How to Buy a Car

Guide Note: How to Buy a Car offers advice on deciding whether or not you're ready to buy a car, whether you should buy a used or new car and whether you should buy or lease car.

More in-depth buying and leasing advice is available through the following Mahalo guides: How to Buy a New Car, How to Buy a Used Car and How to Lease a Car.

Table of Contents:

Introduction

  • Unless you're rolling in dough, shopping for a new or used car can be about as much fun as oral surgery. Pushy salespeople, inflated prices, the constant feeling that you're being swindled. Fortunately, there are some tricks to cutting the confusion out of your car buying experience. With a little patience, a lot of research and a commitment to getting what you want, you can get the best possible deal on a new or used vehicle.

Step 1: Decide If You Need a New Car

  • Before buying a new or used car, ask yourself why you need one. Answer honestly. Would a tune-up and an oil change on your old car suffice, or is your current vehicle just not safe? Is your desire for new wheels driven by vanity or necessity?
(Creative Commons photo by Niels Heidenreich)
(Creative Commons photo by Niels Heidenreich)

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Step 2: Determine If You Can Afford a Car

  • When budgeting to buy a car, remember that the cost of the vehicle isn't the only cost you'll encounter. Take the following into consideration when deciding whether or not you can afford to purchase a new car:
Take the cost of maintenance into consideration. (Creative Commons photo by LHDugger)
Take the cost of maintenance into consideration. (Creative Commons photo by LHDugger)
  1. Insurance: Different cars. Different cities. Difference insurance premiums. Talk to an insurance agent about how to lower your potential premium. There may be breaks for installing an alarm system or driving only a certain number of miles per month.
  2. Cost of the Car: Use The Motley Fool's "What vehicle can I afford?" online calculator to figure out how much you can spend on a vehicle without breaking the bank. You'll need to know the value of your trade-in, how much you've saved for a down payment and what you anticipate spending per month to pay off your auto loan.
  3. Maintenance and Repairs: Unless you're a bit of a mechanic yourself, expect to spend anywhere from $25-$100 every 3,000 miles for basic maintenance and $400-$1,5000 every other year for more substantial tune-ups.
  4. Fuel: With the rising costs of fuel, you can expect to spend a minimum of $100 per month on gas.
  5. Licensing and Registration: Before you can drive off in your new set of wheels, you'll have to pay for its license and registration. The cost of registering a vehicle varies from state to state, but the cost per year will decline as your car's value depreciates.
  6. Parking: If you live in a crowded urban area or commute to one, you'll need to take the costs of parking into consideration.

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Step 3: Choose a New Car or a Used Car

(Photo by Andrew Beierle)
(Photo by Andrew Beierle)
  1. Initial Costs: Used or "pre-owned" cars have lower purchasing prices, licensing and registration fees, taxes and insurance costs.
  2. Operating Costs: New cars have lower operating and maintenance costs because they tend to get better mileage than used cars and require less frequent repairs.
  3. Safety and Reliability: New cars have the latest safety features and tend to be more reliable. Used cars may have a history of problems you don't know about when you roll off the lot.
  4. Warranty: New cars come with a warranty as part of their purchase price. You can purchase a warranty for a used car, but that cost is not included in the vehicle's purchase price.
  5. Environmental Impact: New cars are less likely to release harmful emissions than used cars.

Certified Pre-Owned Cars

  • Why not meet somewhere in the middle? A certified pre-owned car is a used car that comes with a dealer guarantee and an extended warranty of 3 or more years. A certified pre-owned car will cost you more than a used car, but considerably less than a new one. This option is a blessing for people who want the security of the dealer's certification, but don't want to pay new car prices.

Step 4: Decide Whether to Buy or Lease a Car

  • Whether you choose a new or used car, you'll have the option to buy or lease the car. Leasing is typically the more expensive route unless you drive fewer than 12,000 miles per year or require a new car every three years or so. If you are debating the buying versus leasing option, here are some of the things you should take into consideration:
You can't pimp a leased car. (Photo by Rob Blum)
You can't pimp a leased car. (Photo by Rob Blum)
  1. Cost: Buying a car requires more money upfront. You either have that money saved up, or you take out an auto loan to purchase the car. Once you've paid off the loan, the car is yours. To lease a car, you need much less money upfront for your down payment, but your monthly payments will add up. You will have to sign a lease of 2, 3 or 5 years and adhere to various restrictions including mileage limits.
  2. Mileage Restrictions: Leases limit your "free" mileage to 12,000 - 15,000 miles per year. After that, you pay for each mile.
  3. End-of-Lease Terms: At the end of your lease, you must pay for whatever the dealer deems to be "signs of excessive wear and tear." And, despite how much you've paid over the course of your lease, you won't own the car.

Note: Among The Motley Fool's excellent online auto calculators is one that helps you determine whether or not it is more economical for you to buy or lease an automobile.

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Step 5: Consult Mahalo's New or Used Car Buying Guides

  • Once you've decided whether to go the new or used car route, check out the following Mahalo guides to take the stress out of your car buying or leasing experience:

Resources for How to Buy a Car

Car Reviews

Find New and Used Cars Online

New Car Price Quotes

Related Searches

How to Buy a New Car | How to Buy a Used Car | How to Lease a Car | Used Cars | Hybrid Cars | Luxury Cars | How to Get a Free Credit Report | How to Get Better Gas Mileage | How to Inspect a Used Car



Have any great tips on How to Buy a Car? Post your thoughts to the discussion board or email them to Julia: Julia at mahalo dot com.