New Car Buying Tips

Buying a new car isn't difficult; getting a great deal on the car you want is. This page contains several New Car Buying Tips which aim to demystify the world of auto financing, dealerships and the hard sell.

For a complete walkthrough of the new car buying experience, visit Mahalo's How to Buy a New Car and How to Get a Car Loan.

Tips for Buying a New Car

(Creative Commons photo by Niels Heidenreich)

Decide if you really need a new car? A car is one of the most expensive things a person will buy in his or her lifetime. However, unlike a house, a diamond or a big sack of gold, cars are not an investment. With very few exceptions, cars lose their value as soon as they roll off the lot. Before buying a new car, ask yourself why you need one. And, answer honestly.
Figure out if you can afford a car. When budgeting to buy a car, remember that cost of the vehicle isn't the only cost you'll encounter. Don't forget to take insurance, maintenance and repairs, fuel, licensing and registration and parking into account.
- As for the cost of the car itself, use a tool like The Motley Fool's "What vehicle can I afford?" online calculator to figure out exactly how much you can spend without breaking the bank.
Settle on a type of car. Ask yourself a few questions to help narrow down your automotive choices. How much time will you spend in your vehicle? How many miles will you put on your car every year? How will you use your vehicle? Use the process of elimination to figure out what type of car you need versus what type of car you want.
Pick three. Once you've figured out what type of car you need, pick three similar models to test drive and price. If you're relatively flexible with your choices, you're more likely to get the best possible price when it's time to negotiate.
Ignore the MSRP. The Manufacturer's Suggested Retail Price (MSRP) or sticker price is meaningless. It is an arbitrary number created by the manufacturer to be "suggested." It has no bearing on the real price of the vehicle.
Research the Invoice Price. The price you actually want to base your eventual offer on is called the "invoice price" or the price paid by the dealer to the manufacturer. You can find a car's invoice price with or without options online at Edmunds.com, MSN Autos, Autosite or CarPrices.com.
Get a free credit report. Unless you're independently wealthy, you'll probably need to secure financing in order to purchase a new car. Before you start comparing the financing deals, you'll want to get a free copy of your credit report as your credit score determines the interest rate of your car loan.
- Be careful securing a credit report. There are dozens of fraudulent websites offering free credit reports. The only website authorized to give you a report is AnnualCreditReport.com.
- Visit Mahalo's How to Get a Free Credit Report for additional information including how to get a credit report over the phone or by mail.
Secure financing from your bank before you hit the lot. It is best to secure financing from your bank or an online lender. If the dealership from which you buy your car can match or better your bank's terms or offers a rebate as part of their financing package, you might then consider using the dealership as your lender.
- The Motley Fool has several online auto calculators that can help you determine which financing offer is better, what terms make sense in relationship to your budget, what your monthly payments will be and whether it's better for you to finance or outright buy your vehicle.
- Visit Mahalo's How to Get a Car Loan for additional information on how to secure the best car financing deal.
  (Creative Commons photo by Erik Abderhalden)
Make an appointment for a test drive. Call the dealerships in your area. Ask for the sales manager. Tell them that you want to come in to test drive whichever car it is you've decided on. If they do not have that vehicle in stock, do not go there. Even if they do not have the car you're asking for, they will try to get you on the lot. Only make appointments a day or two out. You don't want to go to a lot, and have them tell you when you get there that they sold the vehicle you wanted to test drive. If they do this, leave.
Bring a checklist with you to the test drive. Use the Consumer Reports Test Drive Checklist to collect your thoughts on the vehicle immediately following the test drive.
Take a test drive, but don't buy. This is the number one rule of the test drive. Even if they're willing to cut the price in half and throw-in a year's supply of Turtle Wax, do not buy the car on the same day you test drive it.
Negotiate a price with multiple dealers. The trick to negotiating the best price for a new car is to force multiple dealers to bid competitively for your dollar. All that research you did on the fair market price of the vehicle and the fact that you secured financing from a lender other than the dealer makes you one seriously empowered buyer.
- For a full breakdown of the competitive bidding process, read Mahalo's How to Buy a New Car section on Negotiating a Price with Multiple Dealers.
Use CarBuyingTips.com downloadable pricing worksheets. CarBuyingTips.com offers several free downloadable worksheets to help you get the best price on the vehicle of your choice and an exhaustive rundown of dealers' less ethical sales tactics.
Use the internet to make dealers come to you. Use websites like Yahoo! Autos, CarsDirect, Edmunds.com or Car.com to figure out the invoice price for the car you're interested in. Dealers will contact you based on the online forms you fill out. Use these contacts when you're ready to have the dealers bid for your business.
Negotiate the true, final price of the car. Negotiate the final "drive it off the lot" price of the car with all the dealer fees included. Do not negotiate based on monthly payments, and do not allow the dealer to figure the trade-in value of your old car or financing deals figured into the equation.
Get it in writing. Do not sign on the dotted line until everything is complete and in writing.
Do not sign an As-Is agreement. This is basically waiving off your warranty.
Do not buy extras. Car buying expert Rob Gruhl calls this equivalent of stocking up on candy at the movie theater. Don't buy anything that you can get at the half the price at any after market auto supply store or custom shop.