Buying a car is a big a financial decision you don’t want to rush into. And the more you know about the process, the more likely you are to get a good deal (rather than getting a load of junk or completely destroying your money).
Use these 10 car buying tips to help you find a reliable ride you can afford!
10 Car Buying Tips
1. Calculate your car budget.
2. Limit your choices.
3. Do your research.
4. Get a car insurance quote.
5. Take a test drive.
6. Get a car inspection.
7. Know the best time to buy a car.
8. Always discuss.
9. Ditch the expensive extras.
10. Bring someone with you.
1. Calculate your car budget.
Reality check: Brand new cars depreciate like a bag of rocks, losing 60% of their value in the first five years!1 In other words, you should only consider buying a new car if you have enough money to burn. Our rule of thumb: Unless you have a net worth of $1 million or more, choosing a used car over a new one is the smart thing to do.
With that out of the way, you need to decide how much you can actually pay for a car. Going into debt to buy one is a horrible idea, so go ahead and take a car loan off the table. That means the car you can afford is the car you can pay cash for. Not only is it possible, it’s the best way to drive a car, hands down!
If you don’t have the money to buy a used car at the moment, you will need to save up. Start by creating a budget. Then find ways to lower your expenses so you can put money towards a car fund each month. (If you’re buying a car for your teenager, this is a great time to include them!)
Remember, leasing or financing a car it won’t be help you build wealth. It’s much easier to save about $533 per month (the average used car payment) for 10 months and buy a used car with no strings attached.2 Do you really want to sign up for years of car payments and pay thousands of extra dollars for several years? Of course not – you’re smarter than that!
2. Limit your choices.
Once you’ve decided on a price, start looking at cars that fit your budget. There are plenty of places to find used cars in your area. Your local dealer probably has a website where you can see the used cars they have in stock. And you can check sites like Craigslist to see what other cars are on the market.
Then, narrow down your options to a few cars that fit your price range and needs. Consider factors such as safety, speed, gas mileage, comfort, and how it handles in bad weather.
Maybe you love that sporty looking sedan, but you know in your heart that a minivan is the only thing that makes sense for your family. Remember, just because something fits your wallet well doesn’t mean it will work for your lifestyle – so be realistic.
3. Do your research.
When you find a few cars you like, you still need to do more research and ask the right questions before you’re ready to buy them. Look up the vehicle’s Kelley Blue Book value to make sure the price is fair for that year and model.
You should also check each vehicle’s history report. This will tell you accident history, repair information, possible recalls, and other important information about the car. Simply ask for the Vehicle Identification Number (VIN) from the seller and use a website like VehicleHistory.com or Carfax.com to research the car’s history.
Some sites charge for the car information they provide. But while paid reports may be more comprehensive, free reports will alert you to any major red flags. Some car dealers or private sellers will also provide a report if you ask. Either way, it’s worth a check – because if you get a good deal but go to the shop every week for maintenance, you’ll be spending more money in the long run .
4. Get a car insurance quote.
By now, you should have a handful of potential cars that look historic and fit your budget. But one thing people forget to consider is the cost of car insurance. And if you didn’t know, the type of car you drive affects your monthly premium.
Talk to your current insurance agent about running a few quotes for the cars you have in mind. If the price is too steep, don’t be afraid to consult an independent insurance agent who can shop around to get you the best rate.
5. Take a test drive.
Now for the fun part: Take the car for a test drive!
You should know exactly what you want before you even set foot in a dealership. Otherwise, car dealers are quick to steer you in the more expensive direction. So, keep an eye out for their upselling tactics! If the dealer doesn’t have the car you want but they have a budget-friendly similar model with a new sound system and heated seats, it’s still not the right car for you.
Once you’re ready to get behind the wheel for your test drive, choose a route that allows you to experience different types of driving. The way a car handles on the highway will be different to the way it drives in the city. Pay attention to anything that seems strange. Does the car shake when you go over an embankment? Are there any strange noises?
Write down whatever you notice so you know what issues to bring up in discussion (more on that in a minute).
6. Get a car inspection.
Before you commit to a used car, you need to take it to a mechanic for a full inspection. While the car might look and feel fine when you take it around the block, you never know what might be going on under the hood. And sellers can lie about the true condition of a car when money is on the line.
Don’t feel awkward about asking for an inspection. This is a normal part of the car buying process. And if the seller is hesitant or upset when you ask for one, that’s a huge red flag that they probably have something to hide.
7. Know the best time to buy a car.
In general, the best times to buy a car are during holiday weekend sales, at the end of the month and at the end of each quarter—when salespeople are trying to make their quotas. So, try to buy around March, June, September or December.
At the end of summer, many dealers want to sell as many cars as possible to clear space for newer vehicles. And towards the end of the year, they start cutting prices so they can reach their annual goals. You can also try going later in the day to see if dealers are more willing to sell before their shift ends.
With how crazy the used car market is right now, you may not get as good a deal as you could before with this tip. But waiting for the right time to buy a car can save you hundreds – if not thousands – of dollars on the final sale price.
8. Always discuss.
If you’ve done your research and are paying with cash, you’ve already started negotiating the best car price. And listen, it doesn’t have to be as scary as it sounds.
Give the seller a price you are willing to pay for the car. This price should be lower than what you are actually willing to pay, so there is room for you and the seller to meet in the middle. And make sure you mention any problems that arose during the test drive or inspection.
Negotiation is about the attitude. You have to be prepared to walk away from this car if the seller doesn’t come down on the price. If a dealer senses for even a second that you really want a particular car, you won’t get a good deal.
It also helps to see if another third party or dealer is selling the same car at a better price. If you get a deal from one seller and take that dollar amount to another seller, they may come down on the cost. Be very clear that you are paying in cash and that you are not interested in getting a car payment. While dealerships will likely push you for finance, ultimately they want to make the sale – so don’t pay back.
When buying a car, don’t get stuck paying for things you don’t need – like a roof rack, chrome rims or a fancy backseat sound system. These extras added by dealers can increase the price of the car by hundreds of dollars! So, when they try to talk to you about all the ways you can customize your car, say so no.
Also, don’t buy an extended warranty. That money goes straight into the dealer’s pockets, and your chances of actually using that warranty are low (otherwise, dealerships wouldn’t push them so hard).
The truth is, you don’t need an extended warranty if you have your full emergency fund in place. That alone will cover any car repair costs that arise or even include replacing your car in the near future.
10. Bring someone with you.
When you’re buying a car, it’s never a bad idea to take a friend or family member with you – especially if you don’t have much experience with the process or don’t know how to bargain for a good deal.
Another person can help you stick to your budget and spot things about the car that you may have missed. And if they know a lot about cars, they can use their knowledge to help you make the best decision.
Budget for the Car You Want
Remember, the purpose of a vehicle is to get you from point A to point B, not to prove your social status to the world. As tempting as it is to hit the road in a car you can’t afford, it’s more likely to be a burden than a blessing – especially when you have a huge monthly car payment to worry about.
So, do yourself a favor and save up to a car payment in cash. And the best way to do that is with a budget. A budget helps you make a plan for your money, so you can spend less and save more on the things you want – like a sweet, new you ride!