How to Research a New Car 101
We have simplified this new car buying strategy to 7 steps to buying a new car. You can complete 6 of these steps to buying a new car in an hour on your computer. The last one will require you to change out of your PJ's and go pick up your car. Do your homework - Don't waste a Saturday afternoon playing "What will it take for me to sell you this pretty little car today?"
Step 1: Research & Price the New Car
What’s most important? When you research a new car, you need to know the numbers. You need to know the MSRP, Invoice Price, Dealer Holdback , and Incentives . Why? If you don’t, the manager/salesperson will know you haven’t done your homework and take advantage of the situation.
You can easily research a new car and pull the MSRP and Invoice Pricing on a vehicle by visiting Edmunds.com . All you have to do is select the car you want and the options that you want to include. Many people buy cars at invoice and UNDER invoice – even when there isn’t a cash rebate. So, don’t think of the invoice price as the “cost” that the dealer paid for the vehicle. Check out our incentives page – this page exposes how dealers make $100,000’s even when they sell cars at very low prices.
You can also find the current incentives (Low APR Loans ) on Edmunds.com . Keep in mind that local incentives might not appear on these sites. Newspapers are the best source for dealer specific incentives and some manufacturers (like Toyota) have a “look up incentives” page on their website. Check out our Dealer Loan vs. Cash Rebate page to learn how to select the right money saving incentive.
Step 2: Price your Used Car
If you have a used car that you need to sell or trade-in, you need to know the value of your car before you sell it – right? Would you sell your house without knowing what other homes are selling for? You can pull used car numbers on Edmunds.com on their Appraise a Car page. Edmunds gives you the trade-in value (ouch!), the private party, and the dealer retail price.
We recommend that you don’t trade in any car – it's a sure bet that you will lose money if you trade it in. The internet makes it so easy to sell a car – why not do it yourself! Read more at Selling a Used Car . If you are in a LEASE, check out How to End a Car Lease Early .
Step 3: Order Your Credit Reports and Credit Scores
We recommend that you order both your Credit Reports and Credit Scores from all three credit bureaus. You can order free copies of your credit report from each bureau (once a year), but the reports don’t include your credit score (FICO score).
Websites, such as FreeCreditReport.com and MyFICO offer the option to get all three reports & scores at one time. Your FICO score is going to determine the rate on your Auto Loan . The information and scores on each of these reports can vary. So, it can be very helpful to see all three reports. Credit bureaus make mistakes. Check out Credit Report Tips for more details on these mistakes and how to correct them.
BottomLine: It’s best to see these reports and your scores before the finance manager sees it. Why? If you know your credit history and credit scores before the finance manager, you will have a chance to research your new car financing options and potentially save more money.
Step 4: Apply for Back-Up Financing
Many people skip this step to buying a new car and it costs them thousands of dollars on each car they purchase. There are several well-known auto financing companies (such as MyAutoLoan) and you can complete an application online in 5 minutes. For more details, check out our Auto Loan page.
Even people with perfect credit can save money during this step to buying a new car. If you are accepting a cash rebate, you have no idea what interest rate the dealer is going to offer you (most cash rebate offers are NOT offered in connection with Low APR offers). Don't limit yourself to dealer financing. Several of the online auto financing websites (such as MyAutoLoan) quote interest rates right on their website. If you apply for the loan and have the check in hand when you buy the car, you may even find that the dealer’s finance manager will offer you an even lower rate to go with them. For more details check out these pages: Auto Loans and Low APR Loans .
If you have "bad credit" (low credit scores) and keep getting turned down for loans, don’t continue applying for loans. This will eventually hurt your credit score even more. (Numerous credit inquiries on your credit report are a red flag to lenders.) Instead, apply with MyAutoLoan. These companies offer loans to people with low credit scores. This will save you a lot of time and reduce the number of credit inquiries on your credit report.
Step 5: Apply for Insurance Quotes & Get Extended Warranty Quotes
Whether you have an insurance company or not, it’s a good idea to get a quote on your new car before you make the purchase. Insurance premiums vary by company and your current coverage may no longer be competitive. Knowing your future insurance premium can help you determine your monthly budget and prepare for any premium increases. While you are getting the quote you can also do a little price comparison among the Insurance companies.
Insurance premiums are affected by the number of claims that are submitted in your zip code. One company may have a higher premium than another company based on the claims in your area. Companies like Esurance and 21st Century Insurance make price comparing simple and offer fast & easy online applications.
If you plan to keep this new car longer than the standard warranty, this is a good time to check out your extended warranty options. You aren’t limited to the dealer’s extended warranty. Yes, an extended warranty can be negotiated too. Companies, such as Smart Auto Warranty, offer extended warranties at a fraction of the dealer prices. As with Car Quotes , Financing , and Insurance , we recommend that you price compare – and create a little competition among the companies to get a lower price.
Step 6: Get Car Quotes
There are a handful of easy ways to get quotes on a car. And none of these require you to DRIVE to 8 different dealerships and spend an hour with 8 different salespeople. Companies like Edmunds.com or Yahoo! Autos offer quick online car quotes directly from the dealers in your area. These quotes typically go straight to an “internet department” and cut out the middleman.
If you want to really step your negotiating up a notch, CarSqueeze offers a guide to negotiating with Fleet Managers. Everyone should be using this guide. We've referred several of our personal friends and they now swear by this new car buying strategy. Coupling the tips found on our site and the CarSqueeze guide, they have been able to negotiate prices well below the prices offered by several online buying services and the Edmunds TMV pricing.
Before you collect your car quotes, check out our New Car Buying Tips page for answers to frequently asked questions like – When is the best time to buy? How do I find out about secret incentives? & How many quotes should I get?
Step 7: Finalize Negotiation and Pick Up Your Vehicle!
Change out of those PJ’s – it’s time to pick up your new car. Before you pick up the keys to your new car, sign an auto loan or lease, check out New Car Buying Tips and Top 6 Car Loan Scams to prepare for your visit to the dealership.