Car Buying Guide

How to Buy a Car in
11 Simple Steps

The following car buying guide is a culmination of my nearly 13 years experience in the car business and the multiple thousands upon thousands of car deals that I have been a part of.

My experience in the car business has shown me what steps to buying a car...

• Have worked for customers
• Have not worked for customers
• Have worked for car dealers and...
• Have not worked for car dealers

My goal here is to share my experience with you so that you can avoid the pitfalls and learn the right steps to buying a car for maximum time, money and stress savings.

Now 2 Versions! For the more in depth, most comprehensive car buying guide online start here: Steps to Buying a Car.

If you want your information fast, then the new, more condensed car buying guide is for you. Learn how to buy a car just below.

Table of Contents

• Before You Go
  • Your Credit
  • Pre-Approved Loans
  • Know Insurance Costs

• Get Ready to Go
  • Budget & Shop
  • Figure Trade In Value
  • Figure the Dealers New & Used Cost

• Once You Are There
  • How to Inspect Used Cars
  • Successful Four Square Negotiating
  • FedEx It! Make it an Overnight Delivery
  • Avoid Scams in the Finance Office

• Take Delivery
  • We Owes / Due Bills
  • Buyers Remorse

No matter what your level of "expertise," I'd recommend reading about the 7 types of car buyer as this will help you to establish a solid understanding of the car buying game - who wins, who loses and why. Never underestimate a car salesman!

If after reviewing the car buying guide below, you still have not found what you are looking for, then please feel free to contact me with your car buying questions.

Let's start the car buying guide with steps 1 to 3 and what to do Before You Go...

1. Know Your Credit

It's very important to know what's on your credit report and what your credit score is. Of course, if you are paying cash for your next vehicle, then this step of the car buying guide can be skipped.

However, if you are financing you must know how you will look to a lender and what credit tier you will fall into.

I've seen it many, many times where a customer thinks they have a 750 credit score and that they'll qualify for top tier interest rates, but numerous factors, such as:

• Small collections (medical is the most common)
• High balances on credit cards (balances over 35% of the limit hurt)
• Incorrect information reporting (very common for a Jr. or a Sr. and with very common names)

cause unforeseen problems.

The difference between A+ tier finance rates and let's say a B tier can be 5% or more. A 5% difference on a $20,000 loan at 72 months equals over $3,500 in additional finance charges. What if that 5% was 8% or even higher?

Check your credit and score, settle small collections, pay down credit cards and dispute inaccurate information. You'll save a ton of dough in the long run. You can get your credit report and score here: Free Credit Score!

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2. Get Pre-Approved for an Auto Loan

In the second step of the car buying guide you'll want to arrange your own financing and get pre-approved for an auto loan. Of course, you could let the dealer arrange this for you, but you'd probably change your mind after reading about car dealer finance profits and how much they make arranging loans.

Outside of the profits the dealer makes from arranging financing, having a blank check in your hand from your own source allows you to buy like a cash buyer. It simplifies the negotiation process and helps you focus on the only number that really matters, the sales price.

Not too long ago I had compared 40 cash deals to 40 finance deals and found that on average cash buyers paid over $2,000 less.

Moral of this Story

You will save money Buying Like a Cash Buyer! Up2Drive.com offers extremely competitive rates and once you're approved issues you a Drive Check which you use like a personal check at the dealership. Very easy!

They offer loans for both new cars and used cars. Apply today to see what low rate you'll qualify for.

If your credit is not the best, then you'll want to take a look at my Bad Credit Car Buying Guide

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3. Know Insurance Costs

In the third step of the car buying guide, let's take a look at the three most common types of "insurance" and what to watch for.

Auto Insurance

Imagine that you've found your dream car and wanted it so bad that you were willing to pay $75 more a month than you had originally budgeted for. It will strap you a little bit each month, but for this car it is worth the sacrifice.

Only problem is that you didn't check auto insurance rates until the day after you signed that very legally binding 5, 6 or even 7 year contract. Not only are your monthly payments higher than you can comfortably afford, but now your insurance is jumping up another $65 a month. Ouch!

80% of the dealerships that I've worked for had very strict no return policies and unfortunately for these customers, they were stuck!

Don't get stuck, especially with something as easy as getting insurance quotes. It should always be free to get quotes, it doesn't affect your credit and is typically very fast. Get Your Free Auto Insurance Quote from Esurance

Vehicle Extended Warranties

Buying an extended warranty can be an excellent idea to pay for any future mechanical issues your car may encounter, but you will definitely want to do your homework ahead of time. There are lots of "fly by night" companies that would be happy to take your money and run!

You'll want to know what type of coverage you are buying and about the company you are buying it from. Here are 12 very important questions to ask about your Vehicle Extended Warranty.

In addition, car dealers can make rather hefty profits selling extended warranties and I'd suggest you get some quotes online to be sure the dealer is not out of line with their pricing.

You can get your quotes from the largest online retailer Warranty Direct or if you are buying a GM vehicle, then you can get your Never Pay Retail GM extended warranty quotes.

GAP Insurance

If you will be financing your vehicle and not using at least a 25% down payment, then you definitely want to learn the benefits of GAP insurance.

In a nut shell, GAP insurance will settle the difference between your insurance companies payment and what is actually owed to the lender in the event your vehicle is totaled out in an accident or stolen and not recovered. This can equal thousands of dollars that you'd have to pay without this coverage.

If you are not familiar with GAP insurance, please do yourself a favor and learn more about GAP Insurance once you are done reading the car buying guide.

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Let's move on to steps 4 to 6 of the car buying guide and get ready to go to the dealership...

4. Budget & Shop Cars Online

In the fourth step of the car buying guide we'll cover the importance of budgeting and a couple of great sources to shop for cars online.

It's very important to figure a budget prior to getting to the dealership. Not only do you want to figure one, but you'll want to stick to it once at the dealership.

I've seen more than one customer take on way more payment than they could afford and it usually doesn't end well for their credit.

Use this car payment calculator to get a feel for what type of payments you'll be looking at for the car you want. Don't forget to add for taxes, warranty, GAP insurance, etc. in your estimated amount financed.

If you have excellent credit, figure between 4%-7% for your rate, for above average credit figure 7%-9%, for average credit figure 9-14% and for below average credit, then use a rate between 15% and 24%.

Ready, Set, Shop!

The Internet has made the car buying process so much easier these days. In addition, the Internet has made it possible to save hundreds if not thousands of dollars, before you even step foot in a dealership.

There are two sites that I highly recommend you take a look at. First off, you can get free quotes from Yahoo! Autos. Not only are they free, but you'll get up to 4 competing quotes by filling out 1 simple request.

If you really want to avoid a car salesman altogether, then you'll love CarsDirect and their new car buying service. You'll eliminate the salesman, see MSRP, Invoice and the CarsDirect guaranteed lowest price. It doesn't get much easier than that!

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5. Your Cars Trade In Value

Don't forget about your trade ins value, this fifth step of the car buying guide is often overlooked and can cost you thousands!

You can get a great price on the car you're planning to buy and possibly even buy it a $1 over invoice, but still let the dealership profit thousands of dollars more than they could have, because they "low balled" you on your trade.

Low balling is a term used to describe a dealership showing you $7,000 for your $10,000 car. Instant $3,000 profit to them if you've got no clue what your trade in is worth.

Two of the largest sites for figuring used car values are Kelley Blue Book (west coast states) and NADA (most others).

Take a look at whichever one is used most in your area to find the trade in value of your to get a feel for your trades value. Keep in mind that these are simply guides and their used car values are not set in stone, but they'll give you a good starting point.

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6. Dealers New & Used Car Cost

The sixth step of the car buying guide is a fun one. Figuring out how much the dealer owns their cars for...

New cars are much easier to figure and finding the invoices is simple. Use either one of the car buying websites mentioned above, Yahoo! Autos or CarsDirect, and another great source for researching vehicle values is Edmunds.com.

Figuring a used cars cost is quite a bit different. The easiest way to do this, but not necessarily the most accurate way, is to get the trade in values from either Kelley Blue Book and/or NADA.

Take those trade in values and figure about $400 - $800 (reconditioning cost) on top of those figures to get a rough estimate of what a dealer owns a used car for.

To really master this, I'd suggest you take a look at my dealers used car cost page, because there are quite a few factors that can affect the cost.

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Let's move on to steps 7 to 10 of the car buying guide and learn what to do at the dealership...

7. Automobile Inspections

The seventh step in the car buying guide can be a bit challenging if you are not mechanically inclined, but I'll try to make it easy with some basic areas to inspect.

I always recommend a professional mechanic inspect the vehicle prior to purchasing, but learning how to inspect a vehicle will teach you how to spot obvious problems up front and save you a $75 mechanics inspection fee.

Unfortunately, inspections are not a 1, 2, 3 easy and done type of thing to teach. To learn more than what's covered here I'd refer you to my used car inspection guide, you'll be overhauling engines before you know it.

This may seem obvious, but look for the "obvious" when inspecting a car.

Do a quick walk around and look for...

• Offset wheels
• Broken lights
• Mismatched paint
• Obvious dents or dings
• Cracked or chipped glass
• Condition of the tires and tread depth

Get under the hood and look for obvious signs of problems...

• Oil leaks around the engine or on the ground
• Correct levels of fluid and how clean they are
  • Oil should be a brown, not black
  • Transmission fluid should be light red/pink
  • Coolant should be greenish in color
• Split wires
• Cracked hoses or belts
• Corrosion on the battery

When you're inside the vehicle you want to be sure to check...

• Gauges and lights
• For the smell of mildew
• For cold blowing AC
• All power windows and seats
• The radio, cassette and CD player
• Burns holes or tears in the seats

Basically, push buttons and make sure everything works the way it should.

When you drive it make sure there are no loud knocks, bumps, rattles or thumps. Be sure it doesn't pull to one side or the other and that there are no major clouds of smoke coming from the tailpipe. You want the car to accelerate smoothly and stop on a dime!

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8. Four Square Negotiating

Negotiating...Love it or hate it, there comes a time when you'll have to do it. The eighth step in the car buying guide will prepare you to negotiate a four square like a pro!

Car dealerships have been using four squares for years to negotiate car deals. It's pretty straight forward and consists of one square each for the...

• Sale Price
• Trade In Value
• Down Payment
• Monthly Payments

The key to negotiating car price with a four square is to not do what the dealer wants you to do.

What is it they want you to do?

Well, their goal is to get you to forget about the top two squares (Sale Price and Trade In Value) and focus solely on the bottom two. This is how they make the most profit.

If you fall into this trap you will lose! Negotiate one box at a time starting with the sale price. Get that where you want it to be and then move to your trade in and so on and so on.

For more information follow the Four Square Negotiating link above or if you hate to negotiate, but still want to save some money, here are some easy tips on buying a new car and some easy tips on buying a used car. Either of those will help you to save some serious money without a long drawn out negotiation.

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9. Borrowed Car Agreement

If you've made it to this stage of the car buying guide, then give yourself a big pat on the back! This is what I consider to be the absolutely top car buying tip found throughout this site.

Do not buy the car the first day that you see it and/or the day you negotiate numbers. Ask the dealer to borrow the car for the night.

You'll notice this steps comes after the negotiation and there is a reason for that. Let them show you all the numbers before you spring this on them, because you want to be able to analyze the numbers from the comfort of your home.

In addition, you'll want to wake up to the car in your driveway to see if you still have that "I've gotta have it" feeling in the morning.

Follow this ninth step in the car buying guide and you're practically guaranteed to eliminate buyers remorse.

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10. Scams in the Finance Office

You may think it's the car salesman that's out to get you, but the real scams happen here. Trust me, I am a Finance Manager and have seen many other Finance Managers uses scams, tricks and ploys to separate nice people like you from their hard earned money.

The best advice I can give you is to never sign any contracts or purchase orders blank. Let me say that one more time, because I've seen it happen so, so, so many times...Do Not Sign Blank Contracts!

In addition, be sure you read (don't just take the Finance Managers word for it) everything contractual that you are being asked to sign and verify that the numbers are the same as what you agreed to.

This is most important with the contract and the purchase order. If the Finance Manager is moving too fast on these two, then ask them to slow down or repeat what it is you are confused about.

Read my car buying scams to learn about some of the most common scams in use today.

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You're almost done. Let's move on to step 11 of the car buying guide and get ready to take delivery...

Congratulations! You've made it to the final step of the car buying guide and are now ready to take delivery.

If you have followed the previous ten steps in the car buying guide, then you can pat yourself on the back, because you now know how to buy a car like a pro. You can feel confident that you are getting a great deal all the way around.

Upon delivery of your new car, all you really need to do is give your new car a good one over inside and out. Definitely be very sure that you've got everything promised to you in writing.

Make sure that the detail department has done an adequate job preparing and cleaning your new car and make arrangements to have any "We Owe/Due Bill" work done.

Also be sure the salesman covers all of the options on the car and explains how to use everything, not just the radio.

If for whatever reason you find that after buying your new car there is a problem that is not being handled to your satisfaction by the car dealership then read my Buyers Remorse article for further advice.

If all is well, then all that's left to do is map out a route to all your family and friends houses to show off your new car.

And, as always, if you need help regarding this car buying guide or anything else related to buying a car, please don't hesitate to contact me with your car buying questions, whether it's before, during or after you've bought.

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