Buying a New Car: Everything You Need to Know
Buying a new car is a significant investment. According to Kelley Blue Book, in August 2019, the average purchase price for a new vehicle was $37,401. Because of the hefty price tag, there several things to consider when purchasing a vehicle.
How to Buy a New Car
There are several steps you should take before you even enter a car dealership. These steps include the following:
Set a budget. When you purchase a car, you can pay in cash, take out a loan, or sign a lease. Decide which one of these options is best for you. While paying in cash makes it easier to budget, it's not a good idea if it drains your savings. According to Credit Karma, you should factor in costs like sales tax, car registration, and insurance.
Apply for a pre-approved loan. Taking out a loan not only simplifies the purchasing process, but it can also provide you with leverage at the dealership. If you're pre-approved for a loan, you'll have a better understanding of what you can afford. You'll also be able to compare interest rates with those offered by the dealership's financing department. If you're a member of a credit union or other bank, research what kinds of loans they offer to customers.
Decide on a loan term. The term of your loan should not extend past 60 months. It's also a good idea to make a down payment that's between 10% and 20% of the car cost.
Research your automotive choices. Once you have an idea of what you can afford, you can start researching other aspects of your potential new car. For example, do you require a lot of passenger and cargo space? Which cars have the best safety features? By making a list of your desired features, you can narrow down what you want, which will save you time at the dealership.
Weed out unaffordable vehicles. Be sure to check your list of preferred cars against resources like Kelley Blue Book to ensure that they are in your budget. Sticking to your budget will give you a solid footing when you go to the dealership.
When you're finally ready to go to the dealership, you'll notice the manufacturer's suggested retail price (MSRP), commonly referred to as the "sticker price" on each car. As Credit Karma notes, you'll also see a destination charge. This charge includes the cost of transporting the car to the dealership and upgrades that go beyond the standard features. If you choose to add features such as window tinting, non-standard wheels, or all-weather floor mats, the final purchase price will increase.
In addition to the price you pay at the dealership, Nerdwallet suggests that you consider how much it will cost to own your new car. Is the car you're purchasing reliable, or will it always be in the repair shop? You can consult resources like Consumer Reports and J.D. Power to see which cars have the best reliability ratings. Remember that buying a cheaper car isn't always the best option. A car that is less expensive at the dealership could end up costing you a fortune in repairs.
U.S. News & World Report recommends that you set aside enough time to several cars in quick succession. That way, each driving experience will be fresh in your mind to compare to the others. You can even schedule an appointment with the dealership's internet sales manager, who can pull the models that you would like like to test drive. Your test-drive route should include a variety of driving conditions, such as curvy roads, stretches of highway, and rugged surfaces.
Kelley Blue Book suggests that you pay attention to crucial factors while on your test drive. These include:
Comfort: Some cars give you a smooth ride, while others make you feel every single bump in the road. While driving, take notice of how bumpy your ride is and whether or not the driver's seat is comfortable.
Noise: Is the car's cabin insulated from the sound of the outside world, or can you hear the wind, road noise, or the engine? You want as quiet a car as possible so you can drive without distraction.
Power/Acceleration: When you push the car's accelerator pedal, the vehicle should respond quickly but smoothly, without any lurching. Pay attention to how the motor feels. It should also operate smoothly yet with power.
Braking: When you apply the car's brakes, you shouldn't feel any vibrations, and the steering should not be affected. Take notice as to whether the vehicle stops in a straight line.
Handling: Can you efficiently perform standard functions such as parking and making a U-turn while driving the car? Does the vehicle respond the way you expect it to when you turn the wheel? You should never purchase a vehicle that is too difficult to drive.
Once you've decided on the car you want, you should start negotiating for the best price. Edmunds suggests that you contact at least three dealerships that have the car you want. You should ask the sales department for the total selling price, including the destination charge. When you know the prices at each dealership, you can go with the dealership offering the lowest price or ask the other dealerships if they're willing to beat it. You should also find out which dealerships are willing to throw in some extras, such as paint protection, an extended warranty, or a prepaid maintenance plan.
If you are planning to trade in your old car, make sure you are getting the best price. Credit Karma suggests consulting online pricing guides to see what the dealership will make from reselling your old vehicle. Often, the dealership will offer to pay you the wholesale price, which is well below retail.
Once you've negotiated a fair price for both your new car and your trade-in, make sure to review the sales contract carefully. You should also give your new car a final inspection. The salesperson can give you an overview of the features. Then you can purchase the car right there at the dealership or have it delivered to your home. Either way, because you've done your research, you'll know you've made the right decision.
Sources:
Car and Driver: 2019 Editors' Choice Awards: The Best Sedans, Hatchbacks, Coupes, and Convertibles
Car and Driver: Seven Things Not to Do at a Car Dealership
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