What to Know When Buying a Car

Car Needs

Determine your needs before you shop for a car. Consider the uses you'll put the car to, such as number of passengers, travel times and accessories desired before taking a step into the dealership. Then decide if you'll be buying new or used. Do the math on maintenance costs and new car deals before making a final choice; buying new may cost more up front, but could be less expensive in the long run.

You'll want to set a firm target price before shopping around for a car. Using the Internet you can price multiple autos without the pressure you'll get at a dealership as well the various financing options available.

Any presently owned car may be a factor, either as a trade-in, or as a continuing cost against your budget. You should plan on spending no more than 10 to 15 percent of your monthly budget on the car purchase, including related expenses. Keep insurance costs in mind when budgeting. A new car is more expensive to insure than a used one, especially with collision and comprehensive coverage. Some models are less to insure than others, so research will pay off.

If you plan to take out a car loan, shop around for the lowest rates and get a pre-approved loan before beginning any negotiations with a dealer. Credit unions often charge 1/2 to 1 percent lower interest than banks on car loans.

Shop around for a dealer. Multiple dealers will offer you different prices on the same car make and model. Whenever possible take competing bids from dealerships. Your online search prior to entering the dealership should have given you an idea on the dealer's invoice prices, so you'll know how close to that price he's going on his end. Use Edmunds.com or Kelley Blue Book to find dealer costs (see resource section). If negotiating isn't to your liking there are auto-buying services available that can provide you with low no-haggle prices. For these services look to online sites such as Carsdirect.com for free pricing, discount clubs like Sam's Club and BJs, or to retail auto-buying services for prices that may be harder to find.

Look out for high priced add-ons when closing the sale. Many dealers will try to get the price up at the signing by offering you high profit options for seemingly low prices. These offers will raise the overall price of your car and ruin the gains you made during the negotiation phase.

When buying used, check the history of the car. Many car dealers sell what are known as certified used-cars that often come with a new warranty after undergoing dealer checks. For those not certified, a service like Carfax or Autocheck will find the history of the car by the vehicle identification number and report its findings. Things to walk away from are odometer inconsistencies and salvage titles. You should also have a trusted mechanic check the car before you close the deal.