What To Look Out For When Buying A New Car

But many Americans make big mistakes buying cars. Take new car purchases with a trade-in. A third of buyers roll over an average of $5,000 in debt from their last car into their new loan. They're paying for a car they don't drive anymore. Ouch! That is not a winning personal finance strategy.

\"The single best advice I can give to people is to get preapproved for a car loan from your bank, a credit union or an online lender,\" says Philip Reed. He's the autos editor at the personal finance site NerdWallet. He also worked undercover at an auto dealership to learn the secrets of the business when he worked for the car-buying site Edmunds.com. So Reed is going to pull back the curtain on the car-buying game.

So Reed says having that preapproval can be a valuable card to have in your hand in the car-buying game. It can help you negotiate a better rate. \"The preapproval will act as a bargaining chip,\" he says. \"If you're preapproved at 4.5%, the dealer says, 'Hey, you know, I can get you 3.5. Would you be interested' And it's a good idea to take it, but make sure all of the terms, meaning the down payment and the length of the loan, remain the same.\"

So at the dealership, Reed and Van Alst both say, the first step is to start with the price of the vehicle you are buying. The salesperson at the dealership will often want to know if you're planning to trade in another car and whether you're also looking to get a loan through the dealership. Reed says don't answer those questions! That makes the game too complicated, and you're playing against pros. If you negotiate a really good purchase price on the car, they might jack up the interest rate to make extra money on you that way or lowball you on your trade-in. They can juggle all those factors in their head at once. You don't want to. Keep it simple. One thing at a time.

Once you settle on a price, then you can talk about a trade-in if you have one. But Reed and Van Alst say to do your homework there too. A little research online can tell you what your trade is worth in ballpark terms. Reed suggests looking at the free pricing guides at Edmunds.com, Kelley Blue Book and NADA. On Autotrader, you can also see what people in your area are asking for your car model. And he says, \"You can get an actual offer from Carvana.com and also by taking the car to a CarMax, where they will write you a check on the spot.\"

\"Concerning the extended factory warranty, you can always buy it later,\" says Reed. \"So if you're buying a new car, you can buy it in three years from now, just before it goes out of warranty.\" At that point, if you want the extended warranty, he says, you should call several dealerships and ask for the best price each can offer. That way, he says, you're not rolling the cost into your car loan and paying interest on a service you wouldn't even use for three years because you're still covered by the new car's warranty.

Reed says a colleague at NerdWallet actually bought a minivan recently and \"when she got home, she looked at the contract.\" She had asked for a five-year loan but said the dealership instead stuck her with a seven-year loan. \"And they included a factory warranty which she didn't request and she didn't want.\" Reed says she was able to cancel the entire contract, remove the extended warranty and get a rebate on it.

\"But the point of it is,\" he says, \"I mean, here's somebody who is very financially savvy, and yet they were able to do this to her. And it's not an uncommon scenario for people to think that they've got a good deal, but then when they go home and look at the contract, they find out what's been done to them.\"

\"We're actually living in a golden age of used cars,\" says Reed. \"I mean, the reliability of used cars is remarkable these days.\" Reed says there is an endless river of cars coming off three-year leases that are in very good shape. And even cars that are older than that, he says, are definitely worth considering. \"You know, people are buying good used cars at a hundred-thousand miles and driving them for another hundred-thousand miles,\" says Reed. \"So I'm a big fan of buying a used car as a way to save money.\"

NPR has a personal finance Facebook group called Your Money and Your Life. And we asked group members about car buying. Many said they were shocked by how much money some other people in the group said they were spending on cars. Patricia and Dean Raeker from Minneapolis wrote, \"40 years of owning vehicles and our total transportation purchases don't even add up to the cost of one of the financed ones these folks are talking about.\"

Remember, at its core, buying an automobile is a business transaction, and it is one of the last purchasing experiences that still requires consumers to haggle. The more emotion you keep out of it, the better the final result. Knowing the buying process and how to navigate it is your best path to a smooth buying experience. As in any negotiation, both sides will have some give and take, so knowing where to be firm and where to be flexible is essential.

Buyers need to figure more than just the price of the car into their buying equation. Insurance, fuel, and maintenance costs can add up, so be sure to check those factors out as part of your new car research process.

You should also use geography to your advantage by looking at dealers where sales of the car you are considering might be weaker than others. For example, shop for hybrids in rural areas or pickups at urban dealerships.

It is crucial to drive the specific car that you are looking to buy, not just one that is similar. Not every vehicle coming from the factory is perfect, and a test drive plus a thorough inspection can help you identify problems at the dealership before they become problems in your garage.

The time to make decisions about buying those products is not at the end of a long buying process when you just want to drive your new car home. Before you purchase items such as paint protection, key insurance, or a vehicle service contract, go home and thoroughly research the product and alternatives. If the finance officer tells you that right now is your only opportunity to buy that extended warranty or other add-on, you should consider it a red flag to avoid the purchase.

Knowledge, friendliness, patience, and your ability to walk away are your best tools in the car-buying process, and they can make the difference between getting a bad deal and an excellent one. Your confusion, impatience, and lack of confidence can give professionally trained sales consultants the upper hand.

To lower your anxiety about going to car dealerships and to help make the vehicle shopping experience better, here are six things to look out for and some important tips to remember before you make a deal on your next new car.

Tip: Do your homework before going to a dealership when buying a new car. The salesperson can share information and help answer questions. But without knowing anything going in you're likely opening yourself up to experience a strong sales pitch, upsell, and higher price.

Buying a used car can be a good option when you're looking for a quality vehicle without the higher price tag. While a used car can be a sensible option, buyers still need to make smart choices. There's a lot to look for when buying a used vehicle, but here are some ways to help you choose the right car for you.

Inspect the interior by sitting in all the seats and looking for unusual wear and tear in the upholstery, says CARFAX. If the interior of the car smells musty, check the carpet and floor mats for signs of a a leak or water damage.

Going for a test drive can help you determine the condition of the car and whether it's a good fit for you, according to Edmunds. You may want to turn the key to the \"accessory\" position before starting the engine, says KBB. You should see all the dashboard warning lights go on. If they do not light up, or stay on when you turn the ignition, make sure the issue is inspected.

The VIN can also be used to see if there are any recalls on the vehicle. You can look up a vehicle by VIN on the NHTSA's Safety Issues and Recalls page to see if the vehicle needs repairs due to a safety recall. Keep in mind, however, that there may not be information on an older vehicle, any nonsafety-related recalls or recently announced recalls. Certain brands and international vehicles may also not be listed.

A vehicle history report can help you see title problems, ownership history, service points and previous accidents, says KBB. You can get a vehicle history report online for a fee by entering the VIN or license plate number, says Edmunds. If you're buying through a dealer, though, they may provide a history report for free.

Your insurance rates typically change when you acquire a new vehicle. Before you choose a model, the nonprofit Insurance Information Institute recommends that you ask your insurance rep how much it will cost to insure.1

Design characteristics are important when choosing a new car. Larger and heavier vehicles typically sustain less damage in auto crashes than small cars. Some small utility vehicles and pickups are prone to rollover accidents.

In addition to considering size, look for cars that have crashworthy\" designs. These cars have strong safety cages,\" the section of the vehicle that protects the occupants. Make sure that the front and rear ends are crush zones\" that can absorb the impact of crashes.

If you take time to research prices online before you visit a dealership, you'll have a better idea of what a competitively priced car should cost. Often, the best time to buy is during end-of-the-year sales, when dealers need to make room for newer models, notes the Las Vegas Review-Journal.3

Sources:1 -can-i-save-money-auto-insurance2 -buying/10-steps-to-buying-a-new-car.html3 -secrets-getting-the-best-deal-new-car4 -shopping/buying-a-car-why-you-shouldnt-focus-on-the-monthly-payment-242019 781b155fdc