How to Buy a Car

car buying, salesman

Buying a car is one of the biggest purchases we as consumers make. Apart from purchasing a home, buying a car is one of the most important decisions you will ever make, and with good reason: the consequences of an auto purchase – how it will meet your needs as well as the long-term financial considerations – are enormous. Whether the vehicle is new or used, modest or efficient, cutting-edge in its design or fully-loaded in its features, it’s sure to make an impact in your life. So, what’s the first step in buying a car?

Before You Start Shopping

Assess Your Needs and Narrow it Down

Before you begin shopping for a new or used car, you should narrow your needs and wants down to a list.  Among the things to consider are the following:

  • How much can you afford? This is chief on the list of things to consider when buying a vehicle. What do you have earmarked in your budget? This will include not only the cost of the vehicle, but the related costs of insurance, routine maintenance, registration and taxes.
  • What will be the vehicle’s purpose? Will it be used primarily for work or pleasure? The average American drives 13,500 miles per year. If a vehicle will be used for pleasure or infrequent use, the mileage will be less.  This is a factor in terms of the type of investment you’d like to make in a car.
  • What type of vehicle are you considering? A sedan, SUV, minivan, or truck? Or even a coupe or sports car? Do you prefer a foreign vehicle or a domestic one? Are you looking for luxury or an everyday, reliable vehicle?
  • What features interest you? What are your thoughts on navigation systems, Bluetooth connectivity, remote start, blind spot monitoring, brake assist, sunroofs, and other features?
  • How important is energy efficiency to you? Have you considered going green and exploring options in electric or hybrid vehicles? The U.S. Department of Energy provides information on alternative fuel vehicles as well as data on fuel-efficient cars so consumers can make an informed decision.
  • And lastly, how vital is safety to you? Are the top-rated vehicles in safety most important to you?


Know Your Options

Should I buy a new or used car?

Once you have an idea of what you’re looking for in a vehicle and what you can afford to spend, the next consideration is whether to buy a brand new vehicle or a used one. Both types of vehicles have their pros and cons, with the biggest difference being price.  A brand-new vehicle will cost more, but it comes with the latest in technology and fuel efficiency, most routine maintenance, and special deals on financing.  But a new car also comes with quicker depreciation, a reduction in the value of the car.  As enticing as it is to purchase a brand new car, it may not be the best option for your needs.

A used car is also an option for many car buyers. Whether it’s a standard used vehicle, or a certified pre-owned vehicle – a used car that has met certain criteria or standards by the dealer or manufacturer has benefits associated with it.  Cost, insurance rates and a down payment all tend to be lower compared to a new car.  Depreciation will also be less of an issue because the sharpest decline in the life of a vehicle occurs within its first few years.  A used vehicle also has a record of performance, so buyers can look to sites such as Consumer Reports for the ratings and reliability of a particular year, make and model.  If you’re seriously interested in a used vehicle, it is recommended that you get an inspection prior to purchase.  With a used vehicle, there will be conceivably more repairs and an overall shorter life compared to a new car.

Should I pay cash, finance or lease?

In deciding how a vehicle will be purchased, you have a few choices.  You can pay upfront in cash, finance it or lease it.  If you are able to, paying upfront for a vehicle in cash is the least expensive option.  Unless you have the funds readily available, purchasing a vehicle in cash is something you can save for, and it will avoid paying interest on a loan as well as provide the peace of mind that comes with no monthly payment.

However, financing is also a very popular option.  Most Americans purchase their vehicles, whether new or used, through auto loans.  Though they pay interest, financing allows the buyer to pay for a vehicle over time, such as in 24, 36, 48, 60 and 70-plus month terms with affordable payments as opposed to a lump sum cash payment.  Financing a vehicle is also an excellent way to build credit, which could be a precursor to buying a home.  Car buyers will need to carefully consider all of the details of an auto loan before they commit to one.

Finally, leasing is also a choice for those looking for a vehicle.  Unlike financing or purchasing a vehicle with cash, you will not own the vehicle, and are in effect, renting a vehicle for a set term, usually three years and under a series of restrictions, such as mileage caps and penalty fees.  What may be most intriguing about leasing a vehicle is the luxury of driving a brand-new car with a low monthly payment and low down payment.  The cost of routine maintenance is also something lessees don’t pay.  But before you sign on the dotted line, make sure leasing is right for you.

Do your Homework

Once you’ve decided how you will purchase your vehicle and what you are looking for in a car, you will need to do some further research to make the best possible purchase.  If you are choosing to finance or lease your vehicle, it’s important to know what your credit score is so that you know where you stand in terms of getting the best rate possible and what leverage you have in the car buying process.   One option is AnnualCreditReport, which allows you to pull your credit from the three main credit bureaus for free every year.

Next, you should consider a preapproval for financing or leasing.  Lending can be done through a car dealership, but preapproval is recommended by many, and this can be done through a local bank, credit union or online lender.  It’s likely you will get a better rate through preapproval, but financing through a dealership is still an option.  Just make sure it is the best option for you.

Now is also the time to consider what your down payment will look like with the purchase of your car.  The higher the down payment, the lower the total cost of the vehicle to you.  Although a good rule of thumb is 20 percent of the purchase price, many car buyers pay less than this.  If you plan to trade in a vehicle to reduce the total cost of the purchase of a car or sell it privately, now is also the time to think about that.

All these factors combined will allow you to make an informed decision and negotiate as you zero in on the car that you want.

Window Shop

Now that you’ve done all your research, and determined your car buying needs, it’s time to shop, and there are many ways to do it:

  • Look online. Check out car buying sites like Edmunds, TrueCar and inventory from nearby dealerships. If you’re interested in buying from a private seller, check out the online classifieds as well.
  • Visit dealerships. Check out what they have to offer and test drive multiple cars.
  • Find out the fair market price for your desired car. Look at the manufacturer’s suggested retail price (MSRP), get quotes from a few dealers and consider the information you gained from car sites.
  • Talk to friends. Gather information and ask for recommendations from family and friends.

Make Sure You Have Auto Insurance

As this is factored into your total car budget, you’ll need to make sure you have auto insurance before you can drive off the lot in your new car. Insurance companies can provide a quote on an expected premium if you supply them with information about a potential vehicle, specifically the vehicle identification number, or VIN. In addition, you should inquire about any eligible discounts, including good driver, multiple policy, safety and good student discounts. If you are financing, your lien holder – the bank issuing your car loan – will need to be included on your insurance paperwork, so it’s important to plan.

Choose the Right Time to Buy a Car

Though the need to buy a car may come before the ideal time to purchase, there are periods during the week, day or season that may be beneficial to you as a consumer. The likelihood of saving more and possibly getting the best experience at a dealership tends to happen earlier in the week, and specifically on Mondays. The hustle and bustle of weekend car shopping likely explains this ideal period of the week. The end of the month and the end of the year is also a great time to purchase and this is mainly due to the quotas many salespersons must meet. Holidays, such as Memorial Day, the Fourth of July and Black Friday also offer the chance to get a good deal.

Though there are many factors to consider when buying a car, one thing is for certain: You should be happy with your purchase. Whether you’re insured with us already or looking for a new plan, get a quote with Elephant when you’re buying a car.


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