Buying a Car

Thinking about buying a new car? Then here’s a number of things you should and shouldn’t do.

You should:
• Consider purchasing a vehicle left over on the dealer’s lot from last year, or consider a demo or slightly used car (with up to 7,000 miles on it). Any of these will cost hundreds, and sometimes thousands, of dollars less.

• Before you negotiate for a vehicle, check that model’s wholesale and retail cost, including options, so you know how much negotiating room you’ll have (your final price should be somewhere in the middle). The best resource is the NADA guide (the "Bluebook"), which is available at most libraries. While you’re at it, be sure to check the trade-in value of your current car.

• Check the model’s previous repair cost, repair frequency, safety and performance records in Consumer Reports or in one of the yearly automobile-buying guides.

• If you can, pay cash. If not, get preapproved financing from a bank or lender before you shop. Why? Being able to tell a dealer you already have the funds needed to purchase a vehicle greatly improves your leverage. You can always negotiate for better financing from the dealer after you’ve negotiated the price.

You shouldn't:
• Don’t lease a car, unless you plan on getting a new one every year or two (which is not a good idea). Buying a car and keeping it for at least five (and preferably more) years is almost always more cost-effective than leasing a car.

• Never let the dealer negotiate financing terms first. Settle on the price of the vehicle first, then negotiate for financing if you need it.

• Don’t finance a vehicle for more than four (preferably three) years. If the only way you can afford a specific car is to stretch the financing over five or six years, consider a less expensive car.

• Don’t buy a vehicle in the first year it’s introduced or remodeled. Manufacturers often need a year or two to get the bugs out.

• Don’t buy a car just because you like the way it looks.

• Don’t buy a car before you’ve test-driven it. Better yet, rent a similar model for a couple of days to get familiar with it. Some dealers will even credit the rental cost if you purchase a car.

Why has leasing become so popular? Find out in Lease vs. Purchase: What You Should Know When Acquiring a Family Vehicle

Can't decide between minivan or SUV? Find out which is right for your family?

Rick Shaffer is an attorney, financial writer and host of “The Money Show,” a call-in radio show.