Step one: Figure out how much you can afford to spend. You should set a reasonable price range for the vehicle and begin to eliminate vehicles that are out of that price range. Consider how much you can afford for monthly payments based on your income and other monthly expenses. Be sure to include the costs of gas, insurance and upkeep.
You can visit dealerships to do your research and go on test drives, but you should also read vehicle reviews in magazines and on the internet. You can learn which vehicles are given high marks for safety, which ones get the best gas mileage and so on. Once you've narrowed your list down to a few possibilities, read as many reviews on those makes and models as you can. Some good places to look for both professional and consumer car reviews are:
Buying a new or used vehicle
For most people, buying a used vehicle is usually a better choice than buying a new vehicle. The first owner of a vehicle has absorbed the biggest portion of the vehicle’s depreciation (the decrease in value). When you buy a used vehicle, many of the costs of owning the vehicle are reduced. Benefits of buying used include:
- Lower purchase price
- Lower depreciation
- Lower registration and license fees (which are usually tied to the value of the vehicle)
- Potential for lower insurance premiums
However, buying a used vehicle can have a few negatives:
- Reduced or no manufacturers' warranty
- Potential for higher interest rate on your auto loan or lease
- Potential for reduced reliability
- Paying for maintenance costs such as replacing tires, battery, brakes, and muffler
- New vehicles tend to have better safety records
Buying a new car
When you buy a new car, you need to determine the base price (the price of the vehicle without any special options) and then add in optional features or packages. You can get a good idea of the base price by visiting different dealerships and comparing prices and by using the internet to research. You should also get an idea of how much the dealer will add on for various options like antilock brakes, a security alarm or satellite radio. Try to find out what the dealer price is and then negotiate the sticker price down to or near the dealer price. This negotiation tactic is generally recommended by professionals as opposed to working down from the sticker price.
Buying a used car
Buying a used car or one that is almost new can save you thousands of dollars. If you decide to buy a used car, you'll need to check the mileage carefully and make sure the car is in good mechanical condition. There are 3 types of used cars:
- Used cars come in any year and condition and can come from a dealer’s lot or a private owner. Generally, the more miles on a pre-owned car, the lower the price will be. Check NADAguides.com or Kelley Blue Book to get prices on used vehicles.
- Program cars are former rental vehicles that have been purchased by a dealer or are sold directly to consumers by the rental companies. Program cars are usually less than a year old, have low mileage and are sold at a substantial discount.
- Demonstrator cars are used by employees at the dealership. The mileage is generally low and they often come with the remaining new car warranty coverage.
You can also look for certified used cars at dealerships. This usually means that you'll get a longer warranty and that the car has passed several quality checks, but check with your dealer to be sure.
Value of your trade-in
If you're trading in your present vehicle, you'll need to check its market value. Check NADAguides.com to get estimates on your trade-in. It's also a good idea to go to a couple of dealerships and ask for a price quote on your vehicle's trade-in value.
Dealer or private sale
The Federal Trade Commission's Used Car Rule requires dealers to post a Buyer's Guide in every used car they offer for sale. The Buyer's Guide gives a great deal of information, including:
- Whether the vehicle is being sold as is or with a warranty
- What percentage of the repair costs a dealer will pay under the warranty
- The fact that spoken promises are difficult to enforce
- Major mechanical and electrical systems on the car, including some of the major problems you should look out for
The Buyer's Guide also tells you to ask to have the car inspected by an independent mechanic before the purchase.
Buying a car from a private individual is different than buying from a dealer. Private sales generally aren't covered by the Used Car Rule, or by implied warranties of state law. A private sale probably will be as is—you'll have to pay for anything that goes wrong after the sale.
Find a Bank of America authorized dealer near you
Before you buy
Whether you buy a used car from a dealer or an individual:
- Examine the car using an inspection checklist. You can find checklists in magazines, books and on internet sites that deal with used cars.
- Test drive the car under varied road conditions: on hills, highways and in stop-and-go-traffic
- Ask for the car's maintenance record from the owner, dealer or repair shop
- Hire a mechanic to inspect the car
- Check the vehicle's history with AutoCheck or CarFax