How To Buy A Car
With These 6 Easy
Steps to Buying a Car
These six steps on how to buy a car are based on the thousands of car deals I've personally been involved in, to one degree or another.
I've found that the most successful car buyers used one or all of these methods to save themselves both time and money.
The following six steps are a quick reference car buying guide, but if you'd like a more complete 30,000 foot view of the car buying process you'll definitely want to check out my step by step Car Buying Guide. It's one of the most comprehensive online.
1. Know Your FICO Score & Credit Report
The first step in learning how to buy a car is to know more about your credit file than the dealer. If you don't know your FICO score and what's on your credit report it could lead to a costly surprise (high auto loan rates) when it's time to buy.
A $20,000 loan for 72 months at a 6.9% APR equals a monthly payment of $340.
$340 a month fits into most peoples budgets.
On the other hand...
If you thought you'd qualify for the 6.9% rate, but it actually turned out you qualified for an 18.99% APR, you'd be looking at a $467 payment.
Surprise! And not a good one at that...
Review your credit, dispute any inaccurate accounts and settle any accurate collection accounts. Check your Credit Score - Fast, Free & Easy at CreditReport.com.
2. Know Auto Loan Rates
It's pretty obvious that if you want to know how to buy a car that you're going to need money to buy one. If you don't have the cash in the bank, then you'll need to get an auto loan.
Shop auto loan rates for your type of credit to give yourself a heads up and to keep the dealer honest. The best way to do this is to get pre-approved for an auto loan.
My Auto Loan has one of the best auto loan programs online and offers some excellent rates. Take a look at what rates they are offering today -> Apply for an Auto Loan Now
Getting pre-approved gives you the ability to "Buy Like a Cash Buyer," which greatly increases the leverage you have when negotiating the best possible deal.
Getting pre-approved not only let's you know what type of auto loan rates you qualify for, but can also help to make the dealership compete for your business.
For instance, if you were pre-approved for 6.9% and the dealer were able to offer you a rate of 5.9%, then go with the dealers financing.
If you weren't pre-approved, they may get you approved for 5.9%, but sell that very same loan to you for 7.9% and keep the profit in between.
Trust me, that mark up can add up to big money over the life of your loan. Not to mention, an over inflated monthly payment.
"Buy Like A Cash Buyer," it's how to buy a car with maximum leverage. I recently observed the last 40 deals at my dealership and found that cash buyers saved over $2500 per car deal compared to those that financed.
If that's not a call to action, I don't know what is! If you have average to excellent credit, then you can apply with your local bank or credit union as well, but My Auto Loan will more than likely have them beat.
3. Start Your Shopping Online
In our third step in learning how to buy a car, it's really not a good idea to walk into a dealership and have no clue what average prices are for the new or used vehicle your considering.
Most buyers that walk into a dealership with no clue what the average prices are will typically get caught up in the emotion of the moment and pay way more then they could have.
Get a whiff of that new car smell and suddenly you're taken away to a distant, far away place...
I'd personally suggest that you find your next vehicle online.
- Save you a lot of time
You won't have to go dealership, to dealership, to dealership...
- Increase your leverage in a big way
- Will typically save you money right out the gate
This is because of the competitive nature of the Internet.
It also allows you an easier way to turn someone off, i.e. a sales person. If you don't like what they are offering, simply stop responding to them.
You can quickly get up to four free, no obligation quotes with Yahoo! Autos. This simple step will save you hundreds, if not thousands right out the gate.
Even though this is listed number 3 here it is one of the most important lessons on how to buy a car, as your largest savings will come from this one step.
4. Know Your Trade In Value
If you are planning on trading a car in, then you'll want to know what it's worth. This is more like how to sell your car rather than how to buy a car, but it means big bucks lost if you're not prepared. You'll want to check out sites like Kelley Blue Book, or NADA to get a feel for what your trade in value is.
Keep in mind both of these sources are simply guides, and are not set in stone values, but they can certainly give you a good starting point.
For instance some vehicles may be "soft" (not worth as much as it's book value), like a truck with a V10 engine. When gas prices are $4.00 a gallon a V10 truck that has a book value of $20,000 may only be worth $12,000 to $14,000.
That's right. If a dealership were buying a V10 truck with the intention of reselling it, they'd have to be in a position to sell it quickly, or else they risk it collecting dust on their lot for the next year.
People aren't exactly jumping through burning hoops to rush out and buy 6 MPG trucks with $4.00 a gallon gas. By the way, you'll need to expect to get less trading your vehicle in to the dealer than selling it on your own.
There are some benefits and by trading your vehicle in to the dealer you will not have to:
- Do any selling, telling, or explaining to an assortment of interested buyers
- Have random people come to your home to view the vehicle
- And you won't have two payments to make each month
Take a look at my KBB Used Cars Guide to learn about figuring your trade in value and read tips on how to maximize its value.
If you do expect to sell the vehicle on your own, I'd recommend posting it for sale online with one of the large car websites that are out there. This way you'll get maximum exposure.
You'll also be able to have an in depth description with multiple photos of the vehicle posted. This should save you a lot of the selling, telling and explaining to people that may just be kicking tires.
I've created a complete sales guide that I think you'll find quite useful if you do plan to go the private party route, see How to Sell a Car for a complete 14 step guide.
5. Get Insurance Quotes
Now that you've got the basics down of how to buy a car, let's look at one area that is oftentimes completely overlooked until after the fact. This can be a very big and costly mistake...!
I can't even begin to tell you how many customers I've seen go through the whole buying process (usually hours), get all excited about their new vehicle, maybe agreed to $50 a month more in monthly payment, because they had to have that one, and then they call to get insurance quotes.
Using the same scenario above, the customer is already paying $50 more a month than they had figured and now they call for insurance quotes only to find that their insurance is going to go up another $60 a month.
This can be disastrous to your financial future!
Remember there is more to car a payment than the actual car payment itself.
Get insurance quotes before you ever go to the dealership. It's free and doesn't affect your credit. Get multiple quotes and let the insurance companies compete for your business.
You can get a free insurance quote in under two minutes with Esurance. Get your free auto insurance quote from Esurance in minutes & start saving today!
6. Be Prepared
In our sixth and final step on how to buy a car you'll definitely want to be prepared. Trust me, the car salesman will be. Now that you've got all your ducks in a row, print all related information you've found and bring it to the dealership with you.
This will include:
- Invoices for new cars
- The Kelley Blue Book Value or NADA Value for used cars you want to buy
- Print outs of any competitors, similar vehicles with lower prices
- Blue Book Trade Value for your trade in
- Your Pre-Approval letter showing your approved auto loan rates
- Insurance quotes, as a reference, if you are considering multiple vehicles
If you really want to fluster the car salesman, bring a financial calculator with you and use it while you're negotiating, car salesmen love that (sarcasm).
The Internet is truly a great resource for information on how to buy a car and if you are serious about saving time, money and making a hassle free deal, then I'd highly recommend taking some time to do a little research.
It will payoff in the end...
Follow these simple steps to buying a car to minimize the stress and save big money. Remember, a vehicle is typically the second largest purchase you'll make, and if you don't do your homework a car dealer will make you pay.
Trust me I see it happen every day.
Now that you know how to buy a car, what would you like to do next?
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