Decide What You Can Afford, Want And Need

Some people may have saved enough money to be able to pay cash for a new car. Others may have to finance the purchase.

Check a Used Vehicle's History before You Buy: The CarFax Vehicle History Report can save you money and hassle by revealing a used vehicle's history, including title, DMV, odometer, major damage, recall, insurance and more. Ask friends, co-workers and others about their experiences and satisfaction with their cars, would they buy the car again?

Once you have decided on your price range, decide what type of car you want and need. While a sports coupe might be just what you need to get back and forth to work, a larger vehicle may be needed if you need the car to shuttle children to and from soccer activities.

Equal Your Bargaining Leverage

Once you decide on the type of car you need, it is time to do your research to narrow down the choices. A number of publications and web sites will provide comparison information rating the vehicles and providing unbiased information. You can also find up-to-date car buying information at your local library. Ask friends what they like and dislike about their cars.

Compare such areas as safety, reliability, fuel economy, warranties, operating costs, theft rates and options when making a decision to purchase or lease. Also, you may want to take a look at CarsDirect.com. This company will furnish more information to you regarding any type of new vehicle than you thought possible.

Reliability

A number of sources compare maintenance costs on vehicles and have compiled information about repairs that are likely with particular models. Information is also available on the number of complaints filed about particular cars (see your local Better Business Bureau or Attorney General in your state).

Remember that if you buy a "lemon" that needs constant repairs, you may be protected by "lemon laws" in your state. The car manufacturer may be required to refund your money or repair the vehicle. Maintain a file of every repair order, receipt, and letter of complaint.

Warranties (more info? see our Warranty Facts Page)

Compare each car's warranty coverage, which may vary widely among car manufacturers. Consider the length of the warranty, mileage limits, and deductibles. Some cars have basic warranties which cover the entire vehicle, while others have limited warranties.

Operating Costs (Cost Comparison Calculator)

These costs vary from one model to another obviously with luxury cars costing more than economy cars. The factors included in operating costs are fuel, oil, maintenance, and tires.

Some General Features

Consider your particular needs when analyzing different vehicles. For instance, if you need a lot of trunk space for hauling groceries, baseball equipment, or boxes of supplies for your office, choose models with larger trunks.

When looking at different types and models of cars, consider the standard features. All the cars of a particular make and model come with a standard package of features. Optional features usually add costs to the car. Some models have more standard features than others. For instance, some models include anti-lock brakes as a standard feature; in others, they may be optional or may not be available at all.

Options

Numerous options are available for cars, in any number of different packages, or they can be ordered separately. One option may be so important to you that it determines the type of car you buy.

Publications can help you compare the cost of different options. Weigh the cost of these options with their usefulness. Add up the options to determine generally how much they will cost you. Publications can also help you evaluate the different options that are available, and point out details that are important to you. Many car makers offer "option packages," which include popular options, such as air conditioning and power windows, but also may include some features you may not want or need. To get the option you do want, you may have to buy those you do not want.

Decide ahead of time what features you want in a car to avoid being swayed by package deals which may add to the price but not to the car's usefulness.

Consider your needs. Air conditioning may be necessary for your situation and climate. If you do a great deal of long-distance driving, you may want cruise control.

Consider what items contribute to the resale value of the car. Items which may enhance the value of a used car include: air conditioning, automatic transmission, power steering, a powerful engine, anti-lock brakes, driver-side air bag, passenger-side air bag, four-wheel drive, traction control, cassette/AM/FM stereo, cruise control, power windows, power door locks, remote-adjustable mirrors, sunroof, tilt steering column, and alloy wheels.

Getting Yourself Ready To Shop

Ask friends who have recently bought cars about their experience with local dealerships. Ask them about their impressions of the salespeople, the service department, and the management.

Call your local Better Business Bureau and ask for a reliability report on the dealership and how many, if any, complaints have been received about the dealership and how the complaints were resolved.

Auto clubs, insurance companies, employers, or others may offer membership-based buying services, sometimes at no charge for membership. Buying services do not help you decide which car to buy; they help you get the best price they can on a car you have chosen. They do not guarantee the lowest possible price.

To determine ahead how much negotiating room you have on basic cars and extra options, draw up a work sheet for each type of car you are considering. Using updated price lists available from a number of sources, write down the dealer's cost and MSRP (also called sticker price), for the particular make, model, and trim.

For each car, list the options you want. Also, write down the dealer's cost and the MSRP. Look up the destination charges for the car, and include this in both the dealer's cost and the list price, since there is no markup. The destination charge is the cost the dealer pays to get the vehicle to the dealership.

Now compare the dealer's cost and the list price for the car. The difference is your negotiating room. Do the same thing with each of the options. You may be able to negotiate on individual options.

Negotiating The Best Deal (need more info? see our Negotiating Facts Page)

Getting The Best Price

Do yourself a huge favor and Do Not talk price until you are ready to buy. Tell the salesperson exactly what car and options you would like, and ask for the best price. If the salesperson starts to talk about warranties, trade-ins, or financing, tell him or her that you will discuss that later, after you have agreed on the price of the car. Never let the salesperson know whether or not you have a trade-in before you agree on a final price.

Prices shown on the window sticker of the car, the MSRP may be up to 15 percent higher than what the dealer paid. In some cases, you might be able to get a price that's $150 to $300 over the dealer's cost for mid-sized cars in good supply. Sometimes $500 over cost is a good deal, but you will not know until you shop around. You may be less likely to get a good price on a more popular car that is in short supply.

You may also be able to get a better deal from a car already in stock, because the longer a car sits on the lot, the more expensive it is for the dealer. These cars may have expensive options that you neither need nor want. Ask the dealer to remove the option -- and reduce the cost -- or sell you the car without charging for the option.

Timing may make a difference in negotiating. Try to wait at least a few months after the new models come off the assembly line. Also, the busiest car buying season is spring and early summer; you might have more success getting a lower price in December or January.

Financing Your Vehicle (need more info? see Loan Calculator, Amortization Schedule and Financing Options)

In deciding on a lending agency from which to borrow money to finance your car, you should obtain quotes from a number of agencies about their percentage rates and the total cost of the loan.

Car dealers may also offer financing plans. Ford and GM to name just two.

Try to keep the length of the loan as short as possible. A three-year loan with the same rate of interest costs you less overall than a four or five year loan. While you need to keep the payment within your budget each month, you also need to look at your total cost.

Check with credit unions, associations, auto clubs, banks, or insurance companies to compare their interest rates and the total cost of loans.

Ask if you will have to pay any fees if you payoff the loan early (pre-payment penalty)

Do not sign a contract before reading it very carefully and understanding all its provisions. If a clause concerns you, ask to have it explained, or if necessary, changed. Double check all the figures to make sure they coincide with what you have agreed upon.

Consider getting pre-approval for a loan once you have chosen your lending agency. Some agencies will issue you a check "not to exceed" your pre-approved amount, allowing you to use the check like cash when you go car shopping.