Do’s and Don’ts of Buying a Car

Quick Answer

Buying a car involves a trunk full of do’s and don’ts, such as:

  • Do: Figure out much car you can afford to buy
  • Do: Compare prices at several dealerships
  • Don’t: Focus too much on the dollar amount of the monthly car payment
  • Don’t: Agree to expensive add-ons that you don’t want or need
Happy man receiving keys for his new car as he sits in the driver's seat.

Buying a car is one of the most expensive decisions you'll make. But with a little knowledge and some skills in resisting the hard sell, you can make the process more affordable and less of a hassle.

Here's what to do and what not to do when buying a car.

Things You Should Do When Buying a Car

Check out the following recommendations about things you should do when you're buying a car.

Do Figure Out How Much You Can Afford

New and used cars aren't cheap. In August 2023, the average new car cost $48,451, according to online vehicle marketplace Kelley Blue Book, while the average used car cost $26,651.

Therefore, it's critical to do the math and determine how much you can afford to pay for a car. Use Experian's car payment calculator to give you an idea of how a monthly car payment might fit into your budget.

Online vehicle marketplace Edmunds suggests spending no more than 15% of your monthly take-home pay on payments for a new car and no more than 10% on payments for a used or leased car.

Do Improve Your Credit

If you plan to take out a car loan, get your credit in shape before submitting a loan application. A higher credit score could help you get a lower interest rate, and thus a lower your overall cost.

To get your credit ready for a car purchase, check your credit report and credit score. If you aren't in a rush to purchase a car and your credit score could use some work, take time to improve your credit. Look for things like overdue bills that need to be paid or fixable inaccuracies, such as a late payment that you know you paid on time, that could be dragging down your credit score. In addition, consider paying down credit card debt, which can lower your credit utilization ratio and possibly boost your credit score.

Do Get Preapproved for Financing

Approach a bank or credit union for preapproval if you'll need a car loan. This step gives you a clear idea of how much you can afford to pay for a car before you head to a dealership. Furthermore, it lets you avoid a dealership's potentially more expensive financing offer.

Be sure to check interest rates at several lenders before getting preapproval, though. The average interest rate for a new vehicle was 6.63% in the second quarter of 2023, Experian data shows, and the average interest rate for a used vehicle was 11.38%.

Do Avoid Lengthy Loan Terms

Terms for auto loans now last 84 months or even more. While stretching out a loan term can cut your monthly loan payments, it might not be a budget-friendly move in the long run.

Why? Because longer-term auto loans typically charge higher interest rates than shorter-term auto loans. Even if you're able to find a low interest rate for a longer-term loan, you'd still end up paying interest for a longer period, meaning your loan will be more expensive overall.

Do Shop Around

Comparing prices at several dealerships can put you on the road to saving money. Don't be afraid to pit one dealership's offer against another's to score the best price you can.

The best months to shop for car deals are October, November and December, according to Edmunds. If that's not convenient, consider shopping at the end of a month. That's when dealerships are hurrying to meet or beat monthly sales goals and may help you score a lower price.

No matter when you're looking for a car, don't rush into a purchase or lease. If you or someone else is applying pressure, you could wind up getting a car at a less-than-desirable price.

Do Negotiate the Price

Once you've chosen where to buy your car, try negotiating a better deal. For instance, you may be able to score free dealer-added features such as window tinting or all-season floor mats. This strategy might net you hundreds or even thousands of dollars in savings.

To put yourself in the best negotiating position, do your homework before asking for a lower price. Find out the car's market value and see whether any competitors are selling the car for less. Armed with this information, you can pitch your hoped-for price to a salesperson.

Things You Shouldn't Do When Buying a Car

We've gone over the do's when buying a car. Now, let's look at the don'ts.

Don't Get Too Emotionally Attached

Have you been drooling over a Ferrari but you're living on a Ford budget? If so, you shouldn't get your heart set on a car that you can't reasonably afford. Be realistic about your wants versus your needs. Your checking account will thank you for it.

Don't Fall for a Dealership's Sales Tricks

Watch out for these sales tricks when you're shopping for a car.

  • Wearing you down by prolonging the car-buying process in hopes that you'll agree to their ideal price, not yours.
  • Pushing you into making a quick decision. You're literally in the driver's seat. Don't cave in to a salesperson's high-pressure tactics.
  • Guiding you toward a car you don't want. A salesperson may be itching to sell you a car model that's overstocked rather than the one you're eyeing. Don't let them persuade you to buy a car that you won't necessarily be happy with.

Don't Buy a More Expensive Car Than You Need

A salesperson may try to dazzle you with a car that costs more than you'd planned to pay. If you came to the dealership with a budget in mind, stick to it. Don't surrender to a salesperson's smooth talk about how great you'd look behind the wheel of an $80,000 sports car.

Don't Opt for Expensive Add-Ons

When you're at the dealership, a salesperson or manager might steer you toward expensive add-ons that you don't really want or need. These may include extras like extended warranties, fabric protection and wheel coatings. Resist the temptation to buy them, as they'll drive up the cost of your car.

Don't Focus Too Much on the Monthly Payment

As you're sifting through auto loan offers, consider more than just the monthly payment. You also should take into account factors such as the annual percentage rate (APR) and the length of the loan. The APR and length of the loan contribute to how you'll pay for the car over time and will help determine the monthly payment.

Don't Sign Paperwork You Don't Entirely Understand

After you've worked out the details of a car purchase, you'll need to review and sign the sale agreement before driving off the dealer's lot.

Be sure all of the information is accurate. If you're uncertain about any aspect of the contract, ask questions. If you're not satisfied with the answers, don't be shy about walking away from the deal.

How to Prepare Yourself for Buying a Car

Careful preparation before buying a car can help ensure a smooth deal. Here are some tips for gearing up for a car purchase:

  • Reduce your debt. If you're going to need a loan to buy a car, you'll want your credit to be in the best condition possible. This includes reducing your debt as much as possible with the goal of lifting your credit score. A higher credit score can lead to better lending terms, such as a lower APR.
  • Put off the purchase if your credit is shaky. So, your credit still isn't where you want it to be? That's OK. If possible, delay the purchase to give yourself more time to polish your credit.
  • Beef up your car-buying knowledge. Are you intimidated about purchasing a car? If so, get up to speed on car-buying terminology. This will raise your confidence level as a consumer.
  • Look into costs and values. As you're weighing which car to buy, estimate how much it'll cost to insure and maintain it. In addition, take into consideration how well the car will retain its value over time.
  • Go over your budget. Before signing a sale contract, review your financial situation. Figure out whether you need to make any budgetary changes to accommodate your new car, such as slashing expenses or generating more income.

Getting in the Driver's Seat for a Car Purchase

Buying a car, whether it's new or used, isn't something that should be taken lightly. On average, it represents an investment of tens of thousands of dollars. Buckle up for the ride by setting a car-buying budget, checking your credit score and credit report, shopping around for a car loan, and comparing sale prices at various dealerships. This should help make your car-buying experience less bumpy.