Here Are The Best Steps on How to Buy a Car

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If you’re looking for the best process for buying a car, this guide is for you.


Buying an efficient car is an essential part of personal finance because your car payment can be one of the biggest monthly expenses you have to deal with.


And if you’re here, you probably want your car to be with you as long as possible. So we want to help you get the best deal you can find.


In this article, we’ll give you a comprehensive list of steps on how to buy a car.


You’ll learn:

  1. How to determine your budget

  2. How to get preapproved

  3. Tips on shopping around

  4. Whether or not you should buy or lease

  5. Whether or not you should choose a new or used car

  6. And how to negotiate a fair price


After reading this article, you’ll be confident about what steps you need to take next whether you’re buying a new or used car.


Okay, if you’re ready to learn the best steps on how to buy a car, buckle up and we can get started!


Step 1: Determine your budget


Evaluate the numbers. Determine how much you’ll be paying in insurance and on your monthly loan payment for the new car.


And if you have an old car you’re trying to sell for your new car, add that in to your calculations. This could help with your down payment.


Before factoring in your approval rate in the next step, figure out how much you can afford to pay per month.


Keep in mind the extra costs that come with buying a car aside from just your monthly payments:

  • Stamp duty

  • Possible dealer delivery

  • Insurance

  • Finance costs




Step 2: Get preapproved


This is an essential step in buying a car. You should get preapproved for a loan before even visiting a car dealership.


Getting preapproved will let you know what you can afford. So, this step can be added to step 1 when you’re determining your budget. The amount you’re preapproved for will be based on your credit history. (This is why it’s always a great idea to build your credit score.)


When you’re looking for a loan provider, you’re going to want to shop around because different providers can give you different interest rates. And if you aren’t careful here, that could translate to you paying extra hundreds or even thousands of dollars over the course of your loan period.


And keep in mind that just because a rate is lower than others, that doesn’t automatically mean that it’s better than other options. For example, if you approach a bank that offers you 4.5 % interest while another provider offers you 3.5% interest, the second option may look appealing, but the lower rate may also come with a larger downpayment and longer loan length.


So in general, you’ll want to look for a loan that’s going to cost you the least amount of money throughout its entire duration rather than just a low interest rate.


Another thing to keep in mind is that car dealerships can sometimes also preapprove you for a loan. But in most cases, using a dealership for your loan will include a higher interest rate. So, this is why it’s wisest to shop around for a loan before you shop for a car.




Step 3: Shop around


Now the fun part begins. At this point, you’ll know how much money you can spend. And now it’s time to hit the dealerships.


Compare prices and determine what you like in a car.


Keep in mind when you’re shopping around, you don’t need to tell the car salesperson everything you’re looking for. Shopping around should be treated as a game for getting the best deal. And if you tell the car dealership how much you love what they offer, then you don’t have much leverage in the negotiation process.


Step 4: Buy or lease?


Think of buying or leasing as owning v.s. renting.


If you buy, then you’re choosing to purchase the entire cost of the vehicle. But if you lease, then you only have to pay for the length of time that the lease agreement lasts.


When making this decision, first ask yourself these questions:

  • How much do you drive? Leasing usually comes with a limited number of miles on your car. And you’ll be penalized if you exceed the agreed number of miles. So you probably can’t do much traveling out of town with your lease. And even if you commute a great deal for work, then leasing may not be the right choice for you.

  • Are you a good driver? If you get into an accident while in a lease, you’ll have to pay a penalty fee. Essentially anything you do to the car that decreases its value can potentially penalize you.


Leasing a car can be the more inexpensive option as long as you keep your mileage low and don’t get into any car accidents.

But remember lease agreements range anywhere from 6months to 5 years. So, if you may need to plan what you’re going to do for transportation after your lease ends.


Step 5: New or used?


Determine what you need so you can narrow down your search.






New cars have close to zero on the odometer, so their life expectancy is at the highest. New cars also typically come with lower interest rates and fewer maintenance bills.


Used cars are usually your cheaper option in terms of the purchase price and insurance premiums. License fees and registration can also potentially be less since they depend on how much you paid for your vehicle.


If you decide to purchase a used car, be sure to check the history of the car to make sure it has no serious maintenance issues.


For this step, you can use a service like Carfax.com to look up the history of a used car to see if it’s been in any accidents or if the previous owner kept up with its required maintenance.


As a buyer, you also have the right to have a mechanic check the car before you make the big purchase. You would have to pay for this inspection of course, but it may be necessary if you’re looking at a used car.


Step 6: Choose and negotiate a price


If you’ve followed these steps, then you should have enough research to understand the value of the car you’re buying.


You’ll know its cost compared to other cars, its maintenance history, accident history, etc.


Bring this information to the dealership or whoever you’re purchasing the car from and negotiate a fair price.




Step 7: Buy the thing!


When buying a car, your research can go a long way. Make sure you negotiate a fair price then you can sign the necessary papers.


Make sure you have a receipt from the dealer, registration papers, and the service history of the vehicle if it was used.


What now?


Knowing how to properly buy a car is an essential skill to add to your personal finance goals.


After you experience the steps on how to buy a car, the process should be relatively the same if you ever want to buy a car again.


As you get older and more experienced with your personal finances, hopefully, you’ll improve your credit and get a better interest rate when you decide to buy your next car in a few years.


If you’d like to learn more about boosting your credit so you can experience all the benefits of having a high score, check out our article “How to improve your credit score.”


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