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 choices by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling users to conduct research and compare information at no cost to help you make informed financial decisions. Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website come from companies who pay us. This compensation can affect the way and when products are featured on this site, including such things as the order in which they appear within the listing categories in the event that they are not permitted by law. Our mortgage, home equity, and other products for home loans. However, this compensation will affect the content we publish or the reviews that appear on this website. We do not cover the universe of companies or financial offerings that might be open to you. Caiaimage/Martin Barraud/Getty Images
5 min read Published 21st October 2022
Authored by Rebecca Betterton 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 writing and editing for Bankrate from late 2021. They are dedicated to helping their readers feel confident to manage their finances with concise, well-researched and researched information that breaks down complex topics into manageable bites. The Bankrate guarantee
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If you have questions about money. Bankrate has answers. Our experts have been helping you master your money for more than four years. We strive to continuously provide our readers with the professional guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate adheres to strict standards standard of conduct, so you can rest assured that our content is honest and accurate. Our award-winning editors, reporters and editors provide honest and trustworthy content to help you make the best financial decisions. Our content produced by our editorial staff is objective, factual, and not influenced through our sponsors. We’re transparent regarding how we’re able to bring quality content, competitive rates and useful tools to our customers by revealing 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 or services, or through you clicking certain hyperlinks on our website. So, this compensation can impact how, where and in what order items are listed, except where prohibited by law. We also offer mortgage home equity, mortgage and other home loan products. Other factors, such as our own website rules and whether a product is offered in the area you reside in or is within your own personal credit score could also affect the way and place products are listed on this website. We strive to provide an array of offers, Bankrate does not include the details of every financial or credit product or service. If you’ve been spending the last couple of months dreaming about getting a brand new car in your driveway, you’re probably checking out models, comparing deals and considering what additional features you can pay for. Buying a car is an investment of a lifetime so you’ll need to think about costs of financing, the options for financing and negotiation tactics before heading to the dealership. 7 steps to purchasing the perfect car. When you’re ready, adhere to these seven steps to get the most out of your car-buying experience and walk away with the car you’ve always wanted at an affordable price that won’t be a burden on your budget. 1. Determine your budget may have your heart set on a specific vehicle, but you will not be able to drive it home unless you . Think about the monthly payments in addition to other . One good general rule of thumb is to not spend more that 20 per cent of the monthly household income on a new car. This should include your monthly car loan payment as well as any other costs, including fuel, , maintenance and repairs, as well as registration fees. For the monthly installment alone it is recommended to be aiming for no more than 15 percent of your income. You can use this to determine an accurate estimate of what you can expect to pay each month and the interest over the duration of your loan. It’s equally important since it will determine the rate of interest you pay. 2. Decide whether you want to lease or buy the car Do you intend to drive the car until the wheels are on? If so, buying is the best option as you’ll have the ability to sell or trade in the vehicle whenever you’d like new wheels. If you’re looking for an upgrade at least every 3 years . Leasing means that you might find a better car at a lower cost, since they often come with lower down payment requirements and an affordable monthly installment. However, you will not own the car outright and you’ll have to search for lease conditions that are specific like mileage limitations and wear-and-tear charges, to avoid expensive penalties. Take a look at the cars that are on your radar, and then weigh the one of them. Bankrate’s will assist you in estimating the savings on the cost of purchasing or leasing so you can make an informed choice. Consider certified pre-owned
Certified pre-owned vehicles can be the perfect way to save money on a new car and a cheaper bill. You’ll be able to rely on the warranty of the manufacturer that you wouldn’t get from a private vendor.
3. Research: Once you’ve set your budget and decide on 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 the websites of automakers and independent information websites to evaluate the features that matter to you. Keep track of MSRPs (manufacturer’s proposed retail price) and invoice prices. Then check the local listings of inventory to see what’s available in your area. Additionally, research discounts. Many automakers offer discounts to military members, students, and even members of specific credit unions. These discounts can be stacked together with cash-back rebates offered on the vehicle, which should be deducted after you have negotiated the price. Go to the site of the automaker for such incentives prior to stepping in. 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 rough estimate of the cost of fuel, insurance, repair and maintenance costs within your local area, although these figures will be contingent on your driving habits. For even better accuracy, do your own calculation for fuel based on the amount of miles you drive annually and then get a price estimate for the vehicles you’re considering. You’ll need to give an insurance agent the exact model and trim level, as well as the 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 other documentation costs are not included on the sticker price that dealers advertise. Bankrate tip
Request a detailed price breakdown to know the costs to anticipate.
Bankrate tip: Consider the cost of fees like sales tax, registration fees and documentation fees not included on the sticker price that dealers advertise. Get a full breakdown to know the costs to anticipate 5. Secure your financing prior to going to the dealer Dealers don’t only want to sell you a vehicle -they also want to coordinate the car loan too. Dealers typically pay either a flat fee or commission for the automobile loans they facilitate regardless of whether the loan is directly from the maker or from an local lender. Instead of having the dealer do the work, in banks and credit unions and prior to going to the dealership. Getting preapproved by a bank, credit union or online lender does not mean that you are required to take that deal however it could aid you in determining the most affordable financing option. It could also give you the ability to negotiate if you give the preapproval to your lender and they promise to beat the rate to earn your business. To secure a preapproval letter you’ll need to supply your employment, personal and income information with the lender. They may also inquire about any other debts you currently have to determine how much of an auto loan you can manage to pay for. 6. Test drive Most car owners keep their new vehicles for around six years, so take your time with the test drive. You must ensure that you enjoy the car, particularly when you use it to work or for travel. Don’t hesitate to ask for an extended time behind the steering wheel. Take time while it’s parked to adjust the seats, experiment with the controls and figure out if the passengers are comfortable and if your regular items would fit in the. 7. Negotiate Once it’s time to sit down and talk about pricing, come prepared with the research you’ve done. Check out if other dealers offer better prices on your vehicle and seek a price match with your salesperson. If you’re interested discuss this, you should do it after you negotiate the sale cost of your new vehicle. Separately discussing these issues will allow you to negotiate an even better price for the car you currently own and you’ll do better if you’ve done research on the value of your current vehicle on the internet. Before you sign the contract, you should review the entire contract carefully. Check any fees that are proposed and ensure that what you negotiated verbally is also written down in writing. Be willing to decline the nice extras you might not need or even to the whole deal when it’s not working with you, and the seller isn’t willing to change his mind. The present state of the automobile market. Purchasing a new car is not without some considerations. New car average transaction prices (ATPs) hit record highs over $48,000 for the fifth consecutive month in August of 2022, according to . The prices you will likely encounter are caused by a simple issue of demand and supply. There are fewer vehicles available at car dealerships, due to lingering supply chain problems, and drivers using vehicles, the prices are rising. In addition to the supply and demand, choices from the to quell inflation have made the cost to borrow higher too. This increase is reflected clearly in the amount of money that people are borrowing, an average of $40,290 in the second quarter of 2022, compared to $35,587 by 2021, according to . This all means that you should prepare to spend some extra money for your new vehicle. Next steps Buying a new car is a thrilling procedure, and there’s no better feeling than leaving the dealership with the knowledge that you’ve got the best deal. But before you start your search for the perfect ride, ensure the finances of your family are on track and your credit score is up to par. It’s equally crucial to review your spending plan to determine how much car you can afford. Once you’ve worked out all financial aspects you can shop around to find the most affordable financing to allow you to bargain without fear. Making your way to the dealership with a plan can help you choose the most affordable solution 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 is a specialist in helping readers to navigate the details of borrowing money to purchase a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers to take control of their finances with precise, well-studied information that breaks down complicated topics into manageable bites.
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