10 Steps to Buying a New Car

Step 1: Starting out.

These steps will help you to locate the specific car you want, and at a price that is fair to both you and the dealer. By now, you should have done plenty of research to determine the best car to suit your needs. And, you should have a good idea of what to pay for the car you want. Now you need to narrow the research even more. You will soon be finding the exact car you want to buy with the options you have chosen and then you will be determining a target price to pay. If you have done your homework, this will be a fairly easy process with no unexpected surprises.

Buying a car is a big investment, but it can be exciting and rewarding, especially if you feel like you got the right car at a fair price.

Step 2: Using incentives and rebates.

An incentive is anything that gives you an added reason to buy a particular car. Often, however, it comes in the form of a cash rebate or low-interest financing. A car might be selling for 22,000 USD but the manufacturer is offering 3,000 USD in customer cash for a final price of 19,000 USD. In another example, a 22,000 USD car financed for five years at six percent would have a monthly payment of about 550 USD. But with zero-percent financing, the payment is roughly 480 USD. That's a huge savings to you.

Step 3: Pricing the car.

Car salesmen will usually point to a car's "sticker price" as the amount you have to pay. However, the price the dealership is willing to sell a car for is often well below the sticker price. How do you know what to pay? You can do research on the average price buyers are paying (also known as the "transaction price") for a certain type of car in your area. You may also want to factor in things in your research such as colors and options as well as any incentives and rebates

Step 4: Finding the exact car you want to buy.

You should now have a very specific idea of the car you want to buy. This means you know the make, model, trim level, options and color. The more flexible you can be about these specifics, the wider the range of the cars you'll find available for sale. Ultimately, the ability to consider several versions of the same model can give you additional bargaining power. For example, a shopper might be very firm about the make, model and trim level, but could accept a variety of options and colors. If you're a shopper who definitely wants hard-to-find options and a specific color, it will be more difficult to make a great deal. Why? You have no leverage as a negotiator. You have to pay the dealer's price or try to locate another identical vehicle. Obviously, if you do find the exact car you're looking for, there's no need to volunteer this information to the dealership.

Step 5: Test driving the car salesman.

As you call dealerships to locate the exact car you want to buy, you can also test drive the car salesman. In other words, you can determine if this is a person you want to do business with. It's a good idea to consider this issue ahead of time, before you get to the deal-making phase of the process.

The first way to evaluate a good salesperson is to ask yourself if you feel comfortable dealing with them. Are they impatient and pushy? Or are they relaxed and open? If you asked them about a specific car's availability, did they respond to your needs? Or did they try to steer you toward another car simply because they have too many of that model in stock? Do they return your phone calls? Do they answer your questions in a straightforward manner? Or are they evasive and confusing?

Step 6: If you are trading in your old car...

If you are trading in your old car to a dealer, you will probably not get as much money toward the price of a new car as you would have if you'd sold it yourself to a private party. However, trading in does have some advantages. You can solve all of your car-buying problems in one visit to the dealer. You can unload a hard-to-sell car with no newspaper ads, DMV lines or tire-kicking buyers involved. In some states, you will even pay less sales tax on a deal that involves a trade-in.

If it's important to you to get the maximum value for your trade-in, you should begin by looking up its market value. Then, visit several dealerships and solicit bids. Tell the salesperson that the sale of a new car will be contingent on the amount he or she will give you for your trade-in. Also, tell them you are visiting several dealerships. With a little legwork, you may be able to boost the price you get for your old car by several hundred dollars or more. Remember, the extra effort you spend in getting competitive bids is far less than what it would take to advertise, show and sell the car yourself.

Step 7: Negotiating for your lowest price.

If you want to try for a rock-bottom price, start by getting bids from three local dealers. Follow this up by taking the lowest price, calling the two other dealerships and saying, "I've been offered this car at this price. If you beat it I'll buy it from you." They almost certainly will. However, keep in mind that you can't play this game forever. Eventually, they will give you a take-it-or-leave-it price.

Also, be warned that if you ask the dealer to cut his profit, he might try to take it back somewhere else. Remember, a good deal isn't just the lowest selling price. It's the lowest total out-the-door cost on a car that meets your needs. This means that to ensure you get a fair deal you have to be vigilant throughout the entire purchase process, even after you and the salesman agree on a price.

Step 8: Closing the deal.

If you feel good about the price you have been quoted, it's time to take a look at the big picture. Many buyers focus on the cost of the car and ignore the related expenses. Besides the cost, you will have to pay sales tax and various fees which vary from state to state.

The simplest way to estimate total cost is to ask the salesperson to fax you a worksheet and invoice before you go to the dealership. This way, you'll be able to review the figures in a relaxed environment.

Step 9: Reviewing and signing the paperwork.

At the dealership, you will be presented with the contract for your new car and a dizzying array of forms to sign. This might be done by the Internet salesperson you have been dealing with, or it could be done in a separate office by the finance and insurance (F and I) manager. If this happens, the Fand I manager might try to sell you additional items such as extended service contracts, fabric protection, alarms or a LoJack vehicle locator. In most cases, we recommend turning down these extras with the possible exception of the extended warranty, which provides peace of mind to some buyers.

If you have already seen a worksheet for the deal you've made, the contract should be a formality. Make sure the numbers match the worksheet and no additional charges or fees have been inserted. You will also be asked to sign various forms that register your new car and transfer ownership of your trade-in. Understand what you are signing and what it means. Ask questions if you don't understand, and don't ever feel like you have to hurry. Buying a car is a serious commitment and it's the F and I manager's job to ensure you are comfortable with every document involved. Remember, once you have signed there is no going back.

Step 10: Inspecting and taking possession of your new car.

Most dealerships detail the car and provide a full tank of gas. You will have one more chance to inspect the car before you take possession of it. Make sure you walk around the car and look for scratches in the paint and wheels or dents and dings on the body. If you are paying for floor mats make sure they are included. If anything is missing, or if any work needs to be done, ask for a "Due Bill" that puts it in writing. You will then be able to come back and get the work done later.

As you drive away inhaling that new-car smell, there is only one more thing to be done: enjoy your new car!