Buying a car from a dealership can be equal parts exciting and overwhelming. However, if you follow some simple car-buying tips, choosing your next set of wheels should be a lot less stressful. Whether you want a pre-owned vehicle or a brand-new model, the nine steps below should make it easier to navigate the process. 

1. Calculate Your Budget

Before you begin car shopping, it’s important to take an honest look at your finances. Buying a new vehicle has the potential to increase or perhaps even introduce several expenses into your monthly budget, including: 

• Car loan payments
• Auto insurance premiums
• Property tax payments (which may be annual)
• Maintenance costs

Additionally, you’re likely to have upfront costs associated with your vehicle purchase as well. For example, you might have to pay one month or more of new auto insurance premiums in advance, plus sales tax and property tax on your new purchase.  It’s also common for dealerships to charge document fees and other dealer fees in addition to the purchase price of your vehicle. Some fees and taxes (like sales tax) may be eligible to be rolled into your car loan if you’re financing the vehicle. But you might be responsible for paying other costs, like property tax, out of pocket depending on your lender and the maximum loan-to-value (LTV) ratio it offers.  

2. Check Your Credit

Unless you’re paying cash for your new or used vehicle, it’s critical to review your credit before you start the car shopping process. An auto lender will check one or more of your credit reports and associated credit scores when you apply for financing. Therefore, you should be aware of the condition of your credit so you’ll have proper expectations when you apply for an auto loan.

Lenders rely on credit scores to predict risk. A higher credit score indicates that a borrower is more likely to pay future credit obligations on time. So it makes sense that lenders tend to reserve their lowest rates and best loan offers for applicants with higher credit scores. 

With lower credit scores, you’re more likely to face higher interest rates, less attractive borrowing terms, and possibly higher down payment requirements as well. With bad credit, you might find it difficult to qualify for some auto loans without a co-borrower or co-signer. 

The Fair Credit Reporting Act (FCRA) gives consumers the right to access their three credit reports free of charge at least once every 12 months. (Visit AnnualCreditReport.com to claim your free reports.) These free reports don’t include credit scores. But there are other sources for free credit scores available, such as credit card issuers and online credit monitoring services. 

3. Choose the Vehicle and Features You Want

Once you know your budget and the condition of your credit, you may be ready to begin researching vehicles in your price range. To narrow down potential vehicles you can make a list of your preferences, such as:

• Your preferred vehicle type (e.g., car, van, SUV, truck, etc.)
• The number of passengers you need to transport
• The amount of cargo capacity you need
• Whether you need the ability to tow
• Your access to garage or parking space 
• Whether you want four-wheel drive or all-wheel drive
• The type of fuel economy you want
• Top features on your wishlist (e.g., leather seats, backup camera, sunroof, etc.)

It’s important to have a good idea of the type of vehicle you want to buy and the features that matter most to you before you visit a dealership. Defining your wants and needs in advance makes it harder for a salesperson to push you into purchasing a car you don’t want or can’t afford. Plus, researching the average prices of your favorite vehicle options in advance can help you be better prepared before you step foot onto a car lot. 

4. Get Pre-Approved for a Loan

Comparing financing options from multiple auto lenders is one of the most important steps in the car-buying process—a step you should begin long before you visit your first dealership. According to the Consumer Financial Protection Bureau, shopping for the best rate on an auto loan has the potential to save you hundreds and possibly thousands of dollars.

Thankfully, many auto lenders will allow you to see if you’re pre-approved for a car loan. The pre-approval process can let you check your estimated interest rate, the amount you’re approved to borrow, and your estimated monthly payment. If a lender pre-approves you for a car loan, you’re not guaranteed to be approved, but you have a good chance of qualifying for financing. 

Compare the Best Auto Loan Rates

Lender	APR*	Loan Amounts	Loan Terms
	As low as 2.99%	$2,500–$100,000	2–8 years
	5.54%–9.04%	$500–$350,000	1–7 years
	As low as 2.24%	$5,000–$150,000	1–8 years
	3.99%–24.99%	$5,000–$55,000	24–84 months
	5.19%–17.99%	$500–$150,000	3–7 years
	Not disclosed	Not disclosed	Not disclosed
	1.99%–24.99%	$7,500–$100,000	2–6 years

5. Choose a Dealership

By this point, you may be ready to start visiting car dealerships in your area. To prepare for this step, it’s wise to research established and reputable car dealerships with positive reviews and high customer satisfaction ratings.  Look out for red flags like dealerships that charge high additional fees on top of the vehicles they sell. A reasonable document fee may be standard, depending on your location. It’s also normal to pay sales tax, title and registration fees, and inspection and emission fees in certain states. However, some dealerships may add on other fees (e.g., advertising fees, destination fees, tire protection, market adjustments, appearance packages, etc.) that could add thousands of dollars to the cost of your vehicle purchase. 

In general, it’s best to visit several dealerships. Just as you want to compare auto loan offers, you’ll also want to compare vehicle offers before you make your final decision to make sure you get the best price on a new (or used) car.

6. Test Drive and Inspect the Vehicle

Another important step in the car-buying process is to test-drive the car models you’re considering purchasing. Test drives can help you evaluate the comfort and performance of different vehicle options. (You may want to take notes if you’re still trying to narrow down your options and choose a favorite vehicle make and model.) As you draw closer to the point of choosing a specific vehicle to purchase, you can use the test-drive process to accomplish the following important steps. 

• Verify the vehicle you’re considering has the features you’re looking for and is the trim level you want to purchase. 
• Check for damage or defects on the vehicle’s interior and exterior. 
• See how the vehicle handles at different speeds. 
• Make sure you’re comfortable driving and parking the vehicle. 

If you’re buying a used car, it’s also important to obtain a copy of the vehicle’s history. Doing so should enable you to check for accidents, maintenance records, and details of previous ownership.

7. Negotiate With Salespeople

Whether you’re trying to get the best price on a new car or a used car, it’s important to sharpen up your negotiating skills before you visit an auto dealership. Shopping for a car in today’s market can be more difficult for buyers than it was in the past due to a combination of challenges such as higher prices, higher interest rates, and lower inventory levels. 

Nonetheless, negotiating with auto salespeople (at least to some degree) may still be possible depending on your location. And the tips below may help you navigate the process. 

• Be firm regarding your budget. 
• Feel confident about the vehicle price research you did ahead of time. 
• Don’t be afraid to walk away and visit other dealerships. 
• Get offers from multiple auto dealerships before you make a final decision. 
• Avoid being in a hurry to purchase.
• Pay attention to the total cost of the vehicle (including additional fees the dealer adds on), not just the monthly payment.

Be aware that auto dealers will often try to get you to add on additional products after you purchase your vehicle. For example, a salesperson or finance manager may try to upsell you an extended warranty or GAP insurance. 

Extended warranties and similar products can cost thousands of dollars and are big money-makers for the companies that issue them and the dealerships that sell them. Yet in general, you’re better off saving the same amount of money in an emergency fund, where you’ll have access to the cash if you need it for repairs. And if you don’t have to spend the money on repairs, you can use it for something else.

8. Finalize the Deal

Once you’re confident you’ve negotiated a good deal on your new or used car purchase, it’s time to look over the details. Make sure to read any purchase contracts carefully before you sign them. The same rule applies to auto loan agreements from your lender, whether you got a loan through the manufacturer or an outside lender. If you’re trading in a vehicle as part of your new purchase, look over those details as well. Make sure the dealership is paying you what it agreed for your former car, and that the funds are enough to cover the cost of any existing car loan you owe on that vehicle (if applicable).  The dealership may also need certain information from you to finalize the sale of your new vehicle. For a smoother process, bring the following documents with you during the car-shopping process. 

• Identification
• Proof of insurance
• Lender pre-approval letter(s)

9. Take Delivery

In some cases, you may be able to drive your new vehicle home from the dealership the same day you purchase it. At other times, you may have to arrange pickup or delivery of your vehicle at a later date. Yet in either scenario, the dealership should provide you with a clean vehicle and a full tank of gas.  If your car is arriving at a later date, be sure to inspect it again for any new damage that might have occurred during the delivery process. You should also expect a demonstration of the key features of your new car, including safety features and pairing your phone with the vehicle’s Bluetooth technology. 

Many dealerships will also handle the process of registering your car and obtaining your license plates on your behalf. However, depending on your state of residence, you may have to pay property taxes before the dealership can complete this process for you.