10 tips every car shopper should follow

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I get asked a lot about what’s the best way to buy a car. Should buyers get financing in advance? Trade in their current car to the dealer? Lease?

Everybody’s situation is different, but there are some basic do’s and don’ts to buying a vehicle.

Here’s my list of tips that every car shopper should follow:

1. Be certain of what you want

This sounds simplistic, but you’d be surprised at the number of people who start out with only the vaguest idea about what they want or need and wind up with a vehicle that doesn’t serve them well or costs more than they can afford.

Look at your lifestyle. Do you need to haul around a lot of kids? Do you have a long commute that will mean high fuel bills? Do you need something that can carry a lot of cargo?

Once you’ve answered these questions, narrow down your options to the type of vehicle you need.

2. Honestly assess your vehicle budget

If you make $40,000 a year, don’t think you can afford a $30,000 car.

Your total car expenses — payments, insurance, gas and maintenance — shouldn’t rise to more than 20 percent of your take-home pay.

3. Think seriously — do you really need a new car?

Most new-car purchases are impulse buys — your current car is 4 or more years old, you’re tired of looking at the same dashboard and there’s a shiny new model that has caught your eye.

Even if your car needs a few repairs, it is often better to make those fixes and hang onto your current car for another year. A good rule of thumb: If a repair costs less than three months of new car payments, make the fix.

4. Clean up your old car before selling or trading it

Spend less than $50 for some good car-care products to help clean up the exterior, interior and engine compartment of the vehicle you’re ditching. Doing so may add several hundred dollars of value to the car when you sell it.

5. Get your financing upfront

There are several ways to secure a loan commitment for a specific amount before you go shopping. Check out online lenders, credit unions and banks.

There are two benefits to doing this. First, you’ll know before you shop how much you’ll have to pay each month. Second, once you have a loan for a specific amount, you’re less likely to allow the salesperson to talk you into a more expensive vehicle.

6. Don’t get fixated on a monthly payment

The worst mistake car buyers can make is to tell salespeople they’re prepared to pay “x” amount a month for their car.

With that information, a salesperson can manipulate a deal to make almost any payment possible simply by playing with trade-in numbers, loan percentage points and length of term, and down payment.

In the end, such deals usually leave buyers paying more than they should.

7. Don’t be swayed by a low-payment lease

Advertisements are filled with attractive lease payments on a wide variety of vehicles. However, the terms of these leases don’t really fit the needs of most consumers.

The mileage allotments in these leases often can be as low as 10,000 miles a year and usually run to just 12,000 miles a year. Because most people drive at least 15,000 miles a year, such leases can mean huge penalties when the allotted mileage is exceeded.

8. Take a test drive

Given the huge amount of money spent to purchase a vehicle, it’s amazing that some buyers don’t bother with a test drive. When you take that test drive, pay attention to the seating position, the accessibility of controls, and whether controls are logically placed and easily understood.

Make sure you drive on expressways and city streets. Have the salesman drive while you sit in the backseat to see if your passengers will be comfortable. If you’re considering a particular model, think about renting that model vehicle for a day.

9. Never drive off until the deal is cemented

It’s not unusual for dealers to send people off in a new car with what’s called a conditional finance arrangement in place. This means the dealer — perhaps because it’s late at night or on the weekend — hasn’t placed the loan with a specific lender.

If your credit is good, this is usually not a problem. But more than a few buyers have driven off only to get a call a later that says the dealer couldn’t make the deal for the loan rate or payment amount and that new car will cost you more.

Never drive off until all blanks on a contract are filled in and there are no contingencies to the deal. It’s better to wait a day to pick up the car when everything’s been hammered out than to get a rude surprise.

10. Watch out for the never-ending sale

Many dealers make their profit after the initial sale is done by selling the buyer on extended warranties, such as expensive paint protection and rustproofing. A finance person often pitches such items.

Don’t buy any such extras at the time of the sale. If you decide you need them, they can always be bought — usually at lower prices from other providers — after the rush from getting a new car wears off and you’re thinking more clearly.

Found the car of your dreams? Compare car loan rates at Bankrate.com.