For most people, cars are your second biggest expense (after housing). We either love cars or love to hate them, but either way, we spend a lot of money on them.
We’ve put together this car buying guide to help you navigate the process of buying (or selling) you’re next new-to-you car.
How to buy a car with confidence
Decide how much car you can afford
Whether it’s your first time buying a car or your fiftieth, always begin the car buying process with a budget.
Consider how much you can afford before what kind of car you want. From a financial point-of-view, the less you spend on a car, the more money you have left over for everything else.
Vehicles are not an investment. It’s an emotional thrill to buy a new car, but a used car is a far better value. If you do decide to buy used or lease, remember that a good car salesman will steer you towards the most expensive options. Know your number first so you don’t overspend later.
Find the best price on a car
Many car dealerships are getting better about price transparency, but most still try to push pricey — often unnecessary — add-ons, and you may still run into a shady salesperson. Learn how to spot the most common car sales tricks and how to negotiate around them.
If you can, always negotiate your price via phone or e-mail.
Do your test driving first. Leave the dealership. Call back the next day and negotiate a price over the phone, or better yet, follow this trick the car dealers hate to secure a rock bottom price. The dealer will hate you, but you’ll get the best price possible.
Consider a service like TrueCar to find your car for you.
TrueCar is company that lets you shop and price your car online and matches you with a local partner dealer to deliver the car. Once you select the car you want, TrueCar’s price is guaranteed so there are no surprises upon delivery. Read our review of TrueCar to learn more.
Should you finance, pay cash or lease a car?
Deciding how to pay for a new car is a personal choice, however, we at Money Under 36 feel that it’s always best to pay cash for a car when you can.
When you save cash to buy a car, you’re less likely to overspend — parting with thousands of dollars hurts in away that signing a loan application does not. But there are exceptions. If you’ve already built some amount of wealth, financing or leasing can be advantageous if it allows you to keep cash invested and earning a higher rate of return.
Many times, you need a new car and need to finance. No problem. Fortunately, car loans are fairly easy to get and come at reasonable interest rates. Before you sign, however, you want to make sure you’re getting a fair interest rate and understand how much you’ll pay for the loan.
- Learn how to finance a car the smart way
- Get personalized auto loan quotes online now before you go to the dealer
- Can you finance a used car?
Should you buy an extended warranty?
Say “no” to third-party extended warranties that are not backed by the vehicle manufacturer.
In general, dealer extras like paint coating and VIN etching are totally not worth it. Save the cash for car washes and comprehensive insurance. Extended warranties, however, are a more complicated decision. The best extended warranties are sold by the manufacturer on new or certified pre-owned cars, and you have to watch out for totally worthless warranties sometimes sold on used cards. Proceed carefully.
If you have the option of buying an extended warranty (service contract) from the vehicle manufactuer (Ford, Toyota, BMW, etc.) and you plan to drive the car for many years beyond the expiration of the factory warranty, it might be a good idea. A warranty is a kind of insurance. When you buy it, you’re insured against the cost of major repairs. When you don’t buy it, you assume that risk yourself.
Does it really matter which car insurance company I use?
Yes! Finding the car insurance company that can offer you the most favorable rates can, as the ads promise, save you hundreds of dollars a year.
Not only do you want to compare quotes and shop around, you need to understand what insurance you’re buying so you don’t pay for coverage you don’t need or get into an accident only to discover you didn’t have the coverage you thought you did.
- The best car insurance companies
- Do you need comprehensive and collision insurance?
- 10 questions to ask when buying car insurance
Should I sell or trade in my used car?
You will always get more money for your used car by selling it on your own rather than trading it in at the dealership.
Expect to get an average of 20 percent more for your old car by selling it yourself. Follow our advice for selling your cart to get the absolute most value from your car. Don’t be lazy, sell it yourself!
If you simply can’t stomach the task, be sure to there are steps you can take to maximize how much you get for your trade in at the dealership.
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