Buying New—The 7-Step Formula

• A preapproved auto loan is like bargaining with cash—you're in a better position to talk price with the seller. Be sure your insurance coverage is intact—without it, you may not qualify for a loan.
• Estimate a down payment and monthly payment reasonable for you. Some advisors recommend paying 20% down. Avoid monthly payments larger than 20% of the money you have left each month after paying all other expenses. Use our calculators.
• Monthly payments are only the beginning. Consider the long-term cost.
• Dealers often offer low-rate deals, but with strings attached. Compare the advantage of taking the rebate instead of a lower rate.

Arming yourself with information will help you get a much better deal.

• Find wholesale and retail prices, including all the options you want, for both the car you want to buy and (if applicable) for the car you want to sell or trade, through Web Carbook. Expect to pay between wholesale and retail.
• On your trade-in, you can also clean it up, drive it to three or four used car dealers, and ask them what they’ll pay you for it.
• Also check reliability records. Two good sources are Edmund’s Used Cars and Trucks Prices and Ratings and Consumer Reports.

Start looking at the end of the model year or at the end of the month when dealers need to turn over stock.

• Test-drive the cars that interest you. The car may look good on paper, but once you’re behind the wheel, it may not feel right for you.
• Test-drive several models and see which vehicle best suits your lifestyle and price range.
• Drive in varied road conditions (bumper-to-bumper traffic, highways and hills).

No insurance? No car! Every state requires some type of automobile insurance. And if you borrow money to buy a car, some lenders require coverage for repair and replacement costs.

• Bodily Injury Liability Insurance
• Property Damage Liability
• Uninsured- and Underinsured-Motorist Coverage
• Personal Injury Protection (or "No-Fault”)
• Collision and Comprehensive Insurance
• Optional coverage for rental reimbursement, towing and labor.

 

Shopping for Rates

Teens and Insurance

GEICO discounted insurance for Navy Federal members.

• Always negotiate up from the invoice price (the dealer’s approximate cost plus 2–3%), never down from the manufacturer’s suggested retail price.
• A reasonable price is usually 3–5% above invoice, depending on market demand.
• Once you agree on sales price, make sure that it includes all of the agreed-upon items, i.e., CD player, anti-lock brakes, etc. Get it in writing.
• Or you can shop at a dealer or retailer who has fixed prices. Have them sign a statement detailing the price and options you agree on. Only then should you ask about rebates.

Use the market value you determined in step 2.

If you don’t like the dealer’s offer, and don’t mind the inconvenience, you can probably get more selling the car yourself.