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 offering interactive tools and financial calculators, publishing original and objective content. This allows you to conduct research and compare information at no cost – so that you can make sound financial decisions. Bankrate has agreements 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 come from companies that pay us. This compensation may impact how and where products appear on the site, such as, for example, the sequence in which they be displayed within the listing categories in the event that they are not permitted by law for our loan products, such as mortgages and home equity and other home lending products. But this compensation does affect the content we publish or the reviews that you see on this site. We do not include the entire universe of businesses or financial offers that may be accessible 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 specializes in assisting readers in navigating the details of taking out loans to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping their readers to take control of their finances by providing precise, well-studied information that breaks down otherwise complex topics into manageable bites. The Bankrate guarantee
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You have money questions. Bankrate can help. Our experts have helped you understand your money for more than four years. 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 strict standards standard of conduct, so you can rest assured that our content is honest and precise. Our award-winning editors, reporters and editors produce honest and reliable content to help you make the best financial decisions. Our content produced by our editorial staff is objective, factual and uninfluenced by our advertisers. We’re open about the ways we’re able to bring quality content, 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 receive compensation for the promotion of sponsored goods and, services, or when you click on specific links on our site. Therefore, this compensation may impact how, where and in what order items appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own rules for our website and whether the product is available in your region or within your own personal credit score could also affect the manner in which products appear on this site. We strive to provide the most diverse selection of products, Bankrate does not include information about each financial or credit item or service. If you’ve been spending the last several months dreaming of having a new ride in your driveway, you’re likely considering different models, comparing deals and considering what additional features you can manage to afford. The purchase of a car is an investment of a lifetime; you’ll need to think about the cost, financing options and negotiating strategies prior to going to the dealership. 7 steps to buying the perfect car. When you’re ready, follow these steps to make the most of the buying experience and leave with the car of your dreams at the cost that doesn’t be a burden on your budget. 1. Figure out the amount you can afford. You may have your heart set on a certain vehicle, but you will not be able take it home unless you . Think about the monthly payments together with other . The best general rule of thumb is to spend no more then 20 percent of your monthly household earnings on a new vehicle. This amount should comprise your monthly car loan payment as well as any other costs, including maintenance, fuel, repairs and registration fees. For the monthly installment alone recommends that you be aiming for no less than 15% of your income. Use to get an accurate estimate of how much you’ll be paying every month, and also in interest over the life that you will be paying for the loan. This is equally important as it will determine the interest rate you receive. 2. Decide if you’d like to buy or lease Do you plan to drive the vehicle as long as the wheels are on? If so, buying is the best choice as you’ll be able to sell or trade in the vehicle when you want to get a new set of wheels. If you’re looking for a new car every three years . leasing can help you get a more upscale vehicle for the money, as they typically come with lower down payment requirements and an affordable monthly installment. However, you will not be able to purchase the car for yourself and you’ll need to look for lease conditions that are specific including mileage restrictions and wear-and-tear fees, to avoid hefty penalty charges. Look at the cars that are that are on your radar, and then weigh the pros and cons of each. Bankrate’s website can help you estimate potential savings from buying or leasing so you can make an informed decision. Think about certified used
Certified pre-owned options can be the perfect way to save money on an upgrade to a brand new vehicle and a cheaper bill. You’ll have the assurance of the warranty of the manufacturer which you won’t receive from a private seller.
3. Research After you set your budget and decide on the right type of ownership for your driving style, begin investigating the vehicles that caught your eye. The first step is to visit automaker websites as well as independent auto information sites to assess the features that matter to you. Take note of the MSRPs (manufacturer’s recommended retail price) and the invoice price. Also, check your local listing of inventories to find out what’s available in your local area. Also , look into any discounts that might be available. Many automakers offer discounts to military members, students, and even members of specific credit unions. These discounts can be stackable and paired with cash-back incentives on the vehicle which must be taken after you have negotiated the price. Visit the website of the manufacturer for these incentives before heading into. 4. Calculate the real cost price of owning a car is significantly more than the initial payment. Utilize websites such as or to get a general idea of gas, insurance repairs and maintenance expenses within your local area, although these figures will be contingent on the driving habits you follow. To get even more precise, do your own calculation for fuel costs based on the number of miles you drive annually and then get a price estimate for the cars you are considering. You’ll need to inform the insurance agent the exact model of the car, trim level, engine and add-ons to get an accurate price. It is important to keep in mind that additional fees, such as taxes on sales, registration fees and documentation fees are not included on the sticker price offered by dealers. Bankrate tip
Request a full breakdown so that you know what costs to anticipate.
Bankrate tip: Consider fees, like sales tax, registration fees and document fees, that aren’t included on the price offered by dealers. Request a detailed price breakdown so that you know what costs to anticipate five. Secure your financing prior to going to the dealer Dealers don’t only want to sell you a car — they want to manage the car loan as well. Dealers usually receive an uncapped fee or commission on auto loans they facilitate, regardless of whether or not the loan is from the manufacturer or a local lender. Instead of having your dealer handle the task, you can have them look it up in banks and credit unions prior to going to the dealership. Preapproval from the credit union, bank or online lender doesn’t mean you have to sign up for the offer however it could help you determine which option for financing is the least expensive. It could also give you bargaining power if present the preapproval to your lender and they agree to beat the interest rate in exchange for your business. To obtain a preapproval form you’ll have to submit your employment, personal and income details to the lender. They can also inquire about other outstanding debt obligations that you are currently obligated to pay off. how much of an auto loan you can afford. 6. Test drive The majority of car buyers keep their new vehicles for around six years, so take your time during the test drive. Be sure you truly are in love with the car, especially if you drive a lot to work or for travel. Do not hesitate to request more time behind the wheel. Spend time in the car when it’s stopped to adjust the seats, test the controls, and decide if passengers will be comfortable, and whether your normal goods would be a good fit. 7. Negotiate When you’re ready to talk about pricing, come prepared by completing your research. See if other dealerships offer better prices on your car and ask for price matches from your salesperson. If you’re interested talk about it, do so when you’ve negotiated the purchase price of your new car. Talking about these things separately will help you get the best deal for your current car and you’ll do better if you’ve done some research on your current car’s value on the internet. Before signing the contract in its entirety, examine all the terms carefully. Examine any proposed fees and ensure that what that you had negotiated verbally is spelled out in writing. Be prepared to say no to those nice-to-have extras that you might not need or even to the whole deal in the event that it isn’t working for you and the salesperson doesn’t want to compromise. Current state of the new automobile market. Purchasing a new vehicle requires a few additional considerations. New vehicle average transaction prices (ATPs) reached record-breaking levels, above $48,000, for the fifth month in a row in August of 2022 according to . The prices you will likely encounter result from a basic issue of supply versus demand. There are fewer vehicles available at car dealerships, because of lingering supply chain problems, and drivers in need of vehicles, costs are increasing. In addition to the demand and supply, choices in the fight against inflation has made the cost of borrowing higher too. This can be seen in the amount that drivers are borrowing, an average of $40,290 in the second quarter of 2022 and $35,587 in 2021, according to . It’s a sign that you’ll need to budget some extra money for your new car. Next steps Buying a new car can be a thrilling procedure, and there’s nothing better than leaving the dealership knowing you got the best price. But before you start your search for the perfect vehicle make sure your finances are in order, and your credit score is on par. It’s equally crucial to review your spending plan to determine what car you are able to afford. Once you have ironed out all the financial details look around for the best financing deal so you can negotiate without fear. Making your way to the dealership with a plan can assist you in finding the most affordable financing option that fits your budget. Learn more
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The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ins and outs of securely borrowing money to buy cars. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to control their finances through providing precise, well-studied information that breaks down complicated subjects into bite-sized pieces.
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