I Need Another Car, Now What?

12 Steps to choosing your next vehicle

Shopping for a vehicle can be exciting. But it also can be scary. Because buying a vehicle – new or used – generally is the second-largest purchase most people will make in their lives, topped only by purchasing a home. Of course, that also means it’s the largest purchase for many people. In any case, you want to do it right. So we consulted some expert sources such as Edmunds.com, Kelley Blue Book, TrueCar, Consumer Reports, U.S. News and CarStory.com on the most important steps to purchasing a vehicle that you can enjoy and on which you can depend for as long as you want to own or lease it.

One thing on which experts seem to agree is that you do not start in a car lot or at a dealership.”As much as you might like to dream about what you want in a car, it’s best to think more about what you need – not just now, but in the future, too,” according to Edmunds. Following are a few steps in a process that should help you get into the right car for you or your family.

Assessing Your Needs

In fact, this is where the search for your next vehicle should start, asking questions such:

  • How many passengers do you need to carry?
  • What type of driving do you do – highway, surface streets, off-road?
  • Do you have a long commute and is fuel economy important to you?
  • What safety features are important to you?
  • Do you need a lot of cargo capacity?
  • Will you be doing any towing?
  • How much garage or parking space do you have?

You may come up with a lot more considerations, and now is the time to take them into account, not after you’ve driven your vehicle off the dealership’s lot.

Figuring Out a Budget

Part of the car-buying process should include thinking about how much car you can afford. If you haven’t already figured out a household budget, now would be a good time to do that. It should result in a less emotional approach to your search and will help you narrow your focus.

“Unless you’re paying cash for your car, you’ll need to think about financing your purchase or lease,” says Edmunds. “How much can you really afford to allocate toward a car payment each month? The general rule is no more than 20 percent of your monthly take-home pay.”

There are a lot of budget and car affordability calculators online that will help you figure this out, including calculators at Santander Consumer USA, RoadLoans.com, a direct-to-consumer lending product of Santander Consumer USA, and Chrysler Capital, another SC program.

Whatever calculators you use, this is a step you can’t afford to miss if you don’t want monthly payments to become a financial burden – the last thing your lender wants to do is repossess your vehicle.

New Vehicle or Pre-Owned

There are a number of factors you may want to consider.

Some of the main advantages of buying a new vs. used car are:

  • You probably can get the vehicle the way you want it.
  • The best warranty comes with a new car from the manufacturer.
  • Your new vehicle will have more up-to-date technology – and we’re not just talking nav system.
  • It will be equipped with the latest (often government-mandated) safety features.
  • Fuel efficiency may be greater on a newer model of the same vehicle.
  • Attractive financing options and potential discounts.
  • Less maintenance will be required because, well, it’s new!

The advantages of purchasing a used vs. new car are:

  • Save money compared to a new model – or get more vehicle for the same amount of money.
  • Total cost to own the vehicle comprising all out-of-pocket costs is likely to be lower.
  • Certified pre-owned vehicles – a growing category of used cars – provide the buyer some warranty protection, so there’s less risk of buying someone else’s problem.
  • You can escape the biggest depreciation hit, which comes in the first two or three years of ownership.
  • Vehicle history reports are available on many vehicles.
  • Attractive financing options on CPO vehicles.
  • Insurance rates may be lower, especially if you do your research.

Buying or Leasing

Of course, you may opt to lease a vehicle, which is a whole other kettle of fish with its own set of advantages and drawbacks compared to purchasing your next car, truck or SUV.

Several advantages of leasing vs. buying a vehicle, based on Edmunds, are:

  • A lease requires little or no money down.
  • You can drive a more expensive car for less money thanks to lower monthly payments.
  • You can drive a new car, with the latest technology, every few years.
  • There are no trade-in hassles at the end of the lease.

Several advantages of buying vs. leasing a vehicle, despite a higher initial expense and payments, are:

  • You have more flexibility to sell the car whenever you want.
  • You can modify the car to your tastes.
  • There are no mileage penalties if you drive a lot.
  • In the long run, your car expenses will be lower.

You can find a comprehensive comparison of leasing versus buying at the Chrysler Capital website.

Researching Vehicles

Now that you have assessed your vehicle needs, figured out your budget, decided whether you will by a new car or used, buy or lease, you finally get to research vehicles that fit your needs and budget.

This is a lot easier than it used to be, with just about everything you need online, where you can scout out make and model standard features, options, color, price, mileage (if pre-owned). But it still is a vast landscape – especially when you include more traditional resources in your research.

Among the best and/or most popular resources include:

  • Third-party websites such as Kelley Blue Book, Edmunds, Cars.com, TrueCar, Autotrader, CarsDirect and CarMax – some with information on new cars, others focused on pre-owned.
  • Consumer Reports, which offers an annual New Car Buying Guide on vehicle performance, reliability, satisfaction and safety for comparing a multitude of brands’ new and older models.
  • Dealer and manufacturer websites, which are good places to visit especially if you have narrowed your search to a few models and are ready for a deep dive.
  • Even car shows have their place on this landscape, especially if you want to get a look at a lot of vehicles in a relatively short amount of time without having to drive for miles.
  • Read online reviews, print reviews, whatever you can find – many of which are available at third-party and other websites – that inform you about the vehicles you are considering, something a surprisingly large number of shoppers don’t do.
  • Ask family and friends if they have any specific information on models you may be considering or dealerships with which they might have had a customer experience.

Narrow Your Choices

Easier said than done, but if you’ve been diligent about following these steps so far, you should have a pretty good idea of several models that meet your needs – or at least the type of vehicle you want.

So, for example, if you have decided that you’re leaning toward purchasing a standard-size pickup and have always liked a particular manufacturer … wait! Now it’s time to consider (or re-consider) other vehicles in that category. You could be surprised to find something else suits you better.

Many Web resources provide tools to compare vehicles – or flat out identify similar models.

For example, U.S. News’ annual Best Cars for the Money identifies category winners, as well as runners-up in that category – and not just for one year – and the website also provides overall rankings that might give you other ideas. Consumer Reports also provides reviews and other information by vehicle category, and Kelley Blue Book identifies “Similar Vehicles,” ratings and pricing information.

Ultimately, though, you’ll want to narrow the field, because of some of the following steps.

Used, Not Abused

A thorough walk-around is essential, particularly if you are purchasing a pre-owned vehicle, regardless of whether you’re working with a dealer or a private seller.

Some of the things to look for in your walk around a used vehicle are:

  • Signs of possible body repair or filler where you should find metal – lower door, fenders, etc. – which you can check with a small magnet, as well as panels or seams that don’t line up.
  • Signs of repainting which you may find by opening the trunk, hood and doors. Overspray or non-matching parts are telltale signs that all or part of the vehicle has been repainted.
  • Uneven tire wear, which could indicate signs of poor wheel alignment or suspension issues.
  • Any indication that the car has been in a flood, such as mud or leaves on the top of the gas tank or under the instrument panel, or some other sort of water damage.
  • Signs of driver abuse – or a vehicle that’s older than the odometer indicates – such as heavy wear on the foot pedals (accelerator, brake and clutch) or excessive wear on the steering wheel.
  • Look for any signs of leaking fluids in the engine compartment or under the vehicle, which could indicate significant damage on parts of the engine or transmission.

Take your time and be thorough by having your own mechanic inspect the vehicle if you can, and get both history and safety reports on the vehicle based on the Vehicle Identification Number (VIN). The 17-digit number will allow you to check the title and get a detailed AutoCheck vehicle History Report.

You also should request copies of the vehicle’s service records from the seller.

So far, so good? Then it’s time to …

Test Drive Your Favorites

For most people, this is where the fun really begins – where the rubber literally meets the road – because it may be the first time you get behind the wheel of a vehicle you’re seriously looking at buying.

It might surprise you that a recent survey said more than a quarter of car shoppers don’t do this. That’s not a mistake you should make whether you’re looking at a used car or a new one, whether you’re purchasing from a franchise dealership, used-car dealer or private seller.

Following are some of the most important things you should consider during a test drive:

  • Ride comfort
  • Acceleration
  • Hill climbing
  • Steering and handling
  • Braking
  • Seat comfort
  • Engine and other noise
  • Visibility
  • Dashboard lighting

“Drive all the vehicles you’re considering on the same day, so you can compare them more easily,” suggests Consumer Reports. “Drive them as long as possible – at least 30 minutes – and over different types of road surfaces and in various driving conditions.””

If something doesn’t look or feel right now, it isn’t likely to improve after you purchase the vehicle. This is a good time to be picky about the look and feel of the vehicle compared to the alternatives.

Pre-Approved Financing

Of course, the ideal scenario is to pay for your car outright in cash.

Besides avoiding monthly payments and interest charges, it enables you to aggressively negotiate on price knowing you can take your business elsewhere if necessary or desirable.

Realistically, though, very few of consumers are in a position to do that, with 86 percent of new vehicles and 55 percent of used requiring financing, reports the Consumer Financial Protection Bureau (CFPB).

Pre-approved car loans may strengthen the position of buyers by enabling them to shop with the confidence and flexibility of a cash buyer because they know their terms and can concentrate on shopping for a vehicle – and negotiating a trade-in if that’s going to be part of the deal.

So, where can shoppers get pre-approved for a car loan before heading to a dealership? Traditional banks, credit unions and online lenders such as RoadLoans. Interest rates and requirements will vary by lender, and the CFPB recommends shopping around for auto loan pre-approvals.

“Getting pre-approved by multiple lenders can mean that they may compete for your business,” said the consumer protection bureau. “This puts you in a stronger negotiating position for whichever you choose … [And] because you have pre-approved loan offers in your pocket, you get to choose whether to stick with one of them, or negotiate with the dealer for the best financing option.”

Discuss/Negotiate Price

This is the step almost everyone dreads, but if you’ve done your homework it should go easier.

Kelley Blue Book and TrueCar, for example, provide versions of fair-market pricing for available vehicles, which means you can go into a conversation with a seller knowing the manufacturer’s suggested retail price (MSRP), invoice price, fair-market range for your area and a fair purchase price.

U.S. News calls car buying “one of the last bastions of freewheeling price negotiation,” adding that “nearly every facet of the transaction can be adjusted as you strive to get the best new car deal and the dealer tries to get the most for their product.”

Here are some ways to tilt the discussion in your favor, according to U.S. News:

  • Get quotes from multiple dealerships, which going online makes easier than ever.
  • Know what you want to pay (see above, Figuring Out a Budget).
  • Don’t become emotional, even if you’ve just test driven your dream car.
  • Be ready to walk out, “your biggest advantage, and their greatest fear.”
  • Shop during off hours when you may have the dealership virtually to yourself.
  • Negotiate the purchase price – and nothing but the purchase price at this point.
  • Don’t only focus on monthly payments, which could result in your paying more in the long run – although you should have an affordable monthly payment in mind.
  • Negotiate your vehicle’s trade-in value separately so it doesn’t complicate the process.
  • Negotiate rebates and incentives separately, locking in a price before these are applied.
  • Know which fees are negotiable, such as documentation, marketing and dealer fees.

If you’ve stuck to the plan, you should be able to land yourself a fair deal, at least, if not a great one.

Surviving the F&I Office

Now it’s time to sign all the paperwork and hit the road.

OK. It’s not quite as simple as that. But if you read our companion piece, Knowledge is power: Getting the right deal on your next auto loan, you know where this is headed and how to handle it.

The finance-and-insurance (F&I) office is where dealerships draw up sales contracts, where buyers arrange for payment for the car, and where you’ll be offered additional products for your new vehicle. But, oh, the time it sometimes takes to finish the process.

On average, customers spend more than an hour getting through the F&I process alone, according to a study by Cox Automotive, so it requires determination and fortitude.

Some of the additional products you can expect to encounter, says Edmunds, include the extended warranty, technically an extended service contract; maintenance plans that bundle oil changes and other scheduled work; Anti-theft products ranging from a car alarm to VIN etching and GPS locator; road hazard and wheel warranties; paint and fabric protection; GAP insurance; excess wear and use protection (mainly for leases), and credit insurance or payment protection.

Think about these before you go to the dealership, so you know which products you might find useful.

Drive The Car Home

This is a moment to enjoy, and you’ve earned it, whether you bought a new car or a pre-owned model, because you’ve taken all the steps necessary to make the right choices along the way.

There are more than 260 million cars and trucks on U.S. roads, some new, some old, but this one is yours.

Sure, most car buyers will be making monthly payments to their lender as long as seven or eight years, and keep their vehicles more than 11 years, on average, but that also means they can get to work, drive their kids to school, take family vacations, or satisfy other lifestyle choices.

It also means that taking the time to do it right is one of the best decisions a consumer can make on the road to car ownership.