It's no secret that car buying can be both exciting and stressful. Buying a car is a significant investment, whether you're purchasing your first vehicle or upgrading your old vehicle to something newer, larger, and with more technology than you ever imagined. With countless options and factors to consider, the process can be overwhelming. But without the right advice, you can go into it blind and end up paying more than you want to, potentially having serious buyers' remorse. However, with the right approach and knowledge, you can make a smart decision that suits your needs and budget. Here are some of the best car-buying tips to help you navigate the process confidently.

Determine Your Budget

Before you start shopping for a car, it's crucial to establish a budget. Consider your overall financial situation, including your income, monthly expenses, and savings. A good rule of thumb is to spend no more than 15% of your monthly income (take-home pay, not gross income) on car payments. It's easy to fall into the trap of trying to make the car you want fit into your budget rather than choosing a vehicle that works for your current income and expenses.

When it comes to budgeting for the car, make sure you capture all related expenses, not just your monthly car payment. Don't forget to factor in additional costs like insurance, fuel, maintenance, and registration fees. Also, remember that the Out-the-Door (OTD) price includes tax, tags, title, processing fees, documentation fees, and any additions like an extended warranty. Once you buy the car, you have fuel costs, maintenance costs, and replacement for wear-and-tear car parts. That total cost is hundreds more than your monthly car payment, and you should account for that.

Decide Between New and Used

This is important for you to figure out before you start shopping because it will determine what kind of vehicle you want and need, as well as where you need to shop for it. It also affects your interest rate if you are financing the vehicle. There are numerous considerations to take into account in addition to financing. Deciding whether to buy a new or used car is one of the first choices you'll need to make. Each option has its pros and cons:

  • New: New cars are appealing because they offer the latest technology, safety features, and styling, but they definitely come with a higher price tag and more rapid depreciation. If they are brand new models or full redesigns, then they can be prone to recalls and reliability issues.
  • Used: Pre-owned vehicles are almost always more affordable and have already passed the most accelerated depreciation for the previous owner when purchased the first time. However, they usually lack the latest features/technology, undergone wear and tear, and come with higher maintenance costs.

Research the Right Vehicle

You may want a particular vehicle, but it may not meet your needs. That Chevrolet Corvette looks amazing, but it only holds two people and you have a family of four. A front-wheel drive SUV might not be the best idea because where you live and work gets a lot of snow. Take the time to research different makes and models to find the right vehicle for your needs. Consider factors such as:

  • Size and Space: How many people will you drive on a regular basis? Do you have a big family? Do you need a compact car for city driving, an SUV for a growing family, or a truck for heavy-duty work? Figure out what your space needs are.
  • Fuel Efficiency: How important is fuel economy to you? A more fuel-efficient car can save you money in the long run, especially if you drive a lot. Gas is also easier to find and more convenient than electricity.
  • Reliability: Look for models known for their durability and low maintenance costs. Online reviews and reliability ratings can help you identify trustworthy vehicles. Check Consumer Reports and J.D. Power for reliability and dependability studies and ratings.
  • Resale Value: Some cars retain their value better than others. It might not be an issue of you plan on keeping your car for many years. But, if you plan to sell or trade in your car in a few years, consider models with a strong resale value.

Check Your Credit Score

This is one aspect you can't ignore because it's the single most important factor that determines the kind of financing you get. If you plan to finance your car purchase, your credit score will play a significant role in determining your interest rate and loan terms. It's also not something you can change overnight, so if you have compromised credit and you know you have to buy a car soon, you should come up with a plan to improve it.

Check your credit report before you start shopping to understand your score and if anything needs to be done to bring that score up. If your score is low, consider taking steps to improve it before applying for a loan, such as paying down debts or correcting any errors on your credit report. You should check Experian, Equifax, and CreditKarma. Take the time to review your score and the details carefully. Dispute any incorrect information using documentation and records. Understand that this process takes months to resolve, but it's worth the effort.

Get Pre-Approved for a Loan

Getting pre-approved for a car loan before you start shopping can give you an edge in negotiations and help you stay within your budget. Shop around for the best interest rates from banks, credit unions, and online lenders. Having a pre-approval in hand also gives you a clearer picture of what you can afford.

Consider the Total Cost of Ownership

Don't make the mistake of thinking that the Manufacturer's Suggested Retail Price is all you have to pay. Not even the Out-the-Door Price is what's known as the Total Cost of Ownership. Understanding all of the costs associated with car ownership will help you make a more informed decision and avoid surprises down the road. The sticker price is just one part of the cost of owning a car. Consider the total cost of ownership, which includes:

  • Depreciation: How much value the car will lose over time. As soon as you drive off the lot, your car's value can drop by up to 10%.
  • Insurance: Some models are more expensive to insure than others. If you buy a car with good safety ratings, accident avoidance tech, and active security systems, it could bring the premium down.
  • Fuel Costs: Depending on the car's fuel efficiency and your driving habits, costs could be quite high. The average cost of a gallon of gas in the U.S. right now is more than $3.
  • Maintenance and Repairs: Research the average cost of maintaining the car, especially if you're buying used.

Shop Around for the Best Deal

It's important to be patient when it comes to car buying. Although you might need a car soon, that doesn't mean you should rush. Don't settle for the first deal you find, unless it's exactly what you want at the best price you can find, which is unlikely. Whether you're buying new or used, it's essential to shop around. Visit multiple dealerships, check online listings, and compare prices. Be open to traveling a bit farther if it means getting a better deal.

  • Make a spreadsheet of the best cars you've found with year, make, model, trim level, price, pros/cons, and contact information.
  • Narrow your choices down and move quickly if it's a high-demand vehicle.
  • Reach out to those contacts/dealers and ask for a test drive.

Test Drive the Car

Never buy a car without taking it for a test drive. This is also an area where you shouldn't rush so that you get the most realistic use of the car based on how you will be driving every day. A test drive allows you to assess the car's comfort, performance, and handling. Pay attention to how the car accelerates, brakes, and steers. Listen for any unusual noises, and make sure the car meets your expectations in terms of ride quality and comfort. Also, make sure you check important details like HVAC, infotainment, driver assistance technology, audio, windows, and every detail of the vehicle that you can think of. Make a checklist of everything you need to cover. If the car has special features like remote start or semi-autonomous driving features, make sure those work properly before going further.

Negotiate the Price

Negotiating is a key part of the car-buying process. Sure, there are some dealerships where they say they don't negotiate on price. That might change when it's the end of the month or the quarter, and on a weekday. You don't know until you ask and even push to see if they want the sale. Whether you're at a dealership or dealing with a private seller, don't be afraid to haggle, but also be prepared to walk away. Research the car's market value using tools like Kelley Blue Book or Edmunds to have a solid understanding of what it's worth. Be firm but polite, and be prepared to leave if the seller isn't willing to meet your price. They might just change their minds in the process.

Buying a car doesn't have to be a stressful experience. By following these tips, you can approach the process with confidence and make a well-informed decision. Remember, the key is to do your research, stay within your budget, and be patient. Whether you're buying new or used, the right car is out there waiting for you. Happy car shopping!