How to Buy a Car from Start to Finish

Amanda Peterson

September 4, 2023  •  5 Minute Read

Financial Tips

We all know the drill. Your car is on the fritz. The tires are shot. There's something sketchy with the wiring. You can't run the AC without the radio going haywire. Let's face it. It's time to get a new car. But where to start? If you've never purchased a car before, it's not as hard as you think! CreditSoup explains the step by step process.

Step 1: Determine Your Price Range

This is relatively easy. Do a quick analysis of your expenses. Figure in everything from rent, utilities, credit card debt, student loans, etc. - everything you have payments on in a month. Then, look at your income. Figure out from there, what kind of a payment you can realistically afford to pay each month. Also, keep in mind how much you will pay for insurance and fuel in that new car. If you are financing a new (or new to you) car, the banks will require full coverage insurance on that vehicle until the loan is paid in full. Spend within your means. Nobody wants to end up "car broke."

Once you've determined what kind of payment you can afford, plug that into CreditSoup's Auto Loan Payment Calculator and then you'll know approximately how much your loan will be, so that you can see what the monthly payment will look like.

Also, keep in mind that the average interest rate at time of this publication is 8.8%. This is dependent upon what your credit score is, what state you live in, and also if it's a new or used vehicle. New cars will have a lower interest rate than used. This is because used cars are riskier to the lender. A new car is less likely to break down or become unusable.

Step 2: Go Shopping

Whether this be driving from lot-to-lot in search of your new ride, or simply browsing the internet, know that you have a price range squared away so you can determine if it's something worth looking at in more detail.

Do your research. Get acquainted with the KBB (Kelly Blue Book) site. This site tells you how much that car is actually worth. It will also give you a rough estimate on how much your own car is worth, in the event you wish to offer it as a trade when you're ready to make the purchase.

Step 3: Test Drive It

Contact the salesman (or flag them down, because we know they've been eyeballing you). Ask them about a test drive. During this process, be sure and check out ALL the bells & whistles.

• Make sure the windows go up & down.
• Make sure the heat & AC work.
• Make sure the seats & upholstery are in tact.
• Point out any stains, cracked windows, dings, scratches, etc. that you may find.
• When driving, make sure there are no rattles, noises, leaks, smoke coming out, shakes, and that it shifts gears smoothly.

The test drive is the part that's really important. This is what will help you with price negotiations.

Step 4: The Shakedown - Make an Offer

Once you've taken the car for a spin, head back to the office to get the lowdown from the sales rep. Let them know everything you might be concerned about. Negotiate. Negotiate. Negotiate. If something is not sitting right with you, make sure that it's corrected before it leaves the lot. If it's a large enough issue to warrant a price reduction, then tell them. Let the sales rep know that you are not comfortable paying price XYZ if it's going to have ABC wrong with it. Make them an offer for a lower price.

This is the part that takes the most time. The song & dance. The sales rep will go to their manager and get the approval to sell at a reduced price. Most times, they will come back with a counter offer. Now, it's up to you to either accept the counter offer, or stick to your guns about the offer you suggested. Sometimes this might take a while. You may have to head home and let them think about it and wait for their call back. Again, this is all part of the "shakedown" or bartering process of car buying.

Step 5: What To Do With The Old Car

As you're negotiating the price, you are probably contemplating what to do with your old car. You will most always have the option of trading it in, to use as a down payment on your new car. Depending on the condition of it, you could reduce your payments even more if it's still in decent condition. Mention to the sales rep that you'd possibly be interested in trading it off.

They will have their manager take it for a test drive and then they will compare it with KBB (Kelly Blue Book) pricing. Keep in mind that they will likely low-ball you on your trade. They have to make money on the re-sale. If their offer is not enough for you, keep it and try to sell it on your own. Facebook Marketplace is good place to list personal vehicles.

Step 6: Accepting the Offer

You've finally agreed upon a price with the dealership. Now it's time to get the financing set up. Here's an important factor to know: the dealership will run your credit report through several banks to obtain the cheapest interest rate. This will reflect on your credit report. It's very important that you know for certain that this is the car you desire to buy.

For example: You back out of this car deal after the dealership has already run your credit report. Then you go to a different dealership and they again run your report. Now you have in excess of 6+ credit checks listed on your credit report. This WILL NEGATIVELY AFFECT your Credit Score.

The salesman will then bring you into the Finance Officer's office to fill out paperwork. Pay close attention. They will probably try and sell you various warranties and such, which are all add-on features to try & recoup the money they lost in the negotiation.

The Finally

You did it! You bought a car. Call your insurance agent before you leave the lot and let them know to add the new ride to your plan. You're insurance will likely increase, but knowing that you've got full coverage in the event that something happens before you make it home, is priceless.