Why Buy A New Car
Your loan payment should not exceed 10 percent of your monthly take-home pay, while total car expenses (including loan payment, insurance, gas, repairs, etc.) should not exceed 20 percent. Keeping these rules in mind can help you find a car you can afford for the long-run.
why buy a new car
Prices fluctuate at dealerships because dealers own the vehicles before they're sold. Buyers who might normally expect a certain amount off the MSRP, or manufacturer's suggested retail price, are actually finding higher-than-list prices in some cases.
"Shrunken inventory continues to wreak havoc on both the new and used vehicle markets," said Jessica Caldwell, Edmunds' executive director of insights "Shoppers who can actually get their hands on a vehicle are committing to never-before-seen average payments and loan terms."
As a result, car shoppers today face a limited selection and price hikes from either dealer-added (often non-negotiable) accessories or "market adjustments." Discounts of any sort are scarcer than the cars themselves, leaving buyers with no negotiating power. If you don't like the price of a car, the dealership is betting the next person will. This leads to a greater sense of urgency to make a quick decision on a deal since the car may not be there if you go home to think about it.
These are far from normal times in terms of both the selection of cars available and the lack of discounts you may encounter. If you need a new vehicle today, we suggest starting your shopping process sooner rather than later, as analysts predict that the chipset shortage will likely affect pricing and inventory through this year and into 2023.
If you're shopping for a new or used car in today's difficult marketplace, please see "Car Buying Tips for 2022" for our experts' targeted, data-driven advice. Note that the article below was originally written before the chip shortage, back when vehicle prices were relatively stable and predictable. If the shortages continue, there may not be a so-called "best time to buy" for the foreseeable future. The best time in the current market is when you find a dealer that has the vehicle you want and is willing to sell it to you at MSRP or better, without any additional options that you may not need.
Buying a new car is a big step, but it doesn't have to be a daunting one. Here's how to research, locate, price and negotiate to buy your new car. Smartphones make these steps easier than ever. It is now entirely possible for a buyer to shop for a vehicle while in line at the supermarket or waiting to pick up the kids.
This list explores the steps a buyer would take to purchase a new car. If you're looking to save more money and purchase a used car, the steps will differ slightly, which we cover in the article "How to Buy a Used Car in 10 Steps."
Automaker sites are useful for seeing more photos and learning more about features and options on vehicles. Use these tools and you should have little problem selecting the right car or SUV. Once you have a short list, it's time to figure out how you'll pay for the car.
A preapproved auto loan starts you out on the right foot. You get an idea of how much you can afford, and you'll have an interest rate that you can then compare to the dealership's financing, which might actually offer the lowest annual percentage rate. Look for a loan application on the mobile web pages of your bank, credit union, or other lenders such as Capital One or Nationwide. It's a good idea to do your own research on which lender will work best for you.
As you plan your financing, note that the most common loan terms are for about 72 months. Cars have become more expensive, and people tend to take out a longer loan to keep the monthly payments down. That said, Edmunds recommends a loan term that's no longer than 60 months. And while a 20% down payment is ideal, it's also difficult for most people to handle. So Edmunds recommends combining a down payment of around 10% with gap insurance or new-car replacement coverage. That lets you keep more money in your pocket without the risk of being underwater on your car loan.
To begin the loan approval process for your car purchase, collect your employer and salary information and balances of other debt you may have. Make sure you will be ready to shop within about two weeks of seeking preapproval. This strategy will reduce the number of hard inquiries to your credit history.
There's a faster alternative to trading in a car or selling it yourself: Get an instant offer from Edmunds. The offer is good for seven days, at which point you can ask your local dealership to beat that price or you can sell your car to one of our participating dealerships.
By now, you've settled on a few car candidates. You should see them in person before making a decision. Hundreds of car dealerships throughout the country list their car inventories on Edmunds. And in many cases, you can sort by color, trim level and features. It's a better way to shop than configuring a car on the automaker's website and hoping you will find one with that set of options in the real world. All the listings you'll find on Edmunds pages are real cars with a variety of options. Most will have an Edmunds suggested price that should be comparable to what others are paying.
If you follow the steps below with Edmunds, a salesperson from the dealership will contact you to schedule a test drive. If you found the vehicle on another site, call the dealership's internet sales department to request more information. In either case, keep these do's and don'ts in mind:
Do verify that the car you want is still in stock. It might have been sold recently, and online inventories can take a while to catch up.
Do ask the salesperson if there are any dealer-installed options. Many new vehicles are sold with add-ons such as nitrogen in the tires, all-weather floor mats or theft protection packages. Also, ask if there are any "markups" or "market adjustments" on the car. Both the markups and dealer-installed options can easily add thousands to the selling price.
Don't just show up at the dealer on a busy weekend or late at night. Waits may be long, and you may not get the salesperson's full attention.
Do schedule an appointment for a test drive. Early in the week and mornings are good times. Having an appointment means the car will be waiting for you when you arrive. You can also ask for the vehicle to be brought to your home for the test drive.
Don't just drive around the block. Take the time to see how you and your family fit in the car and how it handles on a variety of roads.
Do ask yourself the following questions: Are the controls easy to use? Is there enough cargo space? Will a child seat fit? (Bring it with you and test it.)
Don't feel obligated to buy the car the same day. Feel free to take a night to think it over.
Call, text or email the internet sales department of three dealerships that have the car you want. Ask each for the total selling price, including any additional accessories that may have already been installed on the car. The best price will be obvious. You also can take that quote and ask the other dealerships to beat it. If you plan on leasing, this is the way to go.
You can save time and trouble by using Edmunds' new inventory tool, to get a locked-in price that's designed to be comparable to the average price that others are paying in your area. We even label which prices are better than others. Make sure you ask the salesperson to email or text you a breakdown of the "out-the-door price," with all the taxes and fees factored in. That lets you see the total amount you'll be spending.
Here's how you do it: Call the dealership finance manager and ask about these products and services. They may be of value to you, but just know that the price is often something you can negotiate. And you don't have to buy them when you buy the car unless you intend to fold their price into the purchase contract.
Now that you have a price quote for the car, your big question is probably whether it's competitive. We have an Edmunds price checker tool on each piece of inventory that allows you to size up the dealership's price for a specific car you're about to purchase. This will give you some perspective and peace of mind on the price you're paying. In the past, we called it "Edmunds TMV" or "Average Price Paid." It's the amount that others are paying in your area for a similarly equipped car.
Keep in mind that a fair price is exactly that. Some people have paid more and others paid less. Some shoppers are only happy if they negotiate their way to a rock-bottom price. But for most shoppers, that usually isn't worth the hassle and frustration. And if your price quote is above the average, it's not necessarily a reason to walk away from a deal. Here's why:
A car's price isn't the only factor that determines a good car deal. You also should look at the interest rate, the loan term, and the value of your trade-in if that's part of your deal. There are even some intangibles, such as how the salesperson and the dealership treat you and the time you save in the shopping process. Those are all factors in a good deal. In fact, at this point in the process, you may be able to improve parts of it.
To see if that's possible, let the dealership run a credit report and assess your interest rate. Or if you know your credit score, tell the finance manager what it is and the rate for which you'd qualify. You can give your information to the finance manager over the phone. Some dealerships have credit applications on their websites, and you can fill one out. If the interest rate is lower than the one in your preapproved loan, go for it. If not, you already have a good loan locked in.
If the price, financing and fees look right, it's time to say yes to the deal. From here, you can proceed in one of two ways: Buy at the dealership or have the car and paperwork delivered to your home. 041b061a72