5 Steps to Buying a Car

Getting a new car (or even a new used car) can be a lot of fun – the new car smell, driving it off the lot for the first time, and having something more reliable than you probably had prior.

However, actually buying the car can be a hassle and a lot of work (trust me…I’ve bought 2 in the last 6 months and it was a nightmare). That’s why I’ve put together a simple guide of the five steps to buying a car to make it easy for you. Go through these steps and save yourself some stress.

Step 1. Identify Your Needs

As with any major financial decision, the first step is identifying your needs. Everyone has a little different need when it comes to a car, so make sure you know what you need versus what you want. For example, maybe you need a third row because you have a big family, but for many, a built-in DVD player is a little over the top and may just be a “want”. Identifying your needs (and sticking to them) is a great way to save significant amounts of money when buying a car.

Step 2. Do Your Research

The next step is to do your research once you’ve figured out what type of car you need. Some good places to start are Kelly Blue Book, Edmunds, and Consumer Reports. These sites will show you the best models that fit your criteria, and you can see what the reviewers had to say about why they are the best. This is a good starting point to find a reliable car.

Personally, I don’t feel like paying for Consumer Reports but I did rely heavily on Edmunds and KBB when buying a car recently. While I knew the particular type of vehicle we needed, and I knew which manufacturers were ones that I trusted, I scoured these sites for the best models and years those models were produced. It was quite intriguing to see all of the complaints from a 2009 Camry compared to the 2011 Camry. Needless to say, the issues/concerns I read about on the ’09 Camry aided in my decision as I opted for the ’11 model which had much better reviews. So far, so good.

Next, you need to figure out how much to pay. These sites also show the MSRP for various cars, and what you can expect to pay at dealers, as well as what the dealer probably paid for the car. This will give you leverage to negotiate later on.

Step 3. Figure Out Your Finances

The next thing you need to do is figure out your own finances. You need to see how much you can truly afford, and figure out the best loan rates. While I’d encourage every WSL to pay cash for a car, the reality is that most will be unable to do that. With that in mind, look at different types of loans, like car log book loans or credit union loans and see where you can get the best rate and terms. Always have a few loan options prior to going to the dealership as this will help in your leverage and also help in what you may be able to negotiate with the car dealership’s lenders. This is essential to getting the best deal.

Step 4. Negotiate Online

The next step is to negotiate for your car choice online. Find every dealer within 200 miles that sells your car, and start requesting quotes online through their website for the car you want. Once they respond in writing, counter them. Even better, use an email from another dealer to beef up your negotiating position. Keep doing this until no dealer will go any lower and if you’re happy with the price, now is the time to go into the dealership.

Step 5. Seal the Deal

Finally, you just need to seal the deal. Head to the dealership and test drive the car. Make sure that everything you saw online matches in person, and that the car runs well. Also, make sure that you bring the check from your loan company, so all you need to do is sign the paperwork and head home on that fresh smelling car.

Readers: do you have any tips when it comes to buying a car?

About the Author

By , on Dec 14, 2012
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of WorkSaveLive.com.

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  1. Our car was flooded and totaled during hurricane Sandy, so we’re now in the market to buy a new (new to us) car. One “tip” I learned from my dad is to negotiate in the floor mats as part of the deal. I never would have thought of this and it seems small, but having mats will keep the carpet in better condition and increase the resale value if you ever want to sell. Many dealers charge extra for the mats. I had no idea.

  2. I know you can get the best deal from private owners but I don’t feel confident enough in my car knowledge to go this option yet. I’ve bought all my cars off of family members so far but I know most people don’t have this option.

    The one thing I will say is I don’t think you should ever go into debt for a depreciating asset. And a car is the prime example of a depreciating asset. Save up and pay yourself before you go out and buy a car. Although if you can snag one of those sub 2% interest loans and have your financial house in order, might not be a bad idea.

  3. This is what I just did to buy my new car. I emailed local dealers and had them compete with others through email. Once I got the lowest deal, I went to the dealer and put a down payment on the car. I was able to get it for close to $2K under invoice.

  4. My advice would be avoid the “discount” brands when purchasing a car.. They just don’t last, and the companies have been known to run and hide when there are warranty repairs needed.. Stick with a known brand like GM, Ford, Toyota, Honda, or Nissan, and don’t be afraid to buy a slightly-used car to get the most for your money.

  5. One of the worst things one can do and I hear it all the time is buy a car because it looks “nice’. Nice cars won’t pay the bills nor will they help you to get to work or wherever you need to go. Do your research before dishing out hard earned cash, I did. Cheers Mr.CBB

  6. I try to avoid dealerships when buying a car. You will get a better price from private sellers.

  7. I love being able to negotiate online. Saves so much time and effort. We did this and ending up getting a great price on a vehicle 150 miles away in the next state. Thousands of dollars less than in our local market. You don’t have to buy in your hometown.

  8. Thad P says:

    If you can only do one of these, which is most important?

    The last used car I bought, I knew the price for the vehicle from the dealer web site. The price on the car itself in the lot? Higher. But when I said I saw a different price on the Internet? They dropped it immediately.

    • Andy says:

      Well I don’t think you can take out ANY of them. lol. Analyzing your needs is imperative, understanding what can fit into your budget is an absolute necessity, and researching the make/model/year of the car is equally important. Sorry Thad, I can’t take out any particular step!

  9. My best tip is to not listen to all of the financial experts who say there is only one way to buy a car. Evaluate all of the circumstances and make the best financial decision for you personally. That doesn’t mean go buy a new Porsche if you only make $20,000 a year, but be reasonable and realize that the generic advice out there is not one size fits all 🙂

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