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 aim is to assist you make smarter financial decisions by offering interactive tools and financial calculators as well as publishing objective and original content. This allows you to conduct research and compare information at no cost and help you make financial decisions with confidence. 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 come from companies that compensate us. This compensation could affect how and where products appear on this site, including for instance, the sequence in which they be listed within the categories of listing and other categories, unless prohibited by law for our loan products, such as mortgages and home equity and other products for home loans. This compensation, however, does have no impact on the information we provide, or the reviews that appear on this website. We do not include the vast array of companies or financial offerings that might be available to you. Caiaimage/Martin Barraud/Getty Images
5 minutes read. Published October 21, 2022
Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in understanding the details of borrowing money to purchase a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are committed to helping readers gain the confidence to manage their finances through providing clear, well-researched information that breaks down otherwise complex subjects into digestible pieces. The Bankrate promises
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If you have questions about money. Bankrate can help. Our experts have helped you understand your finances for more than four decades. We are constantly striving to give our customers the right advice and tools needed to make it through life’s financial journey. Bankrate adheres to a strict code of conduct , so you can trust that our content is honest and accurate. Our award-winning editors and reporters produce honest and reliable information to assist you in making the right financial choices. The content we create by our editorial team is factual, objective, and not influenced from our advertising. We’re transparent about the ways we’re capable of bringing high-quality information, competitive rates and helpful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for the placement of sponsored products and, services, or when you click on certain links posted on our website. This compensation could affect the way, location and in what order products appear within listing categories, except where prohibited by law. This is the case for our mortgage, home equity and other products for home loans. Other elements, like our own proprietary website rules and whether the product is offered in your area or at your own personal credit score can also impact how and where products appear on this website. Although we try to offer an array of offers, Bankrate does not include information about each financial or credit item or service. If you’ve spent the past couple of months dreaming about a new ride in your driveway, you’re likely checking out the models, comparing prices and considering what additional features you are able to afford. Buying a car is a big investment; you’ll need to consider the price, financing options and negotiating tactics before heading to the dealer. 7 steps to purchasing the perfect car. When you’re ready to buy, follow these seven to maximize your car buying experience. You’ll walk away with the car you’ve always wanted at the cost that doesn’t be a burden on your budget. 1. Figure out what you can afford You may be tempted to set your sights on a specific vehicle, but you will not be able take it home until you . Take into consideration the monthly installment in addition to other . A good rule of thumb is to not spend more that 20 per cent of the monthly household income on a brand new car. This figure should include your monthly car loan payments and all other expenses, like fuel, , maintenance, repairs and registration fees. The monthly payment, by itself it is recommended to be aiming for no more than 15 percent of your earnings. You can use this to determine an accurate estimation of the amount you’ll be paying every month, and also in interest over the course of your loan. This is equally important as it will determine the interest rate you will receive. 2. Decide if you’d like to lease or purchase the vehicle Do you intend to drive the vehicle until the wheels remain on? If so, buying is the best choice and you’ll have the ability to sell or trade in the vehicle when you want to get a new set of wheels. If you’re looking for to buy a new car each three years . leasing can help you get a more upscale car for your money as they often come with less down payment requirements and an affordable monthly installment. But you’ll not be able to purchase the car for yourself and will need to check out for specific lease terms, such as mileage restrictions and wear-and-tear charges, to avoid hefty fines. Consider the vehicles that are on your radar, and then weigh the ones you like. Bankrate’s website can provide you with an estimate of the potential cost savings of buying or leasing, so you can make an informed decision. Take into consideration certified pre-owned
Certified pre-owned vehicles can be the perfect way to save money on an upgrade to a brand new vehicle and lower cost. You’ll be able to rely on a manufacturer’s guarantee which you won’t receive from a private vendor.
3. Research After you set your budget and have determined the best type of ownership for your driving habits, you can begin looking into the cars that have attracted your attention. The first step is to visit automaker websites as well as independent auto information sites to determine the features that matter to you. Note MSRPs (manufacturer’s suggested retail prices) and the invoice price. Then check local inventory listings to find out what is available in your local area. Also research any possible discounts. A lot of automakers offer discounts for military members, students, and even members of specific credit unions. Discounts can be stacked and paired with cash-back rebates on the model which must be taken after you negotiate the price. Visit the website of the manufacturer for such incentives prior to stepping in. 4. Calculate the real cost cost of car ownership is significantly more than the initial payment. Check out websites like to get an estimation of insurance, gas repairs and maintenance expenses in your region — however, these figures will vary based on the driving habits you follow. To get even more precise you can calculate your own cost for fuel based on the amount of miles you travel each year and then get a price estimate for the cars you’re thinking of buying. You’ll need to inform the insurance agent the exact model, trim level, engine, and any add-ons in order to receive an accurate estimate. It’s crucial to note that the cost of fees such as sales tax, registration fees and documentation fees are not included in the price offered by dealers. Bankrate’s tip
Request a detailed price breakdown of the quote so that you know what costs to anticipate.
Bankrate tip: Take into consideration charges, such as registration, tax, and other documentation fees that are not included in the price offered by dealers. Ask for a complete breakdown so you can know what fees to expect five. Lock in your financing before going to the dealer Dealers don’t only want to sell you a car -they also want to facilitate the car loan too. Dealers typically receive a flat fee or a commission for the car loans they facilitate, no matter if the loan is from the manufacturer or a local lender. Instead of having your dealer take care of the job, check in banks and credit unions and prior to going to the dealership. Getting preapproved by a bank, credit union or an online lender does not mean that you are required to accept the deal, but it can help you determine which option for financing is the least expensive. It may also grant you bargaining power if give the preapproval for the lender and they offer to beat out the cost to gain your business. To secure a preapproval letter you’ll have to submit your employment, personal and income information with the lender. They may also inquire about other outstanding debt obligations you’re currently facing to figure out how much the auto loan you are able to afford. 6. Test drive Most car shoppers maintain their new cars for about 6 years, so take your time with the test drive. You must ensure that you enjoy the car, particularly in the event that you frequently drive for work or travel. Do not hesitate to request additional time at the steering wheel. Spend time in the car while it’s parked to adjust the seats, play around with the controls, and decide if passengers would be comfortable and if your usual cargo would fit well. 7. Negotiate When it’s time to talk about pricing, prepare by completing your research. Check out if other dealers are offering better deals on your vehicle and seek price matches from your salesperson. If you’re looking to discuss this, you should do it after you negotiate the sale cost of the new car. Talking about these things separately will help you get the best deal for your current car, and you’ll fare even better if you’ve done some research on your current car’s value online. Before you sign the final contract, go over all the details carefully. Check any fees that are proposed and check that everything you negotiated verbally is also documented in writing. Also, be ready to decline the nice extras you might not need or to the entire deal when it’s not working for you and the salesperson isn’t willing to budge. The present state of the car market . Buying a new vehicle requires a few additional considerations. New vehicle average transaction prices (ATPs) have surpassed record levels at over $48,000, for the fifth month in a row in August of 2022, according to . The high prices you will likely encounter result from a basic issue of demand and supply. With fewer vehicles at car dealerships, due to lingering supply chain issues, and drivers in need of vehicles, costs are rising. Along with the increase in supply and demand, choices from the to quell inflation have made the cost of borrowing higher as well. This can be seen in the amount drivers are financing, a median of $40,290 in the second quarter of 2022 and $35,587 in 2021, according to . This all means that you need to be prepared to pay some more money on your new vehicle. Next steps Buying a new car can be a thrilling procedure, and there’s nothing better than driving off the lot confident that you have gotten the most affordable price. Before you begin your search for the perfect vehicle make sure your finances are in order and that your credit score is up to the mark. It’s equally crucial to review your spending plan to determine the amount of car you can afford. After you’ve figured out the financial details you can shop around to find the best deal on financing so you can negotiate without fear. Ahead of time, a dealership visit can help you choose the most affordable solution that fits your budget. Learn more
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the ins and outs of securely taking out loans to purchase a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers feel confident to take control of their finances through providing clear, well-researched information that breaks down complicated topics into manageable bites.
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