Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr Before you buy your first car, or your next car, there are some important things you must know to make sure you get your best deal on the car, and the financing for the car. If you follow the steps below, you will be able to cruise around with confidence that you have a great car you can count on at a price you can afford. Step 1: Know what you can afford. This may seem obvious, but there are many factors that come in to play with a new car. In looking at your budget you have to factor for the amount of the payment, the insurance payment, and gas cost. In order to make your payment affordable, some finance companies and car dealers will extend the term (length) of the loan to 6 or 7 years. Watch the term! If it is too long you will pay a lot more in interest and potentially owe more than the car is worth. Also, depending on the vehicle you buy, the insurance and gas costs will vary greatly. Best bet: narrow your car search down by making a list of a few different models and call around for the cost of full-coverage insurance. Mark that by the vehicle and keep it in mind when figuring your monthly payment expense. (Don’t have a budget yet? Kelel has a blog waiting for you here) Step 2: Figure out how you will pay for the car. While some people will have saved for their first purchase and can pay cash for the car, most people will need to get a car loan to get into that car and make it theirs. Most people will go into a car dealership and let the dealer handle the financing for them, this is dangerous, the salesperson is looking to sell a car and not make your budget make sense. Best bet: get in touch with your credit union and get pre approved for the loan. Credit union’s will help work with you on what is affordable without overcharging on rates. *Added Bonus: When you are preapproved through your credit union you are considered a “cash buyer” at the dealership and can negotiate your best price. Step 3: Know your credit. To prepare yourself for your best loan rate and to understand what lenders will be looking at, you should get a copy of your credit report. Please, please, please do not get your credit report from freecreditreport.com. (for complete details on freecreditreport.com check out our article here.) The 3 major credit bureaus are required to give you a free copy of your credit report yearly with no hidden charges or services to sign up for. To access a copy of your credit report, visit the government authorized site www.annualcreditreport.com. Best bet: you can receive one free credit report from each bureau every year, pull from one individual bureau every 4 months and keep an eye on your credit 3 times a year for free. *Note: You will not receive your credit score free, but it is not necessary to tell you what you need to know. You will be able to see all things reporting on your credit and how your payment history looks. Step 4: Find your car. There are many different dealers out there selling cars, shop around online at cars.com or by directly accessing local dealership websites. If you are looking at a used, or pre-owned, car you can compare the actual value of the car to what the selling price is. Most lenders use www.nada.com to get vehicle values, some use Kelly Blue Book www.kbb.com. You can use these services free and be more informed on what the car is worth vs. what it is selling for, these prices will rarely be the same. You should never pay over “Retail” value for any vehicle. Step 5: Negotiate your best price. Once you have the vehicle picked out, you know what it is worth, and you have your pre-approval, you are ready to go buy the car! Remember that you are a cash buyer and should inform the salesperson of that up front. They will want to try to get you financed or ask about financing, just let them know you are all set. You should be able to buy the car for a little under the retail value. Best bet: take a printout of the vehicle value so that you can refer to it directly with the salesperson if necessary during negotiations. Step 6: Understanding optional services. The dealer, credit union and/or bank will have many optional insurance products that will be available. There will also be multiple options for extended warranties. These products are typically better priced through your credit union. While the insurance products and extended warranties are valuable, they are not always for everyone. Be sure to ask a lot of questions about what is covered and what it costs. If you do not feel like you need it, do not sign for it. Most warranties are available through your credit union even after the car has been purchased if you change your mind. If you follow these 6 steps, you will be one of the elite car buyers in the country. Being educated is your best chance to get the car you need and want at the price you should pay.