The Car Buying Process

Step 1 – Research
Many people buy cars based on what they look like or what they are familiar with. Instead of buying the same type of car that you’ve always driven, it may be wiser to list the attributes you are looking for, and then do some research. Really think about what you want versus what you need. For example, do you care most about safety, size, cargo space, reliability, etc? There are great resources on the internet and in bookstores for car reviews. Come up with a list of options that would fit your needs.

Step 2 - Find Financing
Once you know what you are looking for, think about if you would like to buy new, used, or lease. What financing options are realistic for you based on your income and credit? You can visit our articles on these topics for more information. Don’t borrow more money than you are comfortably able to repay.
Your credit score will directly impact the interest rate you will pay on your loan. For example, an individual with a FICO score of 720 is likely to be offered a loan for about 5.75%. Same loan amount, but applicant B has a credit score of 660. Interest rate is likely to increase to about 9.2%, and this will cause the monthly payment to be $15-$20 higher.

Step 3 – Take Your Time
Now that you have a better idea of your price range, start shopping around for selection and dealer incentives for your particular car choices. Do not rush out and buy the first car you see on an impulse. It's better to exercise some patience and be sure about your choice. Be wary of any dealers that make you feel rushed into buying something. Shop online as well as in person --- that helps you compare prices for similar models.

Step 4 - Negotiate
Once you have found a vehicle you are comfortable with, you may want to try and negotiate for a price that you feel is fair. You’re not obligated to accept any offer – be polite, but stand firm with what price you have predetermined from your budget. You can let the dealer know that you are shopping around with other dealers or sellers. If you know your budget and price, you can shop around and let other sellers know what price you have been offered so they have an opportunity to beat the competitor’s price. Another option is buying from a private seller, but understand that those transactions won’t come with any warranty or service support.

Step 5 – Take Precautions
Once you have the car chosen, take your time with all the paperwork and also make sure to test drive the car. If you are buying used, get the vehicle accident history from Car Fax and also get any and all paperwork regarding the maintenance history. Also, it’s a good idea to get the vehicle inspected by a neutral third party mechanic --- the cost of an inspection is well worth the comfort level knowing the vehicle is safe. Be mindful about feeling overly pressured. This is a big decision and you should proceed at your own pace.

Step 6 – Determine Payment Amount
Getting a lower monthly payment isn’t always the best route. Sometimes a dealer will simply increase the number of months on your loan in order to lower your monthly payment, but that often means you'll pay much more in interest over the life of the loan. Be careful about ending up in car loans that last 6, 7, or 8 years --- that’s a long time to have a car payment (and it’s a lot of interest to pay). Also be careful about getting lured into many additional extras like “extended warranties” the dealer may try to include at the end.

Step 7 – Consider Other Costs
Your total transportation expense will include the vehicle payment, as well as everything else –
insurance, gasoline, oil changes, ongoing maintenance, license plate fees, etc. Make sure that you have added all potential costs into your budget. Once everything looks good, you’re ready to buy the car.