Four Steps to Car Buying

September 03, 2014

This year my daughter is turning 16,and you know what that means. Buying and selling a vehicle can be one of the most intimidating financial transactions you will ever experience, but there is a plethora of information and advice out there to help even the most nervous consumer get through the process. Here are some simple steps you can take to acquire the car of your dreams:

Step 1) Identify the vehicle you wish to purchase.

There is no shortage of cars to choose from, but the first thing you’ll need to decide is whether to buy a new or pre-owned vehicle. New cars come with a full factory warranty and that new-car smell, but as soon as you drive it off the lot, you typically lose about 10% or more of the value. If you plan to drive the car until the wheels come off then that’s probably not a big deal, but if you plan to sell it in the future, then you’ll want to think about the resale value.

A pre-owned vehicle is generally considered more economical, but you may not have the same assurances you get with a new one. Plus, a vehicle can look great cosmetically, but unless you know what to look for, you may have no idea how bad it is under the hood. You can always ask someone to “show you the CARFAX”, but that only tells you about stuff that has been reported, not the stuff that hasn’t. Check out these great sites for tips on buying new and used vehicles.

Step 2) Decide how you would like to take care of your existing vehicle.

If you have a current vehicle you’re looking to get rid of, decide whether you want to trade it in or sell it through a private-party transaction. Trade-ins are convenient, but you are less likely to get as much as you would if you were able to sell it on your own. Try to get the most you can for the amount of effort you are willing to put into it. Know your car’s Kelley Blue Book value and use this 10-steps list from edmonds.com on selling your vehicle.

Step 3) Determine the amount you will need to finance.

Once you have a good idea of the price you are willing to pay and how much you expect to make off of your current vehicle, then you’ll have a pretty good idea as to how much you will need to finance, if anything. You can secure financing in advance of your purchase or finance the vehicle through the dealer. If the dealer does not offer incentive financing, you can always refinance later. Here are some websites that offer current information on auto-financing and refinancing rates: http://www.bankrate.com/auto.aspx & https://www.lendingtree.com/.

Step 4) Be prepared to negotiate.

Some car dealers like CarMax offer no-haggle pricing where the price you see is the price you pay. Others, however, like to make a sport of it. Equip yourself by reviewing these articles on how to negotiate your next car purchase: http://www.edmunds.com/car-buying/negotiating-101.html & http://www.consumerreports.org/cro/2012/12/how-to-negotiate-effectively/index.htm.

As I said earlier, there is no shortage of information to help you buy and sell your vehicle. As long as you’re happy with what you get, it doesn’t matter how you get it. You can find more car tips and advice at http://www.edmunds.com/cars/