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By Alissa Green
Buying your first new car can feel thrilling. There’s something wildly adult about it, even if you know you’ll be taking a selfie as soon as you’re handed the keys.
Why is it, then, that the process of car shopping has gotten such a bad rap? Is it a given that it will be stressful and overwhelming?
Truthfully, you may certainly have moments, where you feel that way. But you should feel in control of your experience for the most part, whether you’re looking for a new car at a dealership or a used car sold by a private seller. You should feel confident that you’re getting the right car for you.
You may think that getting approved for your loan shouldn’t be the first step. Here’s why it is: You will soon discover that not all car loans are created equal.
You need to see what rates you qualify for first, so you can then determine how much car you can afford. You also will need to consider the length of time you need to pay off your loan.
“More and more buyers are getting six year plus auto loans right now,” says Brian Sharapata, Alliant Product Manager for Consumer Loans. “With these extended loan terms, your lower payment might make a car appear more affordable. But these usually come with higher rates which mean that you’ll pay more interest over the life of the loan.”
As an added bonus, attaining loan approval in advance of visiting the dealership also gives you leverage with the dealer (see step #4 in our list below). While you can always choose to finance with a dealership later on, a pre-approved loan from a separate financial institution, like Alliant, will make your negotiations solely about the price of the car instead of adding financing into the mix. This simplifies things greatly.
Most pre-approved auto loans are good for 30 days, so you shouldn’t have to worry about the loan offer expiring unless you drag your feet. If you’re surprised by your high auto-loan rate, check your credit report history to ensure there aren’t any errors.
Important Note: Keep in mind state and local taxes, which can range from 0% up to 8%+. City stickers, title, and license plate fees should also be included in your estimate.
Did you know that most car shoppers visit only 1.6 dealerships on average while car shopping, according to McKinsey Research? Likely, it’s because with sites like True Car, Cars.com and Edmunds, you can shop for your new or used car in the comfort of your own home without someone eyeing your every move. And, equally important, it can be on your schedule.
You can also consider sites like Craigslist for used cars, but many reputable private sellers have started listing their cars on third-party research sites now that listing their cars is free.
I can’t speak for other sites but after working at Cars.com (full disclosure), I can tell you that Cars.com has a robust fraud team to ensure all listings are valid, which inspired confidence. Definitely check out how your online shopping resource protects against fraud before paying for your new car – and NEVER wire money in advance.
Researching cars in advance of visiting the dealership is vital, but there’s nothing like sitting behind the wheel and seeing how a car actually drives. Accelerate on the highway, brake quickly – you know the drill.
If the new car you’re considering is a popular model, call the dealership in advance to make an appointment to drive your desired cars. When I car shopped recently for a Subaru Legacy, I ended up with a Nissan salesmen on my test-drive since all the other salesmen were busy. As you can imagine, he couldn’t answer any of my Subaru questions. D’oh.
Calling the dealership in advance for used cars is especially vital, and dealerships have been known to list one car only to try to sell you another upon arrival.
If you prefer going the private seller route, you likely will be looking at the car by going to the seller’s home. Bring a reliable friend for safety and for the extra opinion. Keep in mind that used cars are each unique, so you may need to be ready to decide earlier on a used car or risk losing out.
Negotiating the price of your new vehicle used to be the worst part of the entire car buying experience. The dealership used to have all the information and the consumers were left in the dark. These days, you don’t need to haggle at all, if you don’t want to. Just use a third-party research site called True Car that’s designed to give you a reduced, pre-negotiated price just by walking in the door.
Or, if you like the thrill of negotiation, use a variety of third-party sites to see what the average price paid for your vehicle in your area was.
When buying my new Subaru, I used three third-party sites to see what the average cost should be and then asked four dealerships' internet sales divisions for their best offer, making sure I didn’t pay above the average estimated price I got online. I also made sure to get the “all in” price, which included all extra fees/taxes.
If you’re buying used, meanwhile, third-party sites should be able to give you a very good idea what number you should offer for the vehicle you’re considering buying. Keep in mind that there’s much more flexibility on used car pricing (both at the dealership and from private sellers). Be ready to know your data and use it when determining the final price.
Important Note: Most car dealerships make their money off of used cars and service. However, they typically have a very tight margin (AKA they don’t make much money) on new cars, so don’t expect to get them to go down significantly from their initial offer.
This is the best step, right? Right. Now, just breathe in that new car smell.