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How to get the best deal on a car

Save time and money buying a car
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Save time and money buying a car | Westend61/Getty Images

Save time and money buying a car

Buying a car is equal parts art and science.

Doing plenty of research on prices, gas mileage, safety, and rebates is important. But your skill in finessing a deal can make or break the purchase.

So whether you're hoping for that new-car smell with a few of the latest bells and whistles or searching for a practical used car with low mileage and a solid warranty, it pays to know a few insider secrets.

Here are 9 tips for saving time and money while buying a car.

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Decide how much you want to pay

Decide how much you want to pay | Guido Mieth/Getty Images

Before you hit the showroom, decide what you want to pay each month.

"A car payment, if you're financing, should be no more than 20% of your take-home pay," says Phil Reed, senior consumer advice editor with Edmunds.com.

Dealers may offer to stretch out payments over 6 or 7 years so that you can meet your budget and buy a pricier car.

Bad move, Reed says. Not only do you pay more in interest, but you'll be making new-car payments on a 6-year-old jalopy.

Instead, use a calculator to factor in your target monthly payment, your down payment, a comfortable loan length and a few interest rates likely for your credit score. That should give you a price range before buying a car.

"It's a good idea to have a realistic idea of what you're going to have to pay for the car before you go shopping, so when they start throwing prices at you, you have an idea if they're good prices," says Reed.

Edmunds and KBB.com report what other buyers in your area are paying for the cars you're considering.

"It's kind of nice to have that knowledge in your pocket," says Jack Nerad, executive market analyst at KBB.com.


Consider the pros and cons of car leasing

Consider the pros and cons of car leasing | Gina Ferazzi/Los Angeles Times/Getty Images

Leasing has gotten more competitive, and dealers aren't the only ones with car leasing programs anymore, says Cathyann Frank, vice president of the McGraw-Hill Federal Credit Union.

Some banks and credit unions also offer car leasing, she says. With car leasing, you can often get a costlier car with lower payments, Frank says.

The downside: At the end of the contract, you don't own the car. And, you could owe some cash if the car is worn or if you drove more miles than the agreement permitted.

You also can't refinance, Frank says.

So ask yourself: Will you want a different car before the lease ends? Or, will your ability to pay change?

Many car buyers don't even consider leasing until they're shopping in the dealership. "And that's a really bad time to do it," KBB.com's Nerad says.


Test drive more than 1 car

Test drive more than 1 car | Gina Ferazzi/Los Angeles Times/Getty Images

Armed with your price range, you'll select a few models you like and test drive 2 or 3. Within your general price range, "there might be something that's better suited to your needs at a better price," Edmunds.com's Reed says.

"Only through comparison can people get a good idea of what they want," he says.

If you want to make sure your favorite model will suit your life, rent 1 for a few days.

You may find that it fits your needs perfectly. Or you could discover that the trunk can't accommodate your golf bag or the car's blind spots bother you.


Do some online shopping

Do some online shopping | David Lees/Getty Images

Email 2 or 3 dealers and tell them what model and colors you're considering, Nerad says. "They will know they're negotiating against others," he says.

It can also pay to check dealer inventories for your target makes, models, and colors, because availability can impact price.

Looking to buy a new ride? Check your credit score for free at myBankrate.com before visiting the dealer.

Many dealers put their inventories online, and there are also inventory tools that will search multiple dealerships in your area, Reed says.

While some inventories are general (no VIN or stock number), others are detailed and specific.

If you want something exotic, like a certain purple sport model with a stick shift, there won't be too many. So, you won't necessarily have much leverage. "If you say you'll be happy with several different colors and there's a wide variety of the vehicles, then you're in pretty good shape," Reed says.


Recognize the lowest price isn't always the best deal

Recognize the lowest price isn't always the best deal | Zero Creatives/Cultura/Getty Images

The dealer who gives you the lowest initial estimate is not always offering the best deal, Reed says.

There could be a lot of upselling on the back end of the deal, he says. And, that purchase price is only part of the deal. There's financing and possibly a trade-in.

"To make a good deal, all the pieces should be good," says Reed. "A lot of times, when someone gives out crazy low prices, it's because they're going to take the money back some other way."

RATE SEARCH: If you plan to buy a new car soon, check out the best car loan rates today. 


Try to negotiate for a lower price

Try to negotiate for a lower price | Echo/Cultura/Getty Images

"Negotiate the price of the car first," says Reed. "Then work out the financing.

And make sure you know the out-the-door price. That will reveal any added or extra fees."

Your most powerful tool in haggling is your feet. If you're not getting what you need, don't be afraid to walk away, Nerad says.

"It's a buyer's market," he says. "There's no shortage of cars looking for owners."

You also should make an offer in the last 2 or 3 days of the month, when salesmen are trying to meet their quotas, McGraw-Hill Federal Credit Union's Frank says.

If you don't like negotiating, there are services that will do it for you.

Edmunds has a free service called "Price Promise." Look up the make and model you want, and it prints out a certificate for an upfront price that many dealers will honor, Reed says.

Frank says some banks and credit unions have buying services, even if you're not getting your loan from them. When you visit a bank or credit union's website, check the page on car loans and see if they offer a buying service. You supply the make and model, and they'll tell you what you should be paying. Some will even negotiate for you.


Educate yourself on fees

Try to negotiate for a lower price | Monty Rakusen/Cultura/Getty Images

No one wants to see fees on their invoice.

In most states, the purchase price of the vehicle, the sales tax, Department of Motor Vehicle fees and documentation fees should be the only fees, Reed says.

But those documentation fees vary widely. In some states, they're capped at $100 to $200, he says. In others, they can run as high as $500.

In addition, some dealerships levy their own fees. "They make them up and give them names," Reed says.

"Our experience has shown it's pretty hard to get them to remove those fees," he says. "But it's easier to negotiate a lower price on the car."

That's because it's simpler for the salesman to go to his manager and ask for a $200 discount to close the deal.


Bring your own loan

Bring your own loan | Zero Creatives/Cultura/Getty Images

After you nail down the best price for your new wheels, it's time to talk financing, Reed says. But, it's always good if you walk in with your own car loan. Not only does it encourage dealers to offer you a better deal, it means you're not a captive audience.

Just understand that every time you apply for a car loan, the lender does a credit check, and your score could dip a few points. And that damage can last up to a year, says Ethan Dornhelm, principal scientist with FICO.

But if you make all your car loan applications within a 45-day period, they will count only as 1 inquiry, according to FICO.

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Be prepared for the upsell

Be prepared for the upsell | Hero Images/Getty Images

"By the time you're ready to sign documents, you tend not to look at the numbers that are there," Frank says. But your contact could contain unexpected additions, like loan insurance, long-term maintenance and tire insurance.

And those are big profit centers for the dealerships, Reed says.

He suggests calling the finance manager ahead of time to ask what products you'll be offered. Then do a little research and some comparison shopping.

If you're concerned about paying off the car should something happen to you, weigh whether a small life insurance policy would be a cheaper option, Frank says.

When it comes to options like extended maintenance or tire insurance, it's also smart to compare the cost and the coverage you'll get to the benefits of banking that money in an emergency fund.

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