You’re ready for a new car—or a new used one. But starting your car search at the dealership puts you at a serious disadvantage. Before you start the process to make such a significant purchase, do your due diligence.
Here’s what you need to do before you look for your next car.
1. Know what you want.
Chances are you already know what you’d love in a new (or new to you) car. You also know what you need. Separate those into two columns: the list of essentials and the list of “nice-to-have” features. Do you drive long distances? You need a car with good gas mileage. Do you have a family of 7? You need enough seating. Do you drive in the snow? All-wheel drive could be a necessity. Do you have the latest smartphone? Bluetooth could be important to you. Knowing what you want in a car is the first step in your car buying journey. Knowing what you need gives you a baseline for your search.
2. Know what you can afford.
A car out of your price range is the wrong car, no matter how many boxes it checks. You need to be able to afford not only the cost of the car but the cost beyond the sticker price. This includes car insurance, registration, taxes, and fees, as well as gas and regular maintenance. Take some time and do a budget on what you can comfortably afford to spend monthly on a car. A good guideline is to spend no more than 20% of your net monthly income. Importantly, keep this number in mind, but keep it to yourself. A car salesman can tempt you with payments stretched out over a longer-term in order to meet your monthly number, but you’ll end up paying more over time.
3. Used or new?
There are pros and cons of buying a new versus a used car. A new car offers the latest technology, including safety features. It’s also under warranty, so if something goes wrong, it’s covered. However, new cars quickly depreciate in value. Used cars depreciate more slowly and are less expensive to start. With a used car, you’ll likely to get outdated technology and less fuel efficiency. There also is the potential for costly maintenance and repairs. If you’re buying a used car, look into pre-certified used options which will come with a manufacturer’s warranty.
4. Buy vs. lease?
Owning your vehicle is the goal for most people; after all, you have something to show for your payments over time. However, leasing can be the right option in some circumstances. A lease is a rental agreement where you pay for use of the car for a specific period of time and then return it or have the option to purchase it. Leasing allows you to drive a car under factory warranty and have the newest technology every few years. It also comes with a lower monthly payment. However, there are mileage restrictions with leases and fees if you end the agreement early. You also don’t have a car to show for it at the end of the leasing period. Buying not only ensures you have a car, but it also allows you to resell it. Plus, after finishing the financing obligation, you’ll be in the coveted spot of having no car payment—at least for a while.
5. Find your current car’s trade-in value.
If you’re going to be trading in your car, knowing its worth will put you in a stronger bargaining position. Check the Kelley Blue Book. Type in your car’s year, make, mileage, and get an estimate of your car’s worth in your region. Use this amount in your negotiations with dealerships and private parties when you trade-in your car as part of the sale.
6. Find potential new and used cars.
There are only so many makes and models in your price range that will fit your needs and wants list. Preview the list before buying so you can start to narrow down your top choices. Read expert reviews, recalls, and road tests. Check out articles like popular cars for parents or if you know your teenager will also be spending time behind the wheel, best cars for teens. Look for used cars within your budget on sites like J.D. Power, Carvana, or CarMax. Note that while you can buy a used car online, you can only buy a new car at a dealership. In the U.S., dealers have the exclusive right to sell them.
7. Think about the best time to buy a car.
You may need a car now. But if you have the luxury of time, you may be able to wait for special pricing, rebates, or promotions—including student or veteran discounts. If you’re not in a hurry, a good time to buy a car is generally between October and December. That’s when dealerships need to make space for new models. They also have year-end quotas to meet. No matter what time of the year, avoid weekends when dealerships are most busy. A weekday will give you more attention and more time to negotiate.
8. Know your financing options.
You may have enough saved to buy your car outright. If not, you have two choices for financing it: direct lending and dealership financing. Independent lenders like your bank may offer a lower interest rate. Dealers however could offer incentives like 0 percent financing. (You may need to qualify with a good credit score.) To put yourself in the strongest possible position to bargain, get preapproved for a car loan. Then, dealerships will treat you as a cash customer rather than a monthly payer.
9. Check your credit score.
Your credit score could determine the interest rate on your loan. Check your score so there are no surprises. You can get a free credit report from each of three nationwide credit bureaus: Equifax, Experian, and TransUnion.
10. Research dealerships.
Just as you will research your car, you’ll also want to learn about the places where you might buy it. Read dealership reviews to get a sense of how happy customers are. Ask family and friends for recommendations. Identify a few dealerships in your region, not just one. That way you can compare prices and experiences.
11. Organize your paperwork.
When you’re ready to buy a car, you’ll need your driver’s license, payment method, and proof of insurance. If you’re financing through a dealership, you’ll also need proof of income and employment. Make sure these papers are in order and ready to go when you need them.
12. Call your insurance company,
When you buy your new car, your dealership often calls your insurance company during the purchase process. That doesn’t give you time to consider the rates for the make and model that you’ve chosen. Give your agent a call ahead of time. Get a cost quote. That way, there will be no surprises when you’re ready to buy.
This article is furnished by California Casualty, providing auto and home insurance to educators, law enforcement officers, firefighters, and nurses. Get a quote at 1.866.704.8614 or www.calcas.com.