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 offering interactive financial calculators and tools, publishing original and objective content, by enabling you to conduct research and compare data for free and help you make financial decisions with confidence. Bankrate has partnerships with issuers such as, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this website are provided by companies who pay us. This compensation can affect the way and when products are featured on this website, for example, for example, the order in which they appear within the listing categories and other categories, unless prohibited by law for our loans, mortgages, and other products for home loans. However, this compensation will have no impact on the information we publish, or the reviews appear on this website. We do not cover the universe of companies or financial offerings that might be accessible to you. Caiaimage/Martin Barraud/Getty Images
5 minutes read. Published October 21, 2022
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is an expert in understanding the ways and pitfalls of borrowing money to purchase an automobile. Edited 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 gain the confidence to control their finances through providing concise, well-researched and researched facts that break down complex topics into manageable bites. The Bankrate promises
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There are money-related questions. Bankrate has the answers. Our experts have helped you understand your money for over four years. We continually strive to provide our readers with the professional guidance and the tools necessary to be successful throughout their financial journey. Bankrate follows a strict policy, which means you can be confident that our content is honest and accurate. Our award-winning editors and reporters provide honest and trustworthy content that will help you make the right financial choices. The content we create by our editorial staff is factual, objective and uninfluenced through our sponsors. We’re open about how we are capable of bringing high-quality information, competitive rates and useful tools to you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods and, services, or by you clicking on certain hyperlinks on our website. Therefore, this compensation may influence the manner, place and in what order products appear in listing categories in the event that they are not permitted by law for our mortgage or home equity products, as well as other home lending products. Other elements, like our own website rules and whether the product is offered in the area you reside in or is within your personal credit score could also affect the way and place products are listed on this website. Although we try to offer 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, chances are you’re looking at various models, looking at deals, and evaluating what add-ons you are able to pay for. Car purchases are an expensive purchase so you’ll need to think about the cost of financing, the options for financing and negotiation tactics before heading to the dealer. 7 steps to buy a new car When you’re ready to buy, follow these seven steps to make the most of the car buying experience. You’ll walk away with the car you’ve always wanted at a cost that doesn’t break the bank. 1. Figure out what you can afford You may have your heart set on a certain car, but you won’t be able take it home until you . Consider the monthly payment together with other . The best guideline is to spend no more then 20 percent of your monthly household earnings on a new vehicle. This figure 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 recommends that you aim for no less than 15% of your annual income. You can use this to determine an accurate estimation of the amount you will be expected to pay each month and in interest over the life of the loan. This is equally important as it determines the rate of interest you pay. 2. Decide if you’d like to buy or lease Do you intend to drive the vehicle until the wheels can stay on? If yes, then buying is the best choice and you’ll have the ability to trade or sell the vehicle whenever you’d like a fresh set of wheels. However, if you want a new car at least every 3 years . Leases can let you obtain a higher-end vehicle for the money, as they usually have less down payment requirements and a more affordable monthly payment. However, you will not be able to purchase the car for yourself and will need to check for lease conditions that are specific, such as mileage restrictions and wear-and-tear fees, to avoid expensive fines. Look at the cars that are you’re considering and consider the ones you like. Bankrate’s can help you estimate potential savings from buying or leasing, so you can make an informed decision. Take into consideration certified pre-owned
Certified pre-owned options can be an excellent option to get a new car and lower costs. You’ll get reassurance of a manufacturer’s guarantee that you can’t get from a private dealer.
3. Research After you set your budget and decide on the best kind of ownership to suit your driving style, begin investigating the vehicles that attracted your attention. The first step is to visit automaker websites and independent auto information websites to evaluate the features that matter to you. Keep track of MSRPs (manufacturer’s proposed retail price) and invoice prices. Check your local listing of inventories to see what’s available in your region. Also , look into any discounts that might be available. Numerous automakers offer discounts to military members, students, and even members of certain credit unions. These discounts can be stackable and paired with cash-back incentives on the vehicle, which should be deducted when you negotiate the price. Go to the site of the automaker for such incentives prior to stepping in. 4. Determine the true cost The cost of car ownership is significantly more than the initial payment. Check out websites like to get a general estimation of insurance, gas repairs and maintenance expenses within your local area, however, these figures will vary based on your driving habits. For even better accuracy, do your own calculation for fuel costs based on the number of miles you take in each year and get an quote on the cars you’re thinking of buying. You’ll need to give your insurance company the exact model, trim level, engine and add-ons to get an accurate quote. It’s crucial to note that additional fees, such as sales tax, registration fees and documentation fees are not included in the price advertised by dealers. Bankrate’s tip
Request a detailed price breakdown of the quote so you can know what costs to anticipate.
Bankrate tip: Think about fees, like sales tax, registration fees and documentation fees not included on the sticker price that dealers advertise. Request a detailed price breakdown so that you know what charges to expect for 5. Lock in your financing before visiting the dealership Dealers don’t want to just sell you a vehicle -they also want to manage the car loan too. Dealers typically receive a flat fee or a commission on car loans they facilitate, regardless of whether or not the loan originates either from a manufacturer or local lender. Instead of having your dealer handle the task, you can have them look it up at banks and credit unions prior to going to the dealership. Being preapproved by 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 the most affordable financing option. It could also give you the ability to negotiate if you present the preapproval for your lender and they promise to beat out the interest rate in exchange for your business. To obtain a preapproval form you’ll have to submit your personal, employment and income data to the lender. They may also inquire about other outstanding debt obligations you’re currently facing to figure out the amount of an auto loan you are able to afford. 6. Test drive Most car shoppers keep their new cars for about six years, so take your time during the test drive. Make sure that you really enjoy the car, particularly if you drive a lot for work or travel. Do not hesitate to request an extended time behind the car. You can spend time in the car while it’s parked to adjust the seats, experiment with the controls, and decide if passengers will be comfortable, and if your usual goods would be a good fit. 7. Negotiate When it’s time to talk about pricing, come prepared by completing your research. See if other dealerships are offering better deals on your car and ask for a price match with your salesperson. If you’re looking to , save that discussion for when you’re negotiating the sale cost of the new car. Separately discussing these issues will allow you to negotiate an even better price for the car you currently own, and you’ll fare even better if you’ve done research on your current car’s value online. Before you sign the contract in its entirety, go over all the details carefully. Check any fees that are proposed and make sure that anything you agreed to verbally is spelled out in writing. Also, be willing to decline those nice-to-have extras that you might not need or even to the whole deal when it’s not working with you, and the seller isn’t willing to budge. Current state of the new car market . Buying a new car is not without some aspects to be considered. New vehicle average transaction prices (ATPs) reached record-breaking levels 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 supply versus demand. There are fewer vehicles available on car lots, due to lingering supply chain issues, and drivers still needing vehicles, prices are rising. In addition to the demand and supply, choices in the fight against inflation has led to the cost to borrow higher too. This increase is reflected clearly in the amount that drivers are borrowing, an average of $40,290 for the second quarter of 2022, compared to $35,587 in 2021, according to . This means you need to be prepared to pay some more money on the new car you purchase. What next steps to take when buying a brand new car is a thrilling processand there’s nothing better than leaving the car dealership with the knowledge that you’ve got the best deal. Before you begin your search for the perfect ride make sure you have your financials in check, and your credit score is up to the mark. It’s equally important to assess your budget and determine how much car you can afford. Once you have ironed out all the financial details you can shop around to find the best deal on financing to negotiate without fear. Going to the dealership prepared can assist you in finding the most affordable option that fits your budget. Learn more
The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the details of borrowing money to buy an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers to manage their finances by providing concise, well-studied and well-researched content that breaks down complicated subjects into bite-sized pieces.
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