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 smarter financial decisions by providing you with 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 to help you make informed 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 Earn money The products that appear on this site are from companies who pay us. This compensation may impact how and when products are featured on this website, for example such things as the order in which they may appear within the listing categories and other categories, unless prohibited by law. This applies to our mortgage, home equity, and other home loan products. This compensation, however, does have no impact on the information we publish, or the reviews you see on this site. We do not include the universe of companies or financial offers that may be open to you. Caiaimage/Martin Barraud/Getty Images
5 min 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 with the ins and outs of securely taking out loans to purchase cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers feel confident to control their finances with precise, well-studied facts that break down complicated topics into bite-sized pieces. The Bankrate promises
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You have money questions. Bankrate has the answers. Our experts have been helping you manage your finances for more than four decades. We continually strive to give our customers the right guidance and tools required to succeed throughout life’s financial journey. Bankrate adheres to a strict code of conduct , so you can trust that our content is honest and reliable. Our award-winning editors and journalists produce honest and reliable information to assist you in making the right financial decisions. The content created by our editorial staff is factual, objective and uninfluenced through our sponsors. We’re transparent regarding how we’re in a position to provide quality content, competitive rates and helpful tools to you by explaining how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods andservices or through you clicking certain hyperlinks on our website. Therefore, this compensation may impact how, where and when products appear in listing categories and categories, unless it is prohibited by law. We also offer mortgage home equity, mortgage and other home lending products. Other factors, such as our own website rules and whether a product is available within your area or at your self-selected credit score range may also influence the manner in which products appear on this site. While we strive to provide an array of offers, Bankrate does not include details about each financial or credit item or service. If you’ve spent the past few months dreaming of a new ride in your driveway, you’re probably looking at models, comparing deals and evaluating what add-ons you can afford. The purchase of a car is a big investment so you’ll need to think about the cost of financing, the options for financing and negotiation tactics before heading to the dealership. 7 steps to purchasing a new car When you’re ready, adhere to these seven steps to make the most of the buying experience and leave with the vehicle of your dreams at a price that won’t be a burden on your budget. 1. Find out the amount you can afford. You may be tempted to set your sights on a specific car, but you won’t be able to drive it home unless you . Consider the monthly payment together with other . A good rule of thumb is to spend no more than 20 percent of your monthly household income on a brand new car. This should include your monthly car loan payments as well as all other costs, including maintenance, fuel, repairs and registration fees. For the monthly payment alone, suggests that you should aim for no less than 15% of your annual income. Utilize this calculator to obtain an accurate estimate of what you will be expected to pay each month and in interest over the course that you will be paying for the loan. It’s equally important since it will determine the interest rate you will receive. 2. Decide if you’d like to lease or buy the car Do you intend to drive the car as long as the wheels remain on? If yes, then buying is the best option as you’ll have the ability to trade or sell the vehicle whenever you’d like to get a new set of wheels. If you’re looking for to buy a new car every three years . Leases can let you find a better car at a lower cost, since they typically have lower down payment requirements and an affordable monthly installment. But you’ll not have the vehicle for a long time and you’ll have to search out for specific lease terms, such as mileage restrictions and wear-and-tear fees, to avoid expensive fines. Take a look at the cars you’re considering and consider the ones you like. Bankrate’s can assist you in estimating the savings on the cost of purchasing or leasing so you can make an informed decision. Take into consideration certified pre-owned
Certified pre-owned vehicles can be an excellent option to get an upgrade to a brand new vehicle and lower cost. You’ll be able to rely on the warranty of the manufacturer that you wouldn’t get from a private dealer.
3. Research After you set your budget and have determined the appropriate type of ownership for your driving style, begin looking into the cars that have been awe-inspiring to you. The first step is to visit the websites of automakers and independent information sites to assess the features that are important to you. Keep track of MSRPs (manufacturer’s suggested retail prices) and invoice prices. Then check the local listings of inventory to see what is available in your region. Also research any possible discounts. Numerous automakers offer discounts to military members, students, as well as members of certain credit unions. These discounts can be stacked together with cash-back incentives on the vehicle, which should be deducted after you negotiate the price. Visit the website of the manufacturer for these incentives before heading to. 4. Find out the actual cost costs of owning a car are significantly more than the initial payment. Utilize websites such as or to get a general estimate of the cost of fuel, insurance and repair and maintenance costs in your area — although these figures will be contingent on the driving habits you follow. To get even more precise, do your own calculation for fuel based on the amount of miles you take in each year and request a quote for the vehicles you’re considering. You’ll need to give the insurance agent the exact model, trim level, engine, and other add-ons for an accurate price. It is important to keep in mind that additional fees, such as sales tax, registration fees and documentation fees are not included on the sticker price offered by dealers. Bankrate tip
Request a detailed price breakdown to know the fees to expect
Bankrate tip: Consider charges, such as sales tax, registration fees and document fees, that aren’t included on the sticker price that dealers advertise. Ask for a complete breakdown so that you know what charges to expect for 5. Make sure you lock in your financing prior to visiting the dealership Dealers don’t want to just sell you a vehicle -they also want to facilitate the car loan as well. Dealers typically receive an uncapped fee or commission for the auto loans they facilitate no matter if the loan originates directly from the maker or from an local lender. Instead of having the dealer do the work, you can inquire at credit unions and banks prior to going to the dealership, you can check with banks and credit unions before heading to the. Preapproval from an institution like a credit union, bank or an online lender doesn’t mean you have to take that deal, but it can help you determine which option for financing is the least expensive. It can also potentially give you negotiating power if you provide the preapproval letter for the lender and they agree to beat out the rate to earn your business. In order to obtain a preapproval letter, you’ll need to provide your employment, personal and income information to the lender. They may also inquire about any other debts that you are currently obligated to pay off. how much the auto loan you can afford. 6. Test drive Most car owners maintain their new cars for about six years, so make sure you take your time with the test drive. Be sure you truly are in love with the car, especially when you use it for work or travel. Don’t hesitate to ask for additional time at the wheel. Spend time in the car while it’s parked to adjust the seats, experiment with the controls, and decide if the passengers are comfortable and if your regular items would fit in the. 7. Negotiate When you’re ready to talk about pricing, prepare with the research you’ve done. Check out if other dealers are offering better deals on your car and ask for price matches with your salesperson. If you’re looking to talk about it, do so when you’ve negotiated the purchase cost of the new car. Separately discussing these issues will allow you to negotiate the best deal for your current vehicle, and you’ll fare even better if you’ve done research about the value of your car on the internet. Before signing the contract, you should go over all the details carefully. Check any fees that are proposed and make sure that anything that you had negotiated verbally is documented in writing. You should also be prepared to say no to the nice extras may not be necessary, or even to the whole deal if it doesn’t work your way and the person selling it refuses to budge. Current state of the new car market Buying a brand new car is not without some aspects to be considered. New vehicle average transaction prices (ATPs) have surpassed record levels at over $48,000, for the fifth straight month in August of 2022, according to . The high prices you will likely encounter are caused by a simple issue of supply versus demand. There are fewer vehicles available at car dealerships, due to lingering supply chain problems, and drivers needing vehicles, prices are increasing. On top of demand and supply, choices of reducing inflation has made the cost of borrowing more expensive as well. This can be seen in the amount that drivers are financing, an average of $40,290 in the second quarter of 2022 versus 35,587 in 2021 according to . It’s a sign that you’ll need to budget some more money on the new car you purchase. Next steps Buying a new car can be a thrilling process, and there is nothing better than leaving the dealership confident that you have gotten the best deal. However, before you begin your search for the perfect vehicle be sure that your finances are in order and that your credit score is at level. It’s also important to evaluate your budget to figure out the amount of car you can afford. After you’ve figured out the financial details look around for the best financing deal to allow you to make a decision without fear. Going to the dealership prepared can assist you in finding the most affordable financing option that works for your budget. Learn more
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the details 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 the end of 2021. They are passionate about helping readers feel confident to manage their finances with clear, well-researched information that breaks down otherwise complex subjects into bite-sized pieces.
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