Things You Should Do When Buying a Car

Here are some recommendations to follow when you’re in the market for a new or used car.

Do Figure Out How Much You Can Afford

New and used cars can be quite expensive. As of August 2023, the average new car cost $48,451, while the average used car cost $26,651. It’s crucial to determine how much you can afford to pay for a car. Use a car payment calculator to see how a monthly car payment fits into your budget. Experts suggest spending no more than 15% of your monthly take-home pay on payments for a new car and no more than 10% on payments for a used or leased car.

Do Improve Your Credit

If you plan to take out a car loan, it’s essential to get your credit in shape before applying. A higher credit score can help you secure a lower interest rate, reducing your overall cost. Check your credit report and score, and take steps to improve it if necessary, such as paying down credit card debt and correcting any inaccuracies.

Do Get Preapproved for Financing

Approach a bank or credit union for preapproval if you’ll need a car loan. This step gives you a clear idea of how much you can afford before heading to a dealership. It also helps you avoid potentially more expensive financing offers from dealerships. Be sure to compare interest rates from several lenders before getting preapproval.

Do Avoid Lengthy Loan Terms

While longer loan terms can reduce your monthly payments, they often come with higher interest rates, making the loan more expensive overall. Aim for shorter loan terms to save money in the long run.

Do Shop Around

Comparing prices at several dealerships can help you save money. Don’t hesitate to pit one dealership’s offer against another’s to get the best price. The best months to shop for car deals are October, November, and December. If that’s not convenient, consider shopping at the end of a month when dealerships are trying to meet sales goals.

Do Negotiate the Price

Once you’ve chosen where to buy your car, try negotiating a better deal. You may be able to get free dealer-added features or a lower price. Do your homework before negotiating by finding out the car’s market value and checking competitors’ prices.

Things You Shouldn’t Do When Buying a Car

Now, let’s look at some things to avoid when buying a car.

Don’t Get Too Emotionally Attached

Be realistic about your wants versus your needs. Don’t get your heart set on a car you can’t afford. Stick to your budget to avoid financial strain.

Don’t Fall for a Dealership’s Sales Tricks

Watch out for sales tricks like prolonging the process to wear you down, pushing you to make a quick decision, or guiding you toward a car you don’t want. Stay firm and don’t let a salesperson pressure you into a decision.

Don’t Buy a More Expensive Car Than You Need

Stick to your budget and don’t be swayed by a salesperson’s pitch for a more expensive car. Remember, you came with a budget for a reason.

Don’t Opt for Expensive Add-Ons

Resist the temptation to buy expensive add-ons like extended warranties or fabric protection. These extras can significantly increase the cost of your car.

Don’t Focus Too Much on the Monthly Payment

Consider more than just the monthly payment when evaluating auto loan offers. Look at the annual percentage rate (APR) and the length of the loan, as these factors will affect your overall cost.

Don’t Sign Paperwork You Don’t Entirely Understand

Before signing any sale agreement, ensure all information is accurate and that you understand every aspect of the contract. If you’re unsure about something, ask questions or walk away if necessary.

How to Prepare Yourself for Buying a Car

Careful preparation can help ensure a smooth car-buying experience. Here are some tips:

Reduce Your Debt

If you need a loan, aim to reduce your debt to improve your credit score. A higher credit score can lead to better lending terms.

Put Off the Purchase if Your Credit is Shaky

If your credit isn’t where you want it to be, consider delaying the purchase to give yourself more time to improve your credit.

Beef Up Your Car-Buying Knowledge

Get familiar with car-buying terminology to boost your confidence as a consumer.

Look into Costs and Values

Estimate the costs of insuring and maintaining the car you’re considering, and think about how well it will retain its value over time.

Go Over Your Budget

Review your financial situation before signing a sale contract. Make any necessary budgetary changes to accommodate your new car.

Getting in the Driver’s Seat for a Car Purchase

Buying a car is a significant investment. By setting a budget, checking your credit score, shopping around for a loan, and comparing prices at various dealerships, you can make the car-buying experience less stressful and more rewarding.