Key takeaways

  • Much of the work in purchasing a car takes place before you set foot in the dealership.
  • Once on the lot, investigate the car thoroughly to make sure it fits your needs and lifestyle.
  • Don't get carried away by excitement or talked into add-ons you don’t want.

A car is one of the most expensive purchases most people make. So, it’s important to be well-prepared for the buying process. Car prices remain higher than before the pandemic, but there’s good news for buyers. As of January, new car prices are down 3.5 percent year-over-year, while used car prices are down by 4 percent.

If a car purchase is in your future, take these steps to ensure you get the best deal and vehicle for your needs.

Before heading to the lot: Researching

Much of the work in buying a new car takes place before you even set foot in a dealership. Here’s where to start.

  • Set your sights. Decide what vehicle you want, including what features are essential versus simply being nice to have.
  • Check pricing. Understand market pricing and set expectations for how much you are willing to spend. Kelley Blue Book is a great resource for researching current vehicle pricing before arriving at the lot.
  • Investigate financing options. There are two primary options for car financing: direct lending and dealership financing. There are pros and cons to both options. Independent lenders may offer you a lower interest rate. But dealerships could have incentives — like 0 percent financing — if you take out a loan through them.
  • Do the math. Owning a vehicle costs far more than just the sticker price. Be prepared to cover additional costs, like maintenance, gas, insurance, registration, taxes and fees.
  • Check your credit. As with most big buys, your credit score is a vital factor in your interest rate. Try improving it before going to the dealership.
  • Organize your paperwork. Arrive at the dealership prepared with your driver’s license, payment method and proof of insurance. If you are financing through the dealership, you’ll also need proof of employment, income and residence.
  • Apply for preapproval. Compare auto loan interest rates with at least three lenders. It only takes a few minutes. A loan preapproval gives you the negotiating power of a cash buyer and shows the dealership you mean business. Most preapproval letters are valid for up to 30 or 60 days.
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Bankrate tip
To make sure you get the cheapest car loan, compare both your monthly payment and your total cost in interest with the Bankrate auto loan calculator.

On the lot: Investigating the car

A test drive is one of the most important elements of your car purchase. Investigate all aspects of your car with your lifestyle in mind.

  • Examine the specifics. This will be your vehicle for quite some time. Make sure that it’s the right fit. Are the seats comfortable? Can you easily access the spare tire? Is the trunk large enough?
  • Map out a test course. Test the car in the same environments where you will drive it. Drive on the freeway, in stop-and-go traffic, in parking lots and on hills. Ask the salesperson where to go if you don’t know the area well.
  • Get behind the wheel. Take your time in the driver’s seat to test the brakes, park in tight spaces and check visibility. You’ll also want to monitor road noise and ride smoothness.
  • Compare the car on the lot to your checklist. Remember that list of nice-to-haves and essentials you made? Now that you’re on the lot, ensure the vehicle aligns with those priorities so you get the best car for your needs and lifestyle.
  • Leave emotions at home. When you’re sitting in that new car on the lot, it’s easy to forget about your budget or must-haves and let emotions take over. If the car you love doesn’t meet your parameters, go home and think before making a decision.

On the lot: Deal-making

Once you have chosen your vehicle, prepare to ask questions and negotiate a good deal.

  • Check for deals. Dealerships have special pricing depending on the time of the year or even the time of the week. Search for special pricing or rebates before meeting with a salesperson.
  • Don’t talk trade-in. A salesperson will likely push for a trade-in. However, it’s best to negotiate your purchase price before talking about your old car. That way, the dealership won’t have a number in mind based on the value of your previous vehicle.
  • Make a counteroffer. Use the number you found when researching market value as your guideline. The key is to push back enough to get the best price while not being so outrageous that the dealer won’t take you seriously.
  • Confidently negotiate. Negotiation is one of the most dreaded aspects of car buying. But if you come prepared to negotiate, you may save big. Remember, don’t rush your negotiation. Walk out if you’re unsatisfied with an offer.
  • Read the fine print. Before signing, read your contract in full. Pay special attention to the money due upfront, including closing costs and added fees. Many of these fees can be negotiated or waived by the dealer.

After you finish your new car checklist

Buying a new car will impact your budget for years. Be sure you’re prepared as you enter the process. Once you check the boxes on your new car checklist, start ownership on the right foot. Manage your auto loan by promptly setting up automatic payments so you’re never late.