Purchasing a new car is an exciting experience, and very rewarding when you get the car you want at a price you can handle. When something doesn’t go just right, though, it can be a real pain. It’s easy to get caught up in the new car excitement and sign up for something that you’ll regret years down the line. With some careful planning, however, you can start down the road to happy car ownership.
Preselect Your Car
Going to a dealership without a solid idea of what you want to buy is a good way to end up with a car that’s either more expensive or less useful than you need. You really can’t even make a smart decision on a dealership to visit without having an idea of what you’re looking for. Consider your needs carefully. That 8-cylinder sports car may really rev your personal engine, but it’s not going to get your family of five anywhere comfortably. Would you be comfortable moving things regularly in a two door? Can you afford to drive a lot of miles in a full sized pickup? Make sure the car you choose fits your needs today and going forward.
Once you have an idea of which cars you’re interested in buying, look up the dealer’s invoice prices and company incentives for those cars. The sticker price on cars at the dealership is not a firm price. You can often get the car at invoice price if you are armed with this knowledge. You can find new car quotes from several dealers at once online. This will help you in negotiations.
Work The Numbers
Now that you have a total price in mind that you feel you can pay, it’s time to plan out the finances of the purchase. If you plan to finance the car, you’ll probably need a down payment. Ideally, you should put down 20% or more on the car. This will pay for your first year’s depreciation and prevent you from being “upside-down” on the car, or owing more than the car is worth.
If you plan to trade a vehicle in as a down payment, make sure to look up its value before taking it in. You’ll be looking for the wholesale value, not the resale value. When you are buying a new car, make sure you get fair value on your trade-in.
If you can, arrange financing from a bank or credit union before going to the dealership. This will give you the best chance at the best deal. If the dealer knows you can finance elsewhere, they may be able to offer you a better deal.
If you have enough cash, you also have the option of paying for the car in full up front. This will save you thousands of dollars in interest. The exact amount depends on your interest rate and the length of the loan you would have taken otherwise. With no loan, you’ll never have to worry about being upside-down.
At The Dealership
Once you arrive at the dealership, make it clear what you’re looking for. Don’t waste time looking at vehicles you aren’t going to buy. Stick to the plan. Don’t get distracted by any extra features unless you know you can afford them.
When you sit down for negotiations, let the salesperson know of any details you have, from pre-approved financing to dealer’s invoice price. Make sure all information is disclosed during the negotiation process. Dealers will often try to build deals based around monthly payments. Make sure that whatever deal you agree to is one you can live with. Don’t get pressured into taking a longer loan term or higher interest rate than you have to. New car loans usually come in 48, 60, or 72 month terms. Shorter terms are most likely to have the best interest rates. Make sure you choose the terms that work best for you.
Select a car, prepare your finances, and stick to the plan. If you follow these directions, in that order, you’ll be riding off with a car you like at a price you can afford. The extra investment of time may take some of the spontaneity out of the buy, but for most people, it’s a fair trade-off for something you’ll be paying for for 4-6 years and, with any luck, driving even longer.