If your old car is on its last legs or you’re simply ready for an upgrade, a new car may be in your future. The car buying process can feel daunting, especially if you’re not sure where to start.
If you want to know how to buy a new car, consider these eight steps to find the right car for you.
How to buy a new car in 8 steps
1. Determine how much you can afford.
Understandably, you want a deal on your car purchase. No one wants to pay more than they really should.
Before you start, it’s essential to determine what you can afford. It’s fun to think about our “dream car,” but our budgets and lifestyle may have other ideas.
To start, determine how you will pay for your car. You can pay cash or take on auto financing.
If you have cash on hand, fantastic! If you decide to take an auto loan to finance your car purchase, you’ll need to keep in mind:
- The overall total you’re borrowing (i.e., your loan amount)
- Your monthly payment amount
- The interest rate of the loan
- Repayment term or how long your loan payments will last
Each of these factors will typically affect the total cost of your auto loan.
After considering your current income, existing expenses, any debt you might have, and your other financial goals, make sure your car purchase doesn’t break your budget. Your budget will need to allow for everything else you want or need in your life.
2. Research vehicles.
After determining a budget for your new car purchase, research new vehicles that fit within your budget. You’ll also want to consider your lifestyle and needs as well. For example, you’ll need a different car if you’re living alone in a city than if you have a family and need to drive your kids around town.
A good place to find different makes and models of vehicles for sale is an online car marketplace. You can research new or used vehicles for sale, like how you might buy shoes or anything else online.
When shopping for a car, you’ll want to consider durability, dependability, and the total cost of car ownership. You might also want to understand:
- Does the type of car typically need a lot of maintenance or repairs?
- Are there known issues with the type of car?
- What is the typical fuel efficiency or miles per gallon for the vehicle?
- What is the depreciation like on this model?
- How safe is the car?
When shopping for a car, it’s easy to look at upfront costs, such as the price of the car, the cost of any accessories or add-ons, or the fees associated with financing, but you’ll need to think about the long-term. As a car owner, you’ll also want to think about additional costs, including maintenance, repairs, gas, and depreciation as part of your budgeting.
3. Get pre-approved for an auto loan.
Cars are often expensive, so you might need to secure some financing before you can make the big purchase.
Before heading to a car dealership, look into getting pre-approved for an auto loan at a reputable bank, credit union, or lender. A good place to start is any financial institution you already have a relationship with, as they might be able to provide benefits or discounts because of your existing accounts.
Getting pre-approved before you buy your car could also earn you a more competitive interest rate. Financing at a car dealership may not be the best available rate, and you may end up paying more than you would elsewhere.
You also may have more leverage or room to negotiate prices or rates if you get a pre-approval ahead of time.
4. Get a car insurance quote.
On top of any monthly payments for your car and the regular costs of gas, maintenance, and repairs, you’ll also likely need to get car insurance coverage.
The make and model of your vehicle impacts the price you pay for auto insurance. Before you make a car purchase, it could be beneficial to review average or typical car insurance premium costs for any car you’re considering.
If you don’t often drive (many Americans drive 40 miles or less every day), you could save money with a pay-per-mile car insurance policy. Car owners and drivers could save 47% a year on average, according to a 2018 survey of new customers who saved with Metromile.
5. Compare prices ahead of time and get quotes from a dealership.
Don’t start your car purchase unprepared.
It’s a good idea to do some legwork before heading to a car dealership or searching online. You’ll want to compare prices for specific makes and models so that you can easily spot if any quotes or prices are off base.
You might find different prices for the same vehicles at different car dealerships or online car marketplaces.
Often, you can email different dealerships and get a quote on any cars you’re considering. You can also use websites to research typical car prices and any discounts, incentives, or rebates that might be available.
When you ask for a quote, make sure you get the total cost of the car, inclusive of any taxes and fees, so that you can make fair, apples-to-apples comparisons.
Research ahead of time can keep you from getting overcharged or a lower trade-in value when you make your car purchase.
6. Schedule a test drive.
Once you’ve determined your budget and found car makes and models you like, it’s time to see if each car is the right fit for you and how you like to drive. That’s where a test drive comes in.
Schedule a test drive ahead of time so that you can get a feel for the car and how it rides on the road.
Plan on dedicating several hours to test driving so that you’re not rushed. Consider taking notes about features you like or don’t like on your phone, or bring a notepad with you for your test drive. Your notes can help you compare features or remind you of things you didn’t like after the test drive.
7. Score a deal.
Once you’ve found the car of your dreams, it’s time to move forward and look for the best price.
If you have a pre-approved offer, use the quote or rate as a starting point for your negotiations.
Remember: You shouldn’t feel pressured into anything. A car is a major purchase and something you’ll have for a long time. It only makes sense that the purchase might take a long time, too.
Be sure to ask about any fees and be wary of any upsells. Consider declining any extras they try to sell you if you don’t really need them.
You could also save money by opting for a shorter repayment term if you’re financing your car. You will have larger monthly payments, but you’ll typically pay less in interest over time.
8. Buy the car.
After you’ve done the research, taken a test drive, and determined how much and how you’ll pay for your car, it’s time to drive off with your new set of wheels.
Before you get on the road, you’ll want to review any paperwork carefully. Don’t leave the dealership or make a purchase online without reviewing all the terms.
Don’t forget to ask about anything you don’t recognize and get any benefits, discounts, or complimentary add-ons you’ve negotiated in writing. After signing any paperwork, remember to keep a copy for yourself.
When buying a car, you can also ask if the dealership will register the vehicle for you. Car registration can be a complicated and lengthy process, but they may be able to help.
The bottom line
Buying a new car can be a rewarding process, but it can also be an overwhelming experience. These steps can help you get a good deal on your car and make an informed decision before you make a purchase.
After you make your purchase, you should also make sure you have the right car insurance coverage for your vehicle and lifestyle.
You can see if Metromile is right for you with a free trial. Download the Metromile app from your favorite app store and start a Ride Along™. After driving for about two weeks (you’ll want to keep your current insurance policy to keep your coverage during the trial), Metromile will tell you how much you could save by switching insurance companies. In some states, you can also earn up to an extra 15% off your initial Metromile quote for being a safe driver during your Ride Along™ trial.
Melanie Lockert is a freelance writer, podcast host of the Mental Health and Wealth show, and author of Dear Debt. She’s a cat mom to two jazzy cats, Miles and Thelonious, an amateur boxer, music lover, and needs coffee to function.