Buying a new car can be intimidating, and one of the hardest parts of the process is knowing where to start. From identifying the right car for your budget and lifestyle to negotiating a deal, there are many steps involved.

New car prices are high due to inflation and limited stock, despite a slight decrease in September. That means it’s especially important to be well-prepared for the buying process.

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. It may sound obvious, but the first step is to decide what vehicle you want, including what features are essential versus simply being nice to have.
  • Check pricing. Before entering negotiations, 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. Understand your credit health and 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. Get preapproved for a car loan with at least three lenders. It only takes a few minutes of your time. A loan preapproval gives you the same negotiating power as a cash buyer and shows the dealership you mean business. Most preapproval letters are valid for up to 30 or 60 days.

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, so be prepared to explore the ins and outs to 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 in which you will drive it — on the freeway, in stop-and-go traffic, in parking lots and on hills. If you don’t know the area well, tell the salesperson the type of driving you want to do and ask them where to go.
  • 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, enjoying its high-tech features and new car smell, it’s easy to forget about your budget or must-haves and let emotions take over. If you find a car you love that doesn’t meet your original parameters, go home and think about the purchase before making a decision.

On the lot: Deal-making

Once you have chosen your dream vehicle, you’ll need to be prepared to ask questions and negotiate to get a good deal.

  • Check for deals. Dealerships will 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, but 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 to a counteroffer is to not be so outrageous that the dealer won’t take you seriously while pushing back enough to get the best price.
  • Confidently negotiate. Negotiation is one of the most dreaded aspects of car buying. But if you come prepared to negotiate the best deal on the car price and dealer financing, if applicable, you may save big. Remember, don’t rush your negotiation; always be prepared to walk out if you’re unsatisfied with an offer.
  • Read the fine print. Before signing on the dotted line, 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.

The bottom line

Buying a new car will impact your budget for years, so be sure you’re prepared as you enter the process.

Research vehicles before you head to the dealership, crunch the numbers and figure out exactly how much you can afford to spend. And, once you head to the dealership, leave your emotions at home and stay firm on your budget.

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