How To Buy A New Car

Its important to learn how to buy a new car because the cost of a new car is second only to a house as the most expensive purchase you will ever make.

The average price of a new car sold in the United States is about $32,000.00. That’s why its crucial to know how to negotiate and deal with car salespeople when buying a new car.

How To Buy A New Car...

If you figure out what car model and options you want BEFORE buying a new car, then you will be less apt to make spur-of-the-moment decisions based on emotion. Emotional decisions when buying a car can and probably will cost you thousands of dollars more.

You can learn how to buy a new car by looking at magazines online, at the library or at a bookstore, that discuss new cars. Try to find out what the dealer costs for the new car you want.

Compare models and prices in newspaper ads. Consider contacting car buying services to compare prices. If (and thats a big IF) you can go to a car dealer to ONLY look at this point without caving into pressure to buy a new car, then do that too.

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I know this may seem obvious, but you are going to want to negotiate the price when you buy a new car. Dealer profit margins are usually between ten and twenty percent, which is usually the difference between the manufacturers suggested retail price (MSRP) and the invoice price.

If the car you want isn't on the lot then you might want to just order a new car. It may take some time, but at least it will be exactly what you want and you won't be paying for options that you don't want. However, because of incentives offered to the sales person, you might be able to negotiate a much lower price on buying a new car that is already on the lot. So if want you want isn't on one lot then just start calling other dealers. Get them to promise that the car you are describing is really there because some salespeople will promise you anything over the phone just to get you on their lot.

New Car Buying Terms...

Part of knowing effectively how to buy a new car involves a few terms you should be familiar with...

Invoice Price: This is what the manufacturer has charged the dealer for the car. This is often a higher price than the dealers final cost because of allowances, discounts, incentives and rebates. The invoice price should include destination and delivery (freight). Make sure you don't get charged twice for freight.

Base Price: This is the cost of the car without options. Base price will include the factory warranty and standard equipment and is shown on the Munroney sticker.

Munroney Sticker Price (MSRP): This will be the sticker shown on the side window and is required by federal law. It includes the base price, manufacturer options, the cars EPA gas mileage and manufacturers transportation charge.

Dealer Sticker Price: This is the MSRP plus the suggested retail price of dealer installed options like, additional dealer profit (ADP), dealer preparation, undercoating, and additional dealer markup (ADM).

How To Finance A New Car...

If you are financing your new car then you need to know that you can almost always get a better car loan from an outside source instead of through the car dealer. Plus, by getting pre-approved, you will know exactly how much car you can buy.

Be very careful of only concentrating on the monthly payment. You need to focus on the annual percentage rate (APR) and the length of the car loan.

Car dealers sometimes offer very low or no interest rate car loans for specific models. The downside is that you may not be able to negotiate a lower price on the car. These low interest loans are often used to entice you into the dealer but your credit rating might not allow you to even get one. Its important to know yours before going to the dealers (and take it with you) in case the salesperson tells you that you have a score that is lower.

When you buy a new car; NEVER discuss how much you want your monthly car payment to be. Just tell them that you are interested in the lowest out-the-door price you can find.

Before signing any contract, make sure you can even afford it! Also make sure you have a copy of the contract that BOTH you and the dealer have signed and that all the blanks are filled in.

Trading in Your Old Car...

Sell your car yourself. You will get more money from your car if you sell it yourself. If you insist on trading in your old car, then you need to check Kelley Blue Book, NADA guides and Edmunds online to find out what its worth before going to the dealer. You should really clean it up too. If the dealer offers you as much as what you could sell your old car yourself for, then its undoubtedly because they added more to the price of your new car. To avoid this, do NOT mention anything about trading in your old car until AFTER you have gotten a firm out-the-door price on the new car.

Buying An Extended Auto Warranty...

Don't let the guy in the finance department tell you that you have to buy an extended auto warranty from him. You don't. Extended auto warranties are basically an insurance policy that covers repairs and parts after your manufacturer warranty ends. It is an insurance policy that adds peace of mind, but you can usually buy one for much less money from an outside source rather than buying the extended car warranty offered to you at the car dealer.

6 Questions to ask BEFORE buying an extended auto warranty...

  1. Whats the difference between the manufacturers warranty and the extended auto warranty?
  2. Does it cover routine maintenance?
  3. What repairs will it cover?
  4. Does it cover the labor and parts for repairs?
  5. How long does the extended warranty last?
  6. What is the cancellation and refund policy?


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