determining your car loan down payment

While it is possible to buy a car with no money down…you’ll end up paying a lot more over the lifespan of the loan if you do. The more you borrow, the more the car will ultimately cost.

To avoid paying more over time, it’s a good idea to make a significant down payment at the start. “Significant” means something different to everyone. Whenever you’re making a purchase, you never want to be upside down after the transaction, meaning, you don’t want to owe more than the car is worth. Decide a comfortable amount you’re willing to spend and make sure you still have savings left afterward.

Effective saving begins with first determining how much you want to save, then setting a reasonable date to achieve your goal.

Maybe you’ve been saving for this for a while (hello, summer job savers?). You may even have enough to purchase a vehicle outright, especially if you’re okay with buying a used car. Congrats! Way to be smart with your money.

  Tip: When you see an advertised low monthly payment, be sure to check the term—how many months will you be paying?

2. Understanding your auto financing

The total amount you pay for a car depends on the price, the annual percentage rate (APR), and the length of the loan. You can use an auto loan calculator to determine your budget and the terms that would work best for you. When financing, make sure you understand the ins and outs of a loan before finalized. There are various financing options available to you when you purchase a vehicle. Weigh your options, and choose the one that best fits your needs.

  Tip: Be wary of extremely low promotional APRs. Though you may qualify for low rates by making a large down payment, it may be more affordable to pay higher financing charges on a car that is lower in price or to buy a car that requires a smaller down payment.

3. Getting the best deal

When looking for your new car, do your homework! Use online price comparison tools to find the best deal and consider potential sales that might be happening over holidays or weekends.

If you’re shopping in person at a dealership, you might have the opportunity to negotiate your car’s price. Some of us are natural born negotiators. From farmers market stands to used car salesmen, having a conversation about price is no problem. But, for some of us, the idea of counteroffering and pushing back makes our palms start to sweat. Go into the dealership prepared! Developing your bargaining skills will be worth it to you in the end.

Something to remember: a deal isn’t a deal if you end up with a car you don’t really want.

  Tip: Look for manufacturer’s incentives. Dealers may offer cash back on specific models.

4. Selling or Trading in your Old Car.

close up of silver car headlightIf you’re looking to buy a new car, you might be looking to trade-in your old one. As sad as it is to say goodbye, through flat tires and smoking engines, and trips you’ll remember for the rest of your life…all good things must come to an end.

You’ll likely be selling your old car and using the profit to pay for part of your new car. If you want the best price…you need to know your car’s worth. Reference sites like Kelley Blue Book and NADA to find out.

 Tip: Trading into the dealer is often the easiest option. To ensure you get the most from a trade-in, do so only after you’ve negotiated the best price possible for your new car.

You could also consider selling your car yourself. You’ll usually get the best price this way, but you’ll have to allow for the time it takes to sell, the effort of placing the ad, and the process of negotiating and meeting with potential buyers.

And, if your vehicle is not worth trading in, or if you’re fortunate enough to consider donating it, there are many nonprofit organizations that will put your car donation to good use. Be sure to get a receipt for your taxes!

5. What kind of car do you want?

woman leaning on car steering wheelYou know how much you want to spend, you’ve practiced negotiating, and you’ve said your goodbyes to your ol’ reliable car. Now’s the fun part, deciding the type of car you want. Here are some things to consider:

Your Needs: Think about your transportation requirements. Does your new car need room for an extra car seat? Maybe you need a sporty car to fit into small city parking spots? Or maybe you’re ready for a truck to handle all your home improvement projects? Since your car is likely going to last you 5, 10, 15 years, be sure to consider your potential future needs as well.

Your Wants: It’s a new car…have some fun with it! Consider what make, color, upgrades, and styles you want in your new set of wheels. Do I want a new, used, or leased vehicle?

Your Monthly Budget: It’s easy to get carried away at the dealership, especially when the newest, shiniest models are the first thing you see when you walk in. But, you don’t want to end up with a car that’s out of your price range and a monthly payment beyond your capacity. Your budget, not a salesperson’s opinion, should dictate your decision. We can help you make a budget here.

The decision to buy a car can be intimidating, but with the right tools and resources it doesn’t have to be. Remember to not sign up for more than you can afford, understand your financing, do your research, and to find a car that fits your lifestyle. Keep this article handy and soon enough you’ll be sitting pretty in a new (or used) set of wheels.

Our affordable car loans offer you the same low rate, whether your car is new or used.