How to Buy a Car: 30 Tips to Save Money

(Last Updated On: August 21, 2019)

Wondering how to buy a car? You’re not alone. Buying a car is one of those things that should be simple but it isn’t.

We made a ton of mistakes when we purchased our first vehicle. There were a lot of very expensive life lessons involved in that purchase. That’s exactly why I’m writing this post today – I want you all to learn from my mistakes!

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Prepare before you even leave home.

I had no idea what I was getting into when we bought our first vehicle. As a result, I was unprepared for everything that happened during the transaction.

If you want to have a successful purchase, you need to prepare beforehand.

Know how much you can afford before you go.

Don’t leave home without having a firm idea about how much you can afford to spend. You need to know ahead of time because you do not want to discuss your personal finances with the salesperson.

If you don’t already have a written budget, it’s time to create one. We have a guide that can help you.

Remember that you need to be able to afford the total amount of ownership and operating expenses associated with your new vehicle. Owning and driving a car costs a lot more than just the monthly payment!

Ownership expenses are the expenses that you incur just by owning the vehicle. Even if you don’t drive it, you still have to pay the monthly payment, insurance costs and registration fees. If you finance the vehicle, you will be required to carry costly comprehensive and collision insurance.

Operating expenses are associated with actually driving the vehicle. These include things like fuel, tolls, parking fees, oil changes, new tires, repairs and other maintenance. If you’re in an accident, you will also need to be able to afford your deductible.

If you squeeze every penny in your budget to afford the monthly payment, you won’t be able to afford to actually drive your vehicle. Be realistic about your expenses.

Check your credit report and clean up any mistakes.

If you are going to finance your vehicle (as most people do), then you ought to check your credit report before you leave home. We’ll show you how to get a free credit report here.

Your credit report will influence the sort of financing you obtain. A lender will review all of your accounts to see any late payments, past-due accounts or collections you may have.

It is very common for reports to be inaccurate. It is your responsibility to check your report and ensure that everything is correct. If it is not, you will need to file a dispute to correct any mistakes. We have a dispute guide here.

Remember that pulling your credit usually causes your credit score to decline. If you wait until after you’ve pulled it to correct these mistakes, you will have to pull it again. This can damage your credit score.

Distinguish between your needs and your wants.

Needs and wants can be a tricky business. You may feel like you need a certain brand of car or a certain sound system, but that’s not necessarily true. You may want those things (and you may want them intensely) but they aren’t necessarily needs.

It can be difficult to separate your needs from your wants. This is something you should think heavily about before you leave home.

Do you need an automatic transmission because you don’t know how to use a clutch? That’s valid. Do you need air conditioning because you live in an area that gets very hot and it could be dangerous to drive without it? Do you have five children and need a larger vehicle? These are valid needs.

I tried, but I can’t come up with a valid reason why someone would need their vehicle to be a certain color or have a certain type of speaker system. Despite what your friends and your salesman may tell you, your car will be perfectly functional even if it doesn’t have any speakers at all.

Make a list of all the needs and wants you can identify. Organize the list into two parts (need and wants) and arrange them by priority. This will help you understand, in advance, what you are looking for in a vehicle so you don’t get distracted by something shiny but impractical at the dealership.

Understand the difference between financing and leasing.

Frequently, buyers are confused by these terms. However, there is a big difference between financing and leasing a vehicle.

If you finance the vehicle, you are making monthly payments toward the purchase price. When it is completely paid off, you will own the vehicle outright.

If you lease the vehicle, you are just renting it for an extended period of time. You will continue paying on the vehicle until you are done using it. Since the vehicle is owned by the lessor, or person leasing it to you, there may be cumbersome rules like mileage limits and other restrictions. Although leasing may sometimes appear cheaper than buying, it is usually more expensive in the long-term and often comes with hidden fees.

Research your financing options before you leave home.

Financing can be complicated. Although seven out of 10 automobiles sold in the United States are financed, financing can be difficult for low income buyers to obtain.

You should always know more about your financial situation than the salesman does. Prequalifying for a loan can help you understand how much you can realistically afford. Shopping around for lower interest rates and better terms can help you avoid spending more than necessary.

If you are able, shop around for financing options before you leave home. The more you know, the better prepared you will be when you find the right vehicle.

You may discover that you are unable to obtain financing. If that is the case, you may want to look for a dealership that offers in-house financing. You can also try to find someone who may be willing to cosign for you, although this can be complicated and ruin relationships if the deal goes south.

Decide whether you want to buy new or used.

Of course, everyone loves the idea of a shiny new car and that famous new-car smell. However, new cars are overpriced and lose much of their value as soon as they are driven off the lot.

New cars are fun. It’s nice to be able to choose your own options. You have the comfort of knowing the car hasn’t been abused by a prior owner and that you have a warranty in case something goes wrong.

However, buying a new car isn’t always realistic. Buying used can save a lot of money, as long as you do it right. You need to be careful about the vehicle you buy or you may end up with a hefty price tag for maintenance and repairs.

For the rest of this article, I will assume you’re buying a used car. After all, this is LowIncomeRelief.com!

Research the vehicles that are available in your area.

The Internet is a fabulous thing. Search the dealerships in your area to see what is available. If you find one that you are interested in, document as much information as possible. This allows you to obtain the Blue Book Value and other information that can help you during your negotiation.

Whenever possible, get the VIN numbers ahead of time so you can look at CarFax reports. Yes, these reports can sometimes be costly… but it’s much more affordable than buying a vehicle with hidden problems.

Prepare a binder before you go to the dealership.

In my experience, it really pays to be prepared. When I am shopping for a new vehicle, I regularly bring a binder with me. I divide into two tabs: Vehicles and Financing.

In the Financing tab, include your income verification statements and any prequalification paperwork you may have. Proof of residence is also sometimes required, especially if the dealership offers in-house financing.

In the Vehicles tab, I include my needs/wants list and any information that I was able to obtain about the vehicles online. Whenever possible, I try to document the Kelley Blue Book Value and the Edmunds True Market Price for each vehicle. I always leave a space for notes.

Be careful how you approach the dealership.

It is always best if you can visit a dealership multiple times before actually purchasing the vehicle. This empowers you to make a more informed decision and protects you from being swindled in a hurried deal.

Be sure to take care of your needs before you try to shop.

Do not arrive at a dealership tired, hungry or thirsty. If you do, you may end up losing money. The process of buying a car can be a time-consuming and difficult power play. You are more likely to be taken advantage of if you are distracted by hunger or exhaustion.

Eat immediately before arriving. Bring a small snack and beverage with you, so that you can be prepared if the process takes longer than you expected.

Bring a buddy whenever possible.

A friend can help you stay focused. If you get distracted, a trusted friend can provide a reality check. Make sure this is someone you trust, who understands your financial situation and needs.

Do not drive your trade-in to the dealership.

If you have a vehicle that you intend to trade in, don’t drive it to the dealership. Park down the street or borrow someone else’s car. If the salesman sees your vehicle and assumes you’ll be trading it in, they can factor that into the prices they quote you. You may get a better deal by leaving the trade-in off the table until the end of the negotiation.

Dress down and avoid wearing jewelry.

It’s unfortunate but true: If you look like you have money, you will probably be charged more money.

Dress casually when you visit the dealership. Remove your jewelry. Don’t give them a reason to suspect that you can afford to pay more.

Never shop at night.

You will need at least one full hour of daylight to fully view, evaluate and test drive a vehicle. The floodlights at the dealership can hide a lot of damage and imperfections, so avoid shopping at night. If you buy at night, you may be surprised at what you see in the morning.

Prepare to visit the dealership at least twice before making a purchase.

It is always best if you can visit a dealership multiple times before actually purchasing the vehicle. This empowers you to make a more informed decision and protects you from being swindled in a hurried deal.

Avoid salesmen as much as possible on your first trip.

Expect to visit the dealership at least twice before purchasing your vehicle. On the first visit, try to avoid salesmen. To avoid the interference of salesmen, it can be beneficial to walk through the lot before the dealership opens or after it closes. If you visit during business hours, insist that you are not buying at the current time and ignore them as best you can.

Wait to seek out a salesman until you are ready to test drive a vehicle. Otherwise, they will just be in the way.

Gather data so that you can do more research at home.

Once you have narrowed down the list of cars you are considering, obtain the VIN numbers and other relevant data about each vehicle.

When you return home, identify the Kelley Blue Book value and the Edmunds True Market Value for each of the vehicles. Write those prices in your binder so that you can use them during your negotiations.

Run a CARFAX report on each one. This will let you see if there is anything concerning in the vehicle’s history. It may help you rule out some of the vehicles. At the very least, it’ll empower you during the negotiation stage.

Get an insurance quote for each vehicle, also. This will help you make sure that it’s something that you can afford to own.

Thoroughly test drive each vehicle that you are considering.

Make sure that your test drive is as thorough as possible. Many people cruise around the block and assume that’s enough to give them a feel for the vehicle. That isn’t the case.

When you are test driving the vehicle, make sure that you adjust the seats to the most comfortable position. Ensure that all the features work properly. Adjust your mirrors. Test everything – and while you’re at it, try all the seats!

Pick a route that is as adventurous as possible. Drive on small side roads. Take it on the freeway. Go up and down hills.

Drive safely but thoroughly test the abilities of the vehicle. When there are no other cars or pedestrians around, make a sudden stop to test the brakes. Let go of the steering wheel to see if the vehicle veers to one side or the other.

During the test drive, keep the car as quiet as possible. Leave the radio off. Turn off the air conditioner or heater. Listen to the engine and try to identify any unusual noises. Clanking or grinding sounds are especially concerning.

Always get an independent mechanic’s inspection.

If you’re buying a new car, you can generally expect that nobody has owned or abused that vehicle before you bought it. This isn’t true when you’re buying used.

Buying a used car can be risky. You can take away some of that risk by getting the vehicle inspected by an independent mechanic. Don’t take it to a mechanic that has a relationship with the dealer!

If the seller does not allow you to do this, that’s a red flag. They are afraid of what you’ll learn during the inspection. I would not buy a vehicle that the seller didn’t want inspected.

The inspection may cost some money but it’s far more affordable than buying a clunker.

Remember that unpopular cars are usually cheaper.

Salesman are less likely to negotiate a lower price on cars that are in high demand and selling quickly. If you can’t get a fair price on the car you want, see if you can wait until the car is replaced by the next hot model or buy something else. The longer a car sits unsold, the more desperate the dealership is to sell it.

Use these techniques to master the negotiation.

Negotiating the sale is often the most stressful part of the transaction. If you keep your cool and follow these steps, you could save hundreds or even thousands of dollars.

Do not act overly interested in or attached to the vehicle.

By now, you know exactly what you want to buy. However, if you are too eager, the quoted price of the vehicle can swell by hundreds or even thousands of dollars. Do not let the salesman know that you are committed to that specific vehicle.

Don’t get distracted by the monthly payment.

Many salesmen want you to focus on the monthly payment. This can be a distraction from the overall purchase price of the vehicle. You could end up with a decent payment and a ridiculous overall price.

Focus on the total price first and avoid answering any questions about a monthly payment until after the total price is settled.

Don’t be afraid to walk away and come back later.

You can save a lot of money if you handle the negotiations properly. You need to be well-rested, hydrated and nourished. Do not arrive at the dealership hungry, tired or thirsty.

If you get a headache or begin to feel frustrated, leave the dealership immediately. You can always return later. Some people find that the best prices emerge after they’ve left the dealership three times.

Watch out for underhanded or unethical practices.

Leave immediately if you feel like the salespeople are not being honest. For example, a dealer may refuse to honor an advertised price because of “typographical errors.” If it is not an obvious error (such as a $25,000 car being sold for $25), be very skeptical.

Ask for the invoice.

You probably won’t be allowed to see it but it never hurts to ask. The invoice can show you how much the dealership paid for the vehicle. At the very least, asking for it can throw the salesperson of their game.

Make your final offer very specific, like $3,562 instead of $3,500.

Start with a very low offer to anchor their expectations and negotiate upwards from there. When you are ready to make your final offer, make sure it is a very specific figure and not a round one. It’s much harder for someone to negotiate with $3,562 than $3,500 because it feels like the specific number has been more carefully calculated.

You can find these strategies and more in this book. I am a huge fan of the book Never Split the Difference: Negotiating as If Your Life Depended On It. This book is written by former FBI Hostage Negotiator Chris Voss. In the book, you will learn everything you need to know about negotiating.

Don’t pack for the guilt trip.

Many salespeople will resort to emotional manipulation to protect their commissions. Statements like, “My children will starve if I sell it for that price!” are common. If the salesman’s job was that bleak, he would find a different job. You’re probably not the only person who heard that line recently.

Be prepared for turnover and closers.

If one salesman isn’t getting a favorable deal, they may call in someone else to negotiate with you. This person may be a closer, who is specifically trained to pressure you into finalizing the sale.

Don’t be persuaded by high-pressure tactics. In many cases, the salesman will say that the deal is only valid that day. That’s not true. If the car is still there tomorrow, the deal will be also.

Be quiet when nobody else is in the room.

Although it’s highly unethical, I’ve read that salesman are sometimes coached to place their phone on “intercom” mode when they leave the room. This allows them to listen into your conversations from another room. This may help them gain the upper hand in the negotiations.

Get everything in writing.

It doesn’t mean anything if it isn’t in writing. Any promises or agreements that the salesman makes are overruled by the contract you sign. If you are promised something, get it in writing.

Do not sign anything that says ‘subject to loan approval.’

If it says ‘subject to loan approval,’ it’s all tentative and nothing is certain. Everything can change dramatically. Demand that the loan be approved before signing any paperwork.

Don’t fall for extras.

Credit life insurance, fabric protection, extra warranties and many other things are upsold during the sales process. Carefully consider what you actually need. In most cases, you can safely decline all the extras.

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2 Comments

  1. Esther Lue
    September 6, 2019
    • Riley Thomson
      September 9, 2019

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