Guide to Buying a New Car
|This article is for general information about buying a new car only. If you need specifics on the process or paperwork required in your state, please refer to our Title Transfers or Paperwork When Buying a Car page.|
Buying a car "fresh off the lot" is a goal for many, and it has somehow become a rite of passage in the American psyche. Once we get to the point in our career where we feel secure enough to be able to afford a new car, we begin to consider the possibility. A new car is more than a status symbol, it also acts as a validation that we have "made it," an endorsement of some measure of our success.
While some people are content to buy and drive secondhand cars throughout their driving days, most people will purchase a new car at least one time in their lives. Others are convinced that buying new is the only way to buy a car and they will do so time and again every few years.
Before you even begin to think too deeply about buying a new car, take some time to consider why you want to buy a new car. If you have a partner, you'll want to think this decision through first--and then go to them with the idea. Expect some healthy questioning from them about the reasons you want to buy a new car, and be willing to negotiate (and perhaps postpone) the decision for the good of the family if necessary.
As you go through this preliminary brainstorming step, you will want to determine why you want to buy a new car. There are a myriad of good reasons to do so, but some of the primary reasons are listed below:
Prestige: Let's face it; buying a new car can do a lot for your image (and ego). Your choice of make, model, extras, and even car color speaks volumes about who you are and how you see yourself in our society. It also makes a statement to friends and family members. The appeal of a new car is heady from a psychological perspective, but don't over think it too much. If you've worked hard to get to the position of being able to afford a new car, enjoy it--you've earned it!
Technology: New cars offer the latest in engineering, style and mechanical innovation. The manufacturers compete to offer the very best in their new makes and models. Fuel efficiency and emissions control improvements can be appealing to those who are concerned with environmental issues. Because the makers continually improve and add technological advances in their newest models, those who appreciate the state of the art are drawn to the cutting edge components of a new car.
Safety: Along the same lines as above, manufacturers continue to make improvements on safety features. The inclusion of such features as side air bags and other features are only available on the latest models. Many families choose to purchase the latest models in order to best protect their children and themselves.
Reliability: New cars provide an element of worry-free driving for an extended period of time. Drivers of new cars appreciate the peace of mind that a new, mechanically sound vehicle provides. Guarantees, warranties and the newer extended warranties ensure that owners of new cars will be spared the expense of costly repairs for several years to come. With the advent of computerized systems on cars, gone are the days of the backyard mechanic; many women and men who never signed up for auto shop find the reliability factor in a new car especially appealing.
Only you can decide how much you can afford to pay for a new car. The desire to own a new car cannot be allowed to overwhelm the practical considerations of your budget. Now is the time to take a brutally honest look at your finances.
Many financial experts state that you should spend no more than 20% of your net income on a monthly car payment. To determine what that number is, you'll need to figure your total net income (take home pay after taxes) and then subtract all your fixed expenses. The remaining amount is your net spendable income. By figuring that out, you can then determine what 20% will be in dollars and cents.
Once you know that number, you can answer three important questions:
- How much can you afford as a down payment?
- How much can you afford in monthly payments?
- How much should you spend on the total price?
While you are working this out, be aware that there will be costs over and above the price of the car itself that will need to be factored in such as insurance, sales taxes, licensing fees, and possibly dealer fees payable at the time of purchase (more about these later).
Both the state sales tax rate and the state licensing fees will vary depending on where you live. Once you know how much you can afford to spend for the total price of the vehicle, calculate those figures based on your state's rates. Those expenses can inflate the total cost of the car beyond your budget, and may require you to shop for a less expensive model.
Many lending and car selling websites offer a loan calculator tool to use online. Before ever stepping into a dealer showroom, run the numbers based on the price of the car, the taxes and licensing fees, any other closing fees you may anticipate, and the rate that you expect to get for financing. Once you know those figures, you will know what your probable monthly payment will be.
In addition to the budgetary considerations, you'll now also want to take a close look at your lifestyle before shopping for a new car. Job security and life stability should come into play before you decide to buy a new car. For example, if you are new on the job or having difficulties in your marriage, your financial future may be changing soon. Before signing a contract for payments for the next several years, be absolutely sure that your career and lifestyle will be able to support such a decision.
After taking a serious look at how much money you can afford for a new car, it is time to fix a price. Write it down and take that number with you when you go to the dealership. Having that number firmly in your mind will help you stay within your budget despite the best efforts of a car salesperson to upgrade you to a more expensive model or tacking on extra features that will increase the total price.
Once you know how much you can reasonable afford for a new car, it is time to do some shopping―with your eyes only. Now is the time to see what is out there in your price range, and which makes and models will best suit your needs. Make a list of makes and models and features you want to consider and then do some searching. Areas to research a new car can include: newspapers, online, television, at the dealership, and talking with friends and family.
The time spent on this step narrows the field of cars you are interested in and brings you to the next invaluable step:
Hopefully, by this time you have decided on an affordable price range, and have chosen some models to concentrate on through the research process. This is the time to bring out all your study and research skills. In today's world, most people will conduct this research online on a home computer, but much of the information is also available at the newsstand or your local library.