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9 Step Car Buying Guide
Taking the time to properly plan and prepare for buying a car can save you hundreds of dollars and set yourself up for a more secure financial future.
- Figure out what you can afford.
Complete a budget. Adjust to see how different transportation expenses fit into your spending plan. You can plug that number into an auto payment calculator to see how much vehicle you can afford.
- Monitor your credit.
Use the credit bureaus’ annual credit report service to get your reports free at www.annualcreditreport.com, or call 877-322-8228. If you would like a certified credit counselor to review your reports with you, call BALANCE at 888-456-2227.
- Find the right car for you.
- How will you use the vehicle? Will you be crossing snow-covered mountain passes with hairpin turns and mile-high drops, or for something more challenging, like chauffeuring your children?
- Note its safety and reliability. A car won’t meet your needs if it’s up on blocks or puts you at risk.
- Check with your insurance provider. That cherry-red sports car might sound like the key to eternal happiness, but you might not be as thrilled with its insurance bill.
- New, used, or leased? Down payment amount?
- Do you prefer the reliability of a new vehicle, even if the value drops sharply in the first year? Or would you rather let someone else absorb depreciation? You could go with a used vehicle if you are comfortable with not fully knowing its history.
- Buy? Or lease? If driving a new car matters more to you than saving money in the long run, leasing might be an option.
- Think about down payment. It can get you qualified for a loan, reduce your interest rate and monthly payment, help you get a more car for the same monthly payment, and build equity.
- Get financing.
- Arrange a loan before going to the dealer. Once at the dealership, you’ll be thinking about different vehicles, test-driving, negotiating prices, etc. See your credit union for better loan options first.
- Avoid subprime lenders. If you don’t qualify for an auto loan with a credit union or bank, work on your credit or get a co-signer. Don’t lock in on unfavorable subprime lender terms.
- Determine favorites, contact dealers, and check quality.
- Websites like cars.com, CNBC, Consumer Reports,Edmunds, Kelley Blue Book, and Yahoo Autos list the best vehicles for particular needs. Identify attributes you want most and how each vehicle stacks up.
- Comparison-shop. Once you know which vehicles you might want, add prices to your list.
- Test-drive your short list of cars and check vehicle histories. If you aren’t sure how to evaluate it, invite a more experienced driver along. You can get a used-car history report from AutoCheck or CARFAX.
- Get the best price on the car.
- Kelley Blue Book, TrueCar, and Edmunds track vehicle price averages and identify what rebates or incentives are available.
- Negotiate each piece of the deal separately. Beware of dealers who roll different components of the transaction – purchase price, financing, trade-in, extras - into one deal. Beware if the deal sounds too good to be true.
- Walk away if you are not happy. You know what you can afford; you control this transaction, so let the salesperson know you won’t hesitate to walk out the door.
- Know your legal responsibilities.
- Find out your state’s insurance requirements. www.iii.org, has information for each state.
- Check with your state’s DMV to make sure you have the items necessary to register your vehicle.
- Put yourself in position to succeed long-term.
- Build an emergency savings account.
- Consider ways you can get more out of your gas tank: Use air conditioning sparingly; remove heavy items from the trunk; keep your tires properly inflated.
- Shop for the best insurance deal, and think about how to get a better deal: Improve your credit score; buy a used car instead of a new one; avoid 4-wheel drive or high performance cars.
- If you are struggling financially, the worst thing you can do is to avoid your lender. Avoid repossession by staying in contact and asking for help.
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