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5 min read Published October 21, 2022

Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is an expert in navigating the ways and pitfalls of borrowing money to purchase a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers gain the confidence to manage their finances with precise, well-studied information that breaks down complex topics into manageable bites. The Bankrate promises

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If you have questions about money. Bankrate has answers. Our experts have been helping you master your money for more than four years. We strive to continuously provide consumers with the expert guidance and tools required to make it through life’s financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our content is honest and reliable. Our award-winning editors and journalists produce honest and reliable content to help you make the right financial decisions. The content we create by our editorial staff is factual, objective and is not influenced by our advertisers. We’re honest regarding how we’re in a position to provide quality information, competitive rates and practical tools for you , by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products and, services, or through you clicking certain hyperlinks on our site. So, this compensation can affect the way, location and in what order items appear in listing categories and categories, unless it is prohibited by law. This is the case for our mortgage or home equity products, as well as other home lending products. Other elements, like our own proprietary website rules and whether a product is available in your region or within your personal credit score may also influence the way and place products are listed on this site. Although we try to offer an array of offers, Bankrate does not include information about every financial or credit product or service. If you’ve spent the last couple of months dreaming about getting a brand new car in your driveway, chances are you’re checking out models, comparing deals and evaluating what add-ons you can afford. Buying a car is an investment of a lifetime; you’ll need to think about costs as well as financing options and negotiation strategies prior to going to the dealer. 7 steps to buying a new car When you’re ready, adhere to these seven to maximize your buying experience and leave with the car that you’ve always wanted for an affordable cost that won’t cost you a fortune. 1. Figure out the amount you can afford. You might have your eye on a particular car, but you won’t be able take it home until you . Take into consideration the monthly installment along with other . The best rule of thumb is to not spend more than 20 percent of your monthly household income on a new car. This amount should comprise the monthly car loan payments as well as all other costs, including fuel, , maintenance, repairs and registration fees. The monthly payment, by itself it is recommended to aim for no less than 15% of your income. You can use this to determine an accurate estimation of the amount you’ll be paying each month and in interest over the life of your loan. This is equally important as it will determine the rate of interest you pay. 2. Decide whether you want to lease or purchase the vehicle Do you want to drive the vehicle until the wheels are on? If yes, then buying is the best choice as you’ll have the ability to sell or trade in the car when you need to get a new set of wheels. But, if you’re looking to get an upgrade at least every 3 years . Leasing means that you might obtain a higher-end car for your money as they usually offer lower down payment requirements , and lower monthly payments. But you won’t own the car outright and you’ll have to search out for lease terms that are specific to your needs, such as mileage restrictions and wear-and-tear fees, to avoid expensive penalty charges. Consider the vehicles on your radar and weigh the one of them. Bankrate’s will help you estimate potential savings on the cost of purchasing or leasing to help you make an informed choice. Take into consideration certified pre-owned

Pre-owned certified options are the perfect way to save money on buying a new car with lower cost. You’ll have the assurance of the warranty of the manufacturer that you wouldn’t get from a private seller.

3. Research: Once you’ve set your budget and determine the right kind of ownership to suit your driving style, begin investigating the vehicles that caught your eye. The first step is to visit automaker websites and independent auto information websites to evaluate the features that are important to you. Note MSRPs (manufacturer’s suggested retail prices) and the invoice price. Also, check the local listings of inventory to determine what is available in your local area. Also research any possible discounts. A lot of automakers offer discounts for military members, students, as well as members of certain credit unions. These discounts can be stackable and combined with any cash-back rebates offered on the vehicle which must be taken after you have negotiated the price. Go to the site of the automaker for the incentives prior to going to. 4. Calculate the real cost costs of owning a car are significantly more than the initial payment. Use websites like or to get a rough idea of gas, insurance repairs and maintenance expenses in your area — although these figures will be contingent on the driving habits you follow. To get even more precise make your own calculations for fuel costs based on the amount of miles you drive annually and get an quote on the cars you’re thinking of buying. It is essential to provide the insurance agent the exact model and trim level, as well as the engine, and other add-ons for an accurate quote. It is important to keep in mind that additional fees, such as sales tax, registration fees and other documentation costs are not included on the sticker price that dealers advertise. Bankrate tip

Request a full breakdown so you can know what charges to expect.

Bankrate tip: Take into consideration charges, such as registration, tax, and documentation fees not included on the sticker price offered by dealers. Get a full breakdown so you can know what fees to expect 5. Secure your financing prior to making a trip to the dealership. Dealers don’t just want to sell you a vehicle -they’re also looking to manage the car loan as well. Dealers usually receive either a flat fee or commission on the car loans they facilitate, regardless of whether the loan is directly from the maker or from an local lender. Instead of having the dealer do the work, at banks and credit unions prior to going to the dealership. Preapproval from the credit union, bank or an online lender doesn’t mean you have to take that deal however, it will assist you in determining the most affordable financing option. It can also potentially give you negotiating power if you provide the preapproval letter to your lender and they promise to beat out the rate to earn your business. To obtain a preapproval form, you’ll need to provide your personal, employment and income details for the lender. They can also inquire about other outstanding debt obligations you currently have to determine the amount the auto loan you can afford. 6. Test drive The majority of car buyers maintain their new cars for around six years, so make sure you take your time during the test drive. Make sure that you really enjoy the car, particularly in the event that you frequently drive for work or travel. Don’t be afraid to ask for an extended time behind the car. Take time while it’s parked to adjust the seats, play around with the controls and determine whether the passengers are comfortable and if your usual items would fit in the. 7. Negotiate Once it’s time to talk about pricing, come prepared with the information you’ve gathered. Check out if other dealers offer better prices on your vehicle and seek a price match with your salesperson. If you’re interested discuss this, you should do it when you’re negotiating the sale cost of the new car. Separately discussing these issues can help you negotiate the best deal for your current car, and you’ll fare even better if you’ve conducted some research on the value of your current vehicle online. Before you sign the final contract, examine all the terms carefully. Check any fees that are proposed and ensure that what you agreed to verbally is documented in writing. You should also be prepared to say no to the extras that may not be necessary, or even to the whole deal when it’s not working your way and the person selling it doesn’t want to change his mind. The present state of the car market Buying a brand new car requires some additional factors to consider. The average transaction price for new vehicles (ATPs) reached record-breaking levels, above $48,000, for the fifth straight month in August of 2022 according to . The high prices you will likely encounter are due to a simple issue of supply versus demand. With less vehicles available on car lots, because of supply chain issues, and drivers still using vehicles, the prices are rising. Along with the increase in demand and supply, the choice in the fight against inflation has made the cost to borrow higher too. This is evident in the amount of money that people are financing, a median of $40,290 in the second quarter of 2022 versus $35,587 in 2021, according to . It’s a sign that you’ll need to budget a bit more on your new vehicle. Next steps Buying a new car is an exciting processand there’s nothing better than leaving the car dealership knowing you got the most affordable price. However, before you begin your search for the perfect ride make sure you have your financials in check and that your credit score is on level. It’s equally important to assess your spending plan to determine the amount of car you can afford. After you’ve figured out all financial aspects, shop around to find the best financing deal to bargain with confidence. Making your way to the dealership with a plan can assist you in finding the most affordable option that works for your budget. Find out more

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The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the details of borrowing money to purchase an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers to control their finances by providing concise, well-studied and well-researched content that breaks down complicated subjects into digestible chunks.

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