Key Takeaways

• Consider how you’ll use a car, how much you drive and where you drive before choosing a new car.
• Look at all the costs of a car, not just the monthly payment, before you buy.
• Determine financing options first to help you find the right car.

Buying a car is a major purchase, and there’s more to consider than choosing a make and model. The right car for you also needs to fit your budget, driving habits and long-term plans.

Before you head to the dealership, take some time to consider your options and understand what you can comfortably afford. These six tips can help you approach the car-buying process with confidence.

Tip #1 Consider the Best Choice for You

Before you go shopping, think about the car that’s right for you by answering these questions.

• How far do you typically drive each day?
• Will you use the car primarily for commuting, errands or longer trips?
• How much passenger or cargo space do you need?
• Will you need all-wheel drive or four-wheel drive for snow or rough roads?
• Where will you park the car when you’re not driving?
• Would your budget allow for a vehicle with higher fuel or charging costs?

Tip #2 Determine the Total Cost of Buying a Car

Once you know what you need in a car, determine how much you can comfortably afford. Keep in mind that the cost of owning a car goes beyond the monthly loan payment.

Car ownership expenses include:

• Monthly payment
• Insurance and registration
• Parking fees
• Gas and/or electric charging fees
• Maintenance, including oil changes and new tires
• Money set aside for unexpected repairs

Tip #3 Establish Financing

Knowing your financing options before you shop helps you avoid falling in love with a car that you can’t afford. Start by calculating the payment using a car loan calculator.

You may also want to consider getting preapproved for an auto loan before you shop. Knowing how much you may be able to borrow can help you focus on vehicles that fit your budget and give you another financing option when negotiating with a dealer.

Your credit score and overall credit history can affect whether you qualify for an auto loan and the interest rate you receive. Income, existing debts and other factors may also be considered when you apply.

It can be helpful to compare financing options from more than one lender so you can make an informed decision. Reviewing rates, terms and estimated payments from several lenders can help you evaluate your options. Before applying, be aware that submitting applications with multiple lenders may impact your credit score.

Consider Leasing

Buying isn’t the only way to finance a vehicle. Leasing may be an option if you prefer driving a newer vehicle every few years and typically drive a limited number of miles.

Lease payments may be lower than payments on an auto loan, although you generally won’t own the vehicle at the end of the lease unless you choose to buy it. Lease terms also typically include mileage limits and other conditions, so be sure to understand the agreement before signing.

Tip #4 Compare New and Used Cars

Now that you know what’s realistic to spend on a car, it’s time to decide what to buy. You can start by comparing new and used cars.

New Cars

A new car may offer:

• The latest features and technology
• Newer safety features
• Manufacturer warranty coverage
• Potential manufacturer financing offers, including low-interest-rate promotions

However, new cars generally cost more than used vehicles and typically lose value more quickly during the first few years of ownership. Insurance costs may also be higher.

Used Cars

A used car may offer:

• A lower purchase price
• Potentially lower insurance costs
• More vehicle for your budget
• Slower depreciation after the initial years of ownership

On the other hand, a used vehicle may have limited or no warranty coverage, depending on its age and condition. Be sure to research its history and have it inspected when appropriate before buying.

Tip #5 Consider Fuel Type and Efficiency

Gas-powered vehicles aren’t your only option. Depending on your driving habits and budget, a hybrid or electric vehicle may be worth considering.

Electric vehicles can have lower operating costs than comparable gas-powered vehicles, but they may have a higher purchase price. Think about how far you typically drive and whether charging stations are convenient for your regular routes.

Hybrid vehicles combine a gas engine with an electric motor and can offer improved fuel efficiency without requiring you to rely on charging stations.

When comparing vehicles, consider both the purchase price and the ongoing cost of keeping the car on the road.

Tip #6 Take Your Time Before You Buy

Once you’ve narrowed down your choices, it’s time to test drive the vehicles you’re considering. Compare prices, review the terms of any financing offers and make sure you understand the total cost before signing.

Don’t feel pressured to buy a car simply because you’re at the dealership. If the price or financing terms don’t fit your budget, it’s OK to keep shopping.

Taking the time to research your options, understand your financing and choose a vehicle that fits your needs can help make the car-buying process easier and more manageable.

Happy driving!