Disclaimer: This How To is based on my personal experience. My suggestions may not always be the best route for all individuals, but I have attempted to give a reasonable method for purchasing a vehicle.
Buying a car is a big investment. Charity and I have owned four cars - two of which we have till this day. Our first car was a 1993 Toyota Corolla that we paid $1,300 for. It died on the side of the road when I forgot to put the oil cap back on and the oil low light failed to turn on. Our second car was given to us and was a Suzuki Samurai, basically a tin box on wheels. When I was hired by Collages.Net I required a more dependable vehicle (and the Samurai's drive chassis was about to fall out) so we went to Stockburger Chevrolet and purchased a 2005 Chevy Aveo (brand new). For the next two years Charity and I shared this vehicle, but then just a little over a month ago we went car shopping again and purchased a 2001 Ford Escape for her from Discount Auto. Through these experiences I have learned a lot about cars and how to buy cars, especially as someone who doesn't know much about cars. My dad is an auto mechanic and always took care of the automobiles, so even common items that many know how to do, I don't have experience with. These days my time is too valuable to repair my car when I can hire someone else to do it, so I still have only minimal knowledge. Anyways, point is - I want to share with you what my experiences have taught me about purchasing a car.
Note: This How To is aimed at those who purchase cars for practical reasons rather than luxury vehicles. While you may learn some things from this How To if you are buying a luxury car it is much more aimed at the average vehicle consumer.
1. Go Browsing - Make a day of it and go car shopping. This is a big investment and is worth several hours of just browsing. Look at different vehicles from different companies (e.g. Ford, Honda, Toyota, Chevrolet). Bring along a pad of paper and a pen. Write down the year, make (e.g. Ford or Toyota), and model (e.g. Escape or Corolla), the sticker price on the car, the miles-per-gallon. Go to different dealerships as well, this allows you to get competitive pricing.
2. Don't Buy! - While you are browsing you are not buying. Depending on the dealer you may receive some pretty high pressure offers. "I can only make you this offer today..." "These cars are selling like hotcakes..." It doesn't matter how good the deal seems, you shouldn't buy on your first day. Give yourself some emotional time to cool off.
3. Visit Kelley's Blue Book - Whether you are buying a vehicle new or used Kelley's Blue Book can give you an idea of the value of the cars you are interested in. Its free and can even refine the price based on your location. This will give you a good idea of what you should expect to pay for the vehicle.
4. Register for the Consumer Reports Web Site - Consumer Reports is a non-profit organization that gives reviews on a wide variety of products. A years subscription to the website is around $25. They offer a list of best/worst cars as far as maintenance goes.
5. Register for the Consumer Report's New Car Buying Kit - If you are purchasing a new car you'll want Consumer Report's New Car Buying Kit. This kit allows you to see how much the dealer paid for the vehicle. This allows you to make informed decisions on what to offer the dealer. Your objective is not to rip the dealer off, but to ensure you are paying a fair markup on the vehicle. This service costs $40 for three months unlimited access or if you know the car you want you can use their single instance service for $14 to get pricing for just one car.
6. Review Information - Now you have a list of cars, you've looked at Kelley's Blue Book to see their values, on the Consumer Reports website to see whether they are a good car or not, and to find out how much the dealer probably paid for the car if it is new. Using this information you can eliminate cars which have bad reviews or that are out of your price range.
7. Determine Financing - Most dealerships offer financing, and oftentimes this financing is pretty competitive. Ensure that your financing through them doesn't include pre-payment penalties if you utilize their bank. That way you can always refinance later if you are able to gain a lower rate. For older vehicles you may want to take out a home equity loan as the older the vehicle the higher the interest rate the bank is going to charge. Use a site such as LowerMyBills to get competitive quotes on what is a reasonable rate/payment for your car loan.
8. Go Back to Buy - Its time to buy. Go back to the dealership and make an offer. It is likely that they will balk at your initial offer if you go low enough (remember, leave some margin, you want to be reasonable - not tick them off). If they won't negotiate to a price you are happy with, leave. Have second and third choices and negotiate based on these vehicles. If you are willing to leave a vehicle, they oftentimes will negotiate. I have seen "impossible" deals occur when I said, "Okay. I can't afford that, I have to go elsewhere." You and the dealer have a common interest - he wants to sell a car and you want to buy one. You'll both have to be willing to compromise to come to an arrangement.
9. Be Willing to Walk Away - I know I just said this, but it deserves re-emphasis. Never get yourself into a situation where you must buy this car, where you have no other options. You want to be able to walk away. A dealer is willing to give you a lower price (within reason) to close a deal.
Additional Steps for New Cars:
1. If it is a new car, I recommend purchasing a warranty. For example, for under $1,000 I received a five year comprehensive warranty on my Chevrolet Aveo.
Additional Steps for Used Cars:
1. Instead of purchasing a warranty on a used car consider putting the money in a savings account. Use it as-needed to repair the car. Balance out the cost of the warranty and what is covers with the cost of repair of one of the major covered parts. If possible, talk to your mechanic before purchasing (usually you can purchase the warranty within 30 days after purchasing the vehicle).
2. If purchasing from a dealership look for a 30 day money back guarantee.
3. If at all possible, take the car to your mechanic (preferably a mechanic you know and trust) and ask them to do a full inspection. It will cost $50-$100 but could save you a lot of heartache. Ask what, if anything needs to be replaced.
4. Be wary of purchases where either an individual or dealership won't let you take it in to a mechanic before purchasing or give you a thirty day money-back guarantee.
Closing Thoughts on Etiquette:
Despite all the jokes, dealers are real humans too - and there are good ones and bad ones. Most dealers receive their pay on a commission of the profit from the vehicle, so they are going to want to make the price as high as possible. Of course, many have a nobility which causes them to give reasonable prices, but others will make the highest possible markup. This is why it is good to know the real price of the vehicle through research before making an offer. If you pitch too low the dealer may (rightfully) feel you are attempting to take advantage of them and refuse to budge on price. On the other hand, if you simply accept the first offer they make you will almost certainly be paying thousands (on a new vehicle) and hundreds (on a used vehicle - possibly thousands) on a used vehicle.
Don't treat a dealer like a dirtbag. They are doing their jobs and have to put food on the table as well. Both dealer and consumer must seek a happy medium - something that allows the dealer to continue living while not robbing the consumer. Using the resources in this article you should be able to find that happy medium with any reasonable dealer.