How to Buy a New Car

Follow our step-by-step guide to pick the right new car for you and get the best deal possible.
Philip ReedDec 17, 2020
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Steps

Buying a new car is a little like a game show. Choose the right door and you win your prize — a sweet deal on a good car. Choose the wrong door and you’ll lose money and hate the shopping experience. has never been easier, thanks to the transparency created by the internet.

So let’s get started. (If it isn't a new car you want after all, check out our guide on .)

Start by deciding if you want to pay cash, take out a loan, or lease your new car. Paying cash makes your budgeting process pretty simple, but don’t spend all your savings. And remember that you will also have to pay sales tax, registration and insurance. Use the NerdWallet to figure out the and down payment.

» COMPARE: 

Most people take out a car loan or, increasingly, opt for leasing a vehicle. It’s because it simplifies the buying process and puts you in a stronger position at the dealership. Later, you’ll see how having a preapproved loan fits into the process.

Now the fun begins — for you. Think about how you plan to use this car. For example, if you have a family, you’ll want enough room for everyone plus ample cargo space. If safety is a top priority, check out the for crash tests.

Narrow the field by making a list of must-have features. Then, search for models with the  tool found on some automotive sites. Filter your search according to your budget and desired features. As you move forward, list three target models to research in more detail.

You want to make sure to choose models not only for their dependability but also for their low . Consumer Reports and J.D. Power collect maintenance reports from owners and rate all cars for reliability.

A closely related issue is the total cost of ownership. Some cars are cheap to buy, but will cost a lot in the long run because of insurance, maintenance, repairs and depreciation. Several automotive websites — such as Kelley Blue Book’s or Consumer Reports’  — show estimates of these expenses. It may be wiser to shell out a bit more money upfront when buying a car.

» MORE:

Ideally, you want to all the cars you’re interested in buying in quick succession so that the impressions will be fresh in your mind for comparison. Consider setting aside a morning or afternoon for the process, and, if possible, do it mid-week when the dealership isn’t too busy.

Rather than just walking on to the car lot, call ahead and schedule an appointment with the internet sales manager. That way, the right model will be pulled out and ready to go.

Select a test-drive route that has a bit of everything: hills, rough pavements, curves and even a stretch of highway.

Maybe one of the cars you tested meets your needs and is the right color. If not, you will have to search local dealerships until you find the right car.

Nearly all dealerships list their entire inventory online. But if you’re searching for an unusual color or option combination, you can use sites that cover an entire region — or even the whole country. Many new cars are listed on sites such as Autotrader.com or CarGuru.com. Manufacturer websites might also allow you to search a broader area rather than individual dealerships. Keep widening your search area until you find exactly the car you want.

Pricing guides, such as , allow you to cut to the chase and find out what other people in your area are paying for the car you want. On the website, accurately input all the options you want and, in some cases, even the color, since all those factors affect the car’s price.

Make sure to see what, if any, incentives and rebates are available for the car you want. Most manufacturer websites list current offers, which usually change each month.

Requesting dealer quotes by email can take the stress out of negotiating. You can through its website. Or, to save time, use a third-party site such as Truecar.com to request quotes from multiple dealerships simultaneously. Compare the seller’s asking price to the average market price you determined through the pricing guides. Chances are, the seller is asking more than the market average.

If you negotiate in person, here are a few tips to use on the car lot:

A lot of people like to trade in their old car so they can resolve all their car-buying hassles at the same time. But this could be a costly choice. While trading in a vehicle is convenient, dealers usually may try to low-ball customers and only pay the wholesale price. To see how much that is, go online to a pricing guide, look up your car and compare the trade-in price (what you would receive) to dealer-retail (what the dealer will try to sell it for).

Often, the difference can be $3,000 or more. For example, Edmunds.com's True Market Value used-car pricing shows that for an average condition 2017 Honda Accord EX, the difference between trade-in and dealer-retail is more than $3,700.

New trade-in options are available, such as selling the vehicle to CarMax. Or, you can sell it to a private party.  At the very least, look up the and negotiate the highest possible price for it.

If you are negotiating via email or phone, ask to have the car delivered to you rather than picking it up at the dealership. It’s quick and stress-free.

But most people go to the dealership to sign papers in person. Even if you have a , the dealership’s finance manager may offer to beat the terms of the loan. It doesn’t hurt to see if he or she can get a better interest rate. Just make sure all the other terms of the loan are the same.

Before the contract is drawn up, the finance manager may also try to sell you additional products and services. Buying an at the right price can provide peace of mind. But check first to see how much warranty is included with the price of your new car. Most new cars have a bumper-to-bumper warranty covering at least three years and 36,000 miles, along with a powertrain warranty that typically lasts up to 75,000 miles. The powertrain warranty covers all the parts that make the car driveable, such as the engine, transmission and suspension.

Take your time reviewing the contract and don’t let yourself be pressured into signing just to get it over with. The contract will include the agreed-on sales price and these additional figures:

Some dealerships might include additional fees, of which some may be bogus. It’s tricky to know what’s legit and what’s included just to boost their profit. If the dealer's finance manager can’t explain a fee in the contract to your satisfaction, ask to have it removed.

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