Do's & Don'ts About Buying a New Car

Buying a new car can be confusing, and not understanding the entire purchase process can be costly. For many people, a car is a requirement to get to and from a job. Unless you live in a metropolitan area with a public transportation system, you need a vehicle. Educating yourself about what you should and should not do when purchasing a new car may save you from paying too much or making a poor decision.

Research Fees

A purchase contract for a new car is often a long contract, with many fees listed that may seem obscure. The dealership may state that each of these fees is a requirement for the purchase, but this is probably not true. An example is the "dealer prep fee." Dealer prep means the work done by the dealership to get the car ready to sell. The car may arrive at the dealership with a type of plastic wrap to protect it during transportation. The car is inspected, and fluids may be added at the dealership. The car manufacturer pays the dealership for this work; however, the dealership may attempt to charge you this fee, which may be $150 to $200, according to Car Info (carinfo.com). If you do not understand this fee, you may feel you have to pay it. You don't. Although the process may be time-consuming, go through each item on the purchase contract and understand what it is and if you are required to pay it. Unfortunately, you may need to do you own research, as the salesperson may not be completely honest about the charges.

Financing

According to Car Info, a practice at many dealerships is to manipulate the interest rate for a "kickback" from the lender. The salesperson may tell you that based on your credit rating that you must pay a higher interest rate than you expected. You may feel as if you have no options; however, this may not be the case. The actual interest rate may be lower, but you are relying on your salesman to provide you an honest interest rate. For example, if your qualify for a 6 percent interest rate, your salesman may tell you that based on your credit you qualify for an 8 percent interest rate. To avoid this potentially costly maneuver, go directly to your bank and get pre-approved for a car loan. You will know your interest rate and have the funding ready for your new car purchase.

Determine Needs

Before you shop for a car, determine what you need in a new vehicle. Once you arrive at a dealership, you may get starry-eyed over a car that is out of your price range. You may be lured into purchasing a car that is difficult to pay for, when you may have initially wanted a car that is much cheaper. Determine what you want and can pay for. Stick to that amount. Use free online quote programs such as CarsDirect, CarQuotes and Autos.com to get a true idea of what a vehicle will cost you. Then, when you go into a dealership, be firm with the salesperson and with yourself on what you are willing to spend.

Add-Ons

After you have agreed to the purchase price of a vehicle and understand the interest, taxes and registration fees, you are often not done with dealership offers. Your salesperson or the finance manager will continue to sell add-ons. For example, you will be offered an extended warranty. The cost to you may be up to $2,000, while the actual cost to the dealership may be half that. If you feel an extended warranty is important, investigate companies outside of the car dealership for pricing. This can be another piece of research you do before going into the high-pressure situation of a dealership.