How To Buy a New Car

Learn how to buy a new car and get the best deal

Saleswoman explaining customers to charge electric car at showroom

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Buying a new car can be one of the most intimidating purchases you’ll ever make, if for no other reason than its price tag. While buying a used car would have set you back an average of $27,768 at the tail end of 2022, the average new car was selling for $41,445, according to Experian. 

Another big wrinkle was caused by the pandemic hitting the auto industry hard, a blow from which it hasn’t fully recovered yet. As a result, a lot of traditional car-buying advice became scrambled up and thrown to the wind. We’ll help guide you through how to buy a new car today. 

1. Research Vehicle Types and Market Status

One of the first decisions you’ll have to make is this: do you need a car now, or are you willing and able to wait a long time for the right vehicle if needed? 

The answer will dictate the next steps you need to take, which can be very different. Traditional advice focuses on buying a car that’s already in stock, but the pandemic caused a big shift in how people buy new cars today. Now, it’s quite common to place a custom factory order and wait several months for delivery, especially for popular models and electric vehicles (EVs).  

For example, most experts suggest getting pre-approved before you head to a dealership. But those offers expire in 30 - 60 days, which is a problem if your car won’t be here for six months. Things are changing month by month as the economy gets back on track, so it’s important to first take current stock of what’s available, what you want in a car, and whether you’d be able to wait. 

2. Decide on a Vehicle

Once you’ve got a rough idea of the type of car you want and how difficult it will be to buy, do some additional research to zero in on the right model(s) for you. Look for features that are important to you, like interior features or ease of repair. 

It’s also a good idea to put together a list of car ownership costs, including fuel, car insurance, registration, and repairs and maintenance. The auto loan itself isn’t very useful if you can’t afford to drive your car anywhere, after all.

3. Check Your Credit

Applying for a car loan if you’re not sure of your credit can be a dicey prospect. But if you take a few minutes to look up your credit report and your credit score ahead of time, it can eliminate any surprises. 

It also helps you zero in on the right type of auto loan to apply for. If you have bad credit, for example, you know you can skip the lenders that focus on excellent-credit applicants. It also gives you time to fix any errors on your credit report so you get the best loan terms possible. 

4. Set Your Budget

If you have enough cash to pay for a new car outright without sacrificing your other important savings, like your emergency or retirement fund, that’s an ideal spot to be in. But eight out of 10 new cars are financed, and if you have plans for that, it’s important to make sure your new car loan fits within your budget too. 

If you don’t already have a monthly budget, go ahead and make one. This will tell you how much extra money you have for a car loan payment, in addition to all of the other car-related expenses you tallied up earlier. 

From there, you can use a car loan calculator to calculate how much car you can actually afford after you add in other factors like savings for a car down payment or a trade-in.

You don’t need to spend every extra dollar on your car loan. Remember to keep some wiggle room in your budget in case your expenses or income changes over time.  

5. Get Pre-Approved for Multiple Loans

If you’re ready to buy now, go ahead and shop around for a new car loan by getting pre-approved with as many lenders as you can. It’s usually a quick process with each lender, and it’ll show you the rates and loan options you’re likely to qualify for. Try to get all your rate shopping done within a two-week window so you can minimize any negative impacts to your credit.

If the car you’re interested in is facing a long wait time, then hold off on this process until you’ve already reserved the car and received notification that it’s left the factory. That way your pre-approval offers will still be valid by the time your car arrives and you need to arrange financing. 

Best Car Loan Rates

Lender APR Range* Loan Amounts Loan Terms
AUTOPAY 2.99% and up $2,500–$100,000 24–96 months
Consumers Credit Union 5.24% and up $500–$350,000 60–84 months
LendingTree 4.75% and up Not disclosed 36–72 months
PenFed 5.39%–17.99% $500–$150,000 36–84 months
*APRs are accurate as of publication.

See how we chose the best car loans and see more options:

6. Locate and Test Drive the Car

If the car you’re interested in is available near you, go to a dealership and take it for a test drive to make sure it’s comfortable to drive in. 

If the car you want to drive faces a long back-order with no models available to test drive at the dealership, you’re not out of options. Many people are getting creative by turning to places like Craigslist or Turo, where you may be able to rent the car you’re interested in from someone who already has that model. 

7. Shop Around With Different Dealerships

Some dealerships may offer better deals or be more open to negotiating than others—but not always, and that may be more apparent if you’re ordering a new car. Many car manufacturers require you to place the order on their own website, with the dealership playing a smaller role just for the vehicle’s delivery. 

If you do have the luxury of being able to shop for a car in person, try visiting multiple dealerships to test-drive cars and get car purchase quotes. You may be able to use these as bargaining chips as well to negotiate a lower cost on your new car. Remember, a car’s MSRP is just that—the Manufacturer’s Suggested Retail Price. Dealerships can sell you a car for a lower price if they’re keen enough for your business. 

8. Close On the Deal

Once you’ve identified the exact car you want to buy, it’s time to head to the negotiating table. Show the dealership your pre-approval offers and ask if they can do any better. If the dealership is able to give you a better financing offer based on the legwork you already did, then great. If not, go with your best pre-approved offer. 

Read all of your paperwork thoroughly, and keep a special lookout for any sneaky dealership fees or add-ons. 

Reach out to your car insurance company to find out whether you’ll need a new policy that same day or if you’re covered for a 30-day window under your current coverage. 

9. Get Your New Car

Depending on the dealership’s policies, you might be picking it up at the dealership or having a salesperson come to your house. Either way, make sure you do a full visual inspection just as if you’d be renting a car. Look for any dents, dings, or other defects, and check that the gas tank is full. 

Ask the salesperson for a demonstration of the key things you need to know to drive your car, like how to operate all of the switches. After that, you’ll be off to fresh adventures with your new car. 

What Counts as a New Car?

A new car is exactly what it sounds like—a car that’s never had an owner before and is fresh from the factory. New cars are more expensive than used cars and depreciate rapidly as soon as you drive them off the lot. However, new cars are usually more reliable and have the latest features.

What’s the Cheapest Way to Buy a New Car?

The biggest thing you can do to buy a cheap new car is to choose a less-expensive car to buy. Once you’ve zeroed in on a model, get quotes from multiple dealerships on the cost of that new car. Then, show these price estimates to the other dealerships to see if they’re willing to lower the price to earn your business.

How Long Does It Take To Buy a Car?

It depends on the type of car you’re buying. If the dealership has the car in stock, you may be able to wrap up all of the details and complete the purchase as soon as the same day. But if you’ve got your heart set on certain popular models, you may need to wait months or even years before your pre-order arrives.

Can You Buy a Car With Bad Credit?

Yes, you can buy a car with bad credit, but it’ll be harder to get approved for financing and you’ll pay higher loan costs too. Watch out for buy-here-pay-here dealerships which focus on selling used cars to people with bad credit, but charge exorbitant rates and make it easy to repossess your car. 

How Much Money Should You Have for a New Car?

A down payment isn’t always required if you’re buying a new car, but it’s a good idea. Most experts recommend saving up a 20% down payment for a new car because that lowers your loan amount—an important factor given how fast your new car’s value will decline. Lenders may also offer better rates if you’re taking out a smaller loan over a shorter period of time too.