How to buy a new car Part Of Buying a Car In this series Buying a Car Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by offering interactive tools and financial calculators as well as publishing objective and original content. This allows you to conduct research and compare data for free to help you make informed financial decisions. Bankrate has agreements with issuers including, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this website come from companies who pay us. This compensation can affect the way and when products are featured on this website, for example such things as the sequence in which they appear within the listing categories, except where prohibited by law. This applies to our loan products, such as mortgages and home equity and other products for home loans. This compensation, however, does not influence the content we publish or the reviews you read on this site. We do not include the universe of companies or financial deals that could be open to you. Caiaimage/Martin Barraud/Getty Images
5 min read published October 21, 2022
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers with the ways and pitfalls of borrowing money to buy an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping their readers gain the confidence to control their finances through providing concise, well-researched and researched information that breaks down otherwise complex subjects into digestible pieces. The Bankrate promise
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You have money questions. Bankrate can help. Our experts have helped you understand your money for more than four years. We are constantly striving to provide consumers with the expert advice and tools needed to make it through life’s financial journey. Bankrate follows a strict policy, which means you can be confident that our content is honest and precise. Our award-winning editors and journalists provide honest and trustworthy information to assist you in making the right financial decisions. The content created by our editorial team is factual, objective and uninfluenced through our sponsors. We’re transparent about the ways we’re in a position to provide quality content, competitive rates and useful tools to you , by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products or services, or when you click on specific links on our website. So, this compensation can impact how, where and in what order items are listed in the event that they are not permitted by law for our mortgage, home equity and other home lending products. Other elements, like our own rules for our website and whether a product is offered in your area or at your personal credit score could also affect how and where products appear on this website. While we strive to provide the most diverse selection of products, Bankrate does not include information about every financial or credit product or service. If you’ve spent the last couple of months dreaming about getting a brand new car in your driveway, chances are you’re considering different various models, looking at deals, and considering what additional features you can afford. Buying a car is a big investment so you’ll need to think about costs as well as financing options and negotiation tactics before heading to the dealership. 7 steps to purchasing the perfect car. When you’re ready, adhere to these steps to make the most of the car-buying experience and walk away with the vehicle of your dreams at an affordable price that won’t cost you a fortune. 1. Figure out the amount you can afford. You may have your heart set on a specific vehicle, but you will not be able to take it home until you . Take into consideration the monthly installment in addition to other . The best rule of thumb is to limit yourself to spending less that 20 per cent of the monthly household income on a brand new car. This should include the monthly car loan payments and all other costs, including maintenance, fuel, repairs and registration fees. For the monthly installment alone recommends that you be aiming for no less than 15% of your earnings. You can use this to determine an accurate estimate of what you’ll be paying every month, and also in interest over the duration that you will be paying for the loan. It’s equally important since it will determine the interest rate you receive. 2. Decide if you’d like to lease or buy the car Do you plan to drive the vehicle as long as the wheels are on? If so, buying is the best option, and you’ll be able to sell or trade in the car when you need new wheels. But, if you’re looking to get an upgrade every three years . Leases can let you find a better car at a lower cost, since they often have lower down payment requirements , and a more affordable monthly payment. However, you will not own the car outright and will need to check out for specific lease terms, such as mileage restrictions and wear-and-tear fees, to avoid costly fines. Consider the vehicles on your radar and weigh the ones you like. Bankrate’s website can assist you in estimating the cost savings of buying or leasing, so you can make an informed decision. Consider certified pre-owned
Certified pre-owned options can be a great route toward a new car and a cheaper bill. You’ll get reassurance of the warranty of the manufacturer which you won’t receive from a private dealer.
3. Research Once you have established your budget and decide on the best kind of ownership to suit your driving habits, you can begin investigating the vehicles that attracted your attention. First, visit automaker websites and independent auto information sites to assess the features that are important to you. Keep track of MSRPs (manufacturer’s proposed retail price) and the invoice price. Also, check local inventory listings to find out what’s available in your local area. Additionally, research discounts. Numerous automakers offer discounts to military members, students, and even members of specific credit unions. These discounts can be stackable together with cash-back rebates on the model that should be taken after you have negotiated the price. Visit the website of the manufacturer for such incentives prior to stepping to. 4. Find out the actual cost price of owning a car is much more than just your initial payment. Utilize websites such as or to get a rough estimate of the cost of fuel, insurance, repair and maintenance costs in your region — however, these figures will vary based on your driving habits. To get even more precise make your own calculations for fuel costs based on the number of miles you drive annually and request a quote for the cars you are considering. You’ll need to inform the insurance agent the exact model of the car, trim level, engine, and other add-ons for an accurate price. It is important to keep in mind that additional fees, such as taxes on sales, registration fees and other documentation costs are not included on the sticker price that dealers advertise. Bankrate tip
Request a detailed price breakdown of the quote to know the costs to anticipate.
Bankrate tip: Think about charges, such as registration, tax, and document fees, that aren’t included on the price that dealers advertise. Request a detailed price breakdown so that you know what costs to anticipate 5. Make sure you lock in your financing prior to visiting the dealership Dealers don’t just want to sell you a car -they also want to coordinate the car loan as well. Dealers usually receive an uncapped fee or commission on automobile loans they facilitate, regardless of whether the loan is from the manufacturer or a local lender. Instead of having the dealer handle the task, you can have them look it up you can inquire at credit unions and banks prior to going to the dealership. Being preapproved by a bank, credit union or an online lender doesn’t mean you need to accept the deal, but it can help you determine which option for financing is the least expensive. It may also grant you the ability to negotiate if you present the preapproval for the lender and they agree to beat out the interest rate in exchange for your business. To secure a preapproval letter, you’ll need to provide your employment, personal and income data to the lender. They might also ask about any outstanding debt obligations you currently have to determine how much you can afford for an automobile loan you are able to afford. 6. Test drive Most car owners maintain their new cars for around six years, so take your time during the test drive. Be sure you truly are in love with the car, especially in the event that you frequently drive for work or travel. Don’t hesitate to ask for additional time at the car. Take time when it’s stopped to adjust the seats, play around with the controls and figure out if passengers would be comfortable and whether your normal cargo would fit well. 7. Negotiate Once it’s time to sit down and talk about pricing, prepare with the research you’ve done. See if other dealerships offer better prices on your vehicle and seek a price match with your salesperson. If you’re looking to , save that discussion for after you negotiate the sale cost of your new vehicle. Separately discussing these issues can help you negotiate the best deal for your current vehicle and will be better if you’ve done research on the value of your current vehicle online. Before you sign the contract in its entirety, examine all the terms carefully. Review any fees proposed and ensure that what you negotiated verbally is also written down in writing. Also, be prepared to say no to those nice-to-have extras that you might not need or to the entire deal in the event that it isn’t working with you, and the seller isn’t willing to budge. The present state of the car market Buying a brand new vehicle requires a few additional considerations. New car average transaction prices (ATPs) hit record highs at over $48,000, for the fifth straight month in August 2022, according to . The prices you will likely face are due to a simple issue of supply versus demand. With less vehicles available at car dealerships, because of supply chain problems, and drivers needing vehicles, prices are rising. In addition to the demand and supply, the choice in the fight against inflation have made the cost of borrowing higher as well. This increase is reflected clearly in the amount of money that people are borrowing, an average of $40,290 in the second quarter of 2022, compared to $35,587 in 2021, according to . This means you should prepare to spend some more money on the new car you purchase. The next step in buying a new car is an exciting procedure, and there’s nothing better than leaving the car dealership confident that you have gotten the most affordable price. However, before you begin your search for the perfect ride make sure the finances of your family are on track and that your credit score is at par. It’s also important to evaluate your budget and determine what car you are able to afford. After you’ve figured out the financial details look around for the best financing deal so you can negotiate with confidence. Ahead of time, a dealership visit will help you find the most affordable financing option that fits your budget. Learn more
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers in navigating the ways and pitfalls of borrowing money to purchase a car. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are committed to helping readers feel confident to take control of their finances through providing precise, well-studied information that break down complex subjects into bite-sized pieces.
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