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Learn... Plan... Buy a Vehicle!

Steps to Vehicle Purchase
  Step 1 - Review your budget
  Step 2 - Determine your down payment
  Step 3 - Price your trade-in
  Step 4 - Check loan rates
  Step 5 - Research your vehicle choices
  Step 6 - Check out your vehicle choices
  Step 7 - Get competitive bids
  Step 8 - Prepare for the purchase
Calculators
  "How much vehicle can I afford?" (Wachovia)
  How much will my monthly payments be? (State Farm)
Tools
  "How much will the insurance cost? " (InsWeb)
  "How much will the insurance cost? " (Insurance.com)
  Check current lending rates at Bankrate
  Research your car (Edmunds, MSNAutos, or USAToday)
  For a used car, check its history at CarFax.com
  Visit online lenders at E-Loan and Capital One Finance
Prepare to buy a vehicle

Everyone wants to get the right car at the right price, but it takes time and it does require you to do some homework. The following describes this process and identifies a number of tools and services that can help you.

Step 1: Review your budget
The first step is to look at your monthly budget to determine how much room you have for car payments and insurance premiums. If you need help, visit our budget section and check out the budget worksheet to help you with these calculations.

If you are currently making a car payment, then you have some idea of how expensive a new car can be, and how long you have to make those payments. If you bought a car for $20,000 and your payments are or were about $450 a month, you should expect the payments now to be about the same for a car costing a similar amount. As a general rule of thumb, if you're devoting more than 15 to 20 percent of your household income to transportation, you should probably scale back.

If you already have a certain car in mind (or you've done step 5), contact your current insurance agent to find out how much your premiums might change. You can also check out InsWeb or Insurance.com to get online quotes for your vehicle type. You may be surprised how much or how little the rate changes based on the type of car you are choosing. Make sure you factor any significant increase into your budget.

Step 2: Determine your down payment
Now look at your savings and decide on a down payment. First, you need to understand the importance of making a down payment. Second, you need to evaluate how a down payment will lower your monthly payments (use the monthly payment calculator in the left column). Of course, this greatly depends on whether you have saved any money for a down payment, and whether or not you can use the equity in your current vehicle as a down payment.

Step 3: Price your trade-in
If you intend to trade your current vehicle in as part of your new car purchase, here are a couple of methods that can help you determine your present car's value:

  • Take it to some local dealers and ask what they'd pay for it. This will take a little time, but you'll have the upper hand when you're ready to buy. If you don't like the trade-in offers, simply sell the car to the highest bidder and use the proceeds for your purchase. One of the best dealers for seeing what your car might be worth is CarMax. They will give you a quote in writing, and will buy your car within a certain amount of time at the stated price. At least this gives you negotiating room if you then go to a dealer.
  • Look for similar cars online or in the classifieds. Web sites such as Cars.com, Autobytel, and Edmunds will let you search by make, model and year. But keep in mind that these are typically retail prices. If you sell your old car to a dealer you'll be selling at wholesale, so check the resources that many dealers use -- Kelly's Blue Book or NADA guides . Remember, though, that much of a used car's value is based on its condition and mileage, so make sue you account for these items when reviewing comparable prices.
Step 4: Check loan rates
If you have to borrow, you'll want to research loan rates in your area to find out which lenders offer the best deals. Individual rates will vary based on the amount borrowed, the term of the loan, and your credit rating, but at least you'll get a feel for the market.

For the latest information on manufacturer financing and rebate offers, check the manufacturer web sites for special deals (go to Useful Car Links for a list of manufacturer sites). If you're lucky enough to have a choice between a rebate offer or special financing, use this calculator to help you determine which would offer the greatest savings.

With a handle on your trade-in's value, downpayment and financing terms, you can hone your price range with the "How much will my monthly car payments be? " calculator. Try various purchase prices until the monthly payment is in line with your budget.

Step 5: Research your new car
Visit Edmunds, MSNAutos or USAToday to retrieve a list of cars that meet your price and needs. You can search cars by year, vehicle type, and price range. The results, which are a little different on each site, include photos and key information for each model, including its TMV (true market value), MSRP and Invoice price. MSRP is the suggested retail price, while the Invoice price is what the dealer pays for the vehicle before rebates and other incentives. You can also request multiple price quotes from local dealers. Another web site that offers similar services, including exclusive online services for members, is AAA.

If you are considering a pre-owned vehicle, try and get the VIN (vehicle identification number) so you can check its history at CarFax. You can order a single report for $19.99 or an unlimited number of vehicle reports for $24.99. It's a great investment to make sure that you are buying a vehicle previously damaged in a flood or a serious accident.

Once you've narrowed your choice to a few models, you might also wish to compare the cars' track records. Visit the National Highway Traffic and Safety Administration Web site for information on recalls and crash tests, and check the Insurance Institute for Highway Safety Web site for rankings on injury, collision and theft losses. The IIHS also offers more information on shopping for a safer car. The Federal Trade Commission offers advice for the consumer interested in a new car or a used car. Another good site, especially if you want vehicle reviews, buyers guides and and even daily news about the automotive industry, is the CarConnection.

Step 6: Go for a test drive
Before making your final decision, test drive the various makes or models that you are interested in. Go to a dealership to do just that and nothing else. Be sure you are comfortable in the car. Is there enough leg and head room? How does it handle? How does the back seat feel, and is there enough room for your passengers?

Step 7: Get competitive bids
The best way to find the cheapest price on a new car is to get competitive bids from several dealers in your area. The first place to start is with the web sites of various local dealers. If you visit the manufacturer's website, they will have a list of the local dealers and their websites. You can then check their inventory online, and many of the dealers also list their sales prices along with any local incentives (rebates or special financing). Second, you can visit the dealers and ask the sales manager how much above or below the (factory) Invoice price he or she is willing to go. Make sure the sales manager knows that you will be taking bids from other dealers. For more information on this technique, see "How To Get A Great Deal On A New Car." Third, you can use the services at Edmunds and other web sites to request online quotes from multiple dealers in your area. Finally, if you'd rather not take the time to try all of these options, you can pay $190 to have someone else do the negotiating for you at CarBargains.

Step 8: Prepare to buy that new (used) vehicle
There are two parts to preparing for the purchase. First, you want to prepare for the whole buying experience, which is typically not fun, and even stressful. Second, you need to decide whether to sell or trade-in any existing vehicle.

Prepare for the buying experience
Even though many people now use the Internet to research auto information and prices, almost all buyers still go to a dealership to view and test drive cars and to do the actual buying. Dealers come in different varieties and it's safe to say that no two are alike. Therefore, no two experiences buying experiences are exactly alike, although they do have many similarities.

Whether it's a small operation or a large conglomerate, a full-service dealer or a no-haggle price dealer, the experience can be rewarding and stressful at the same time. Knowledge can make a tremendous amount of difference, not only in the deal you get but also in lowering your stress level. The more you know about the entire experience, the better you can deal with it. The intent here is arm you with information and strategies and show you what to be wary of from the moment you step on to the dealer's lot to the time you drive off in your brand new vehicle. Read the articles below to learn some of the things you need to watch out for during this buying process.

There are also a number of other sources that can help inform you about the buying process.

  • CarBuyingTips is a good source to consult for advice on dealing with dealers and for updated information on new sales techniques you should be aware of.
  • The Federal Trade Commission enforces a number of laws pertaining to the sale of both new cars and used cars and offers advice on shopping and purchasing them as well.
  • When considering a large financial transaction with any dealer, you might want to contact your local consumer protection agency, state attorney general, and the Better Business Bureau to find out if any unresolved complaints are on file about a particular dealer.

Decide whether to sell or trade-in your vehicle
Obviously, the easiest way to handle this part of the purchase is to trade-in your vehicle. However, this isn't always the best way to get the most money for your current vehicle. You have to decide which way is the best for you, so on to the next section which will help you sell or trade-in your vehicle.

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