Knowing what to do, and what not to do, when buying a car can mean the difference of hundreds or even thousands of dollars over the term of your loan and the life of your vehicle. Before ever setting foot in a dealership, make sure you've done the necessary preparation to put yourself in a position to leverage the best deal possible. Here are 30 tips to purchasing your first car seamlessly.
1. Get Pre-Approved for Financing
When you get approved for financing before you enter negotiations with a dealer, you force the dealer to match or beat the rate your bank or credit union has already offered. This step essentially gives you a bargaining chip to enter negotiations.
"If you have no backup plan, you’re stuck with whatever the dealer is willing to do," said Brian Moody, site editor at Autotrader.
2. Don't String Out Payments for Too Many Months
Signing on to an extended loan can add hundreds or even thousands of dollars to the price of a vehicle. People often seek longer loans because they're buying a car they can't actually afford.
"Practically anything seems affordable if you break it up over enough payments," said Joe Wiesenfelder, executive editor of Cars.com. "This is what leads shoppers to lose sight of the car’s purchase price."
3. Shop for the Best Interest Rate
The interest rate on your loan is just as important as the price of the car. A deal on a car's price isn't good if the exorbitant interest rate on your loan is going to jack up the overall cost over time.
Remember that credit unions often offer lower interest rates than big banks.
"A dealer might be able to get you the best rate," Wiesenfelder said. "Especially in the case of factory incentives like low‐ or zero‐percent financing, but you won’t know it unless you go in with another quote or two from, say, your own bank or a credit union. The dealership is a middleman, and you might be able to save by going directly to the source."
Read: Visiting the Car Dealership at This Hour Will Get You the Best Deal
4. Know Your Credit Score
There is a direct correlation between your credit score and the loan you'll be able to secure. Your FICO credit score, which ranges between 300 and 850, is an approximate representation of the risk you pose to lenders.
"Before ever visiting a dealership, a car buyer needs to know what his or her credit rating is and how that will impact the financing options," said Karl Brauer, senior analyst for Kelley Blue Book. "The best way to do this is to get a report from one of the major credit tracking companies (Equifax, Experian and TransUnion)."
5. Work on Raising Your Credit Score Before Purchasing
Use the time that you're car shopping to boost your credit score.
"A better credit score will mean better financing terms and lower interest," Moody said. "The ads people see on TV for low lease payments or low interest rates all have fine print — that fine print say 'for buyers who qualify.' Translation: buyers with excellent credit."
One of the fastest ways to quickly boost a score is to pay down credit card debt, because credit-card utilization carries a lot of weight with credit reporting agencies.
Related: 7 Ways to Boost Your Credit Score in One Month
6. Research the Fair Market Value and Average Selling Price
Find out the fair market value of the car you're considering. This price enables the dealer to make a profit while still giving you a good deal. When the dealer knows you've done your homework, he is more likely to offer his best deal first. Also, it is crucial to know the average selling price of your car, as well.
7. Don't Shop Above Your Budget
Your shopping strategy must be based on deciding between the cars you can afford, not the cars you want.
"The most common mistake is buying a car that’s too expensive given the shopper’s budget," Moody said. "The best way to combat this is to work out a budget, figure out what cars or what kinds of cars are within your budget and start there."
8. Don't Confuse Shopping With Buying
Shopping and buying are separate phases; they each have different purposes and must come with different strategies.
"Shopping is when you set aside time for research, test drive etc.," Moody said. "During that time you’re just evaluating the various cars. Once you've decided on one car, return to the dealership that has the car you like on a separate occasion and let them know you’re ready to buy. Shopping is not buying."
9. Conduct Shopping in Two Phases
Although shopping is a separate phase from buying, it contains two steps of its own.
"Think of choosing the car you want as a completely separate exercise from purchasing the car," said Joni Gray, content editor at Autobytel.com. "Take time and have fun researching options, features and price to get to your short list and test drive two to three cars to come to your final decision."
After shopping for a car, it's time to shop for auto financing.
"Then, get back to your computer after your decision is made and start researching the finance options your selected dealers are offering — along with what your banks, credit unions and other financial institutions."
10. Consider How You Will Use Your Car
Your dream car might not be practical in real life. It is critical to evaluate your family's needs, the demands of your commute and the vehicle's central purpose before narrowing down your selection.
"Do you need third-row seating?," a CarMax representative said. "Do you need a place for a surfboard or your dog? Do you have a long daily commute or travel often? Have open discussions about your important vehicle criteria and budget at a reputable dealer so they can help you find the vehicle that is just right."
Keep reading: 5 Ways Women Can Avoid Getting Ripped Off at the Car Dealership
11. Cross-Shop Different Dealerships of the Same Brand
Dealerships that share a brand name often have different inventories and different prices or deals. Don't assume that the car you're considering is the same at two dealerships — even if they're both local.
"Shoppers should always cross-shop dealerships of the same brand in their town," Moody said. "If you know you want a Ford Fusion, be sure to ask two or three local Ford dealers for their best price and give the other dealership a chance to beat it."
12. Consider Certified, Pre-Owned Vehicles
Cars lose value quickly, even if they haven't sustained a lot of wear and tear and are still in great shape. If a certified, pre-owned vehicle has low mileage, the previous owner has likely swallowed the cost of depreciation for you without beating up the car.
"Cars’ values begin to drop as soon as the cars are driven off the dealership lot," said Cindy Balser, a KeyBank consumer credit manager. "Given that, purchasing a used car over a new car might make more financial sense."
13. Ask for Perks When the Price Won't Budge
Sometimes it is simply not possible to get a dealer to come down on sticker price — but that doesn't mean you can't save money.
"Even if your dealership isn't willing to budge on the price of the car (some 'no haggle' dealerships have a non-negotiable price for every car), ask for other perks like free oil changes, accessories or regular car washes," Moody said. "This way, you can save money without getting the dealer to come down on the car’s price."
14. Don't Focus Too Much on Monthly Payments
Most people go into the buying process knowing roughly what they can afford to pay each month. But fixating on monthly payments can cause you to ignore important considerations.
"Most people have an ideal monthly payment in mind when considering their budget and try to focus on this at the dealership," said Ron Montoya, consumer advice editor for Edmunds. "Problem is, you lose track of the other important aspects of the deal. You need to know the purchase price of the car, interest rate, term of the loan and what you're being offered for the trade in."
15. Don't Let Dealers Shop Your Application
Even if they're doing it to try to get you the best rate, dealers can inadvertently harm you by shopping your application to too many lenders at the same time.
"Think twice about letting the dealer pull your credit report and shop your application," said Gerri Detweiler, director of consumer education for Credit.com. "We've heard reports from consumers who have found 10, 25 or more inquiries on their credit reports as a result of one dealer blasting their application to numerous lenders. While some credit scoring models don't count all car loan inquiries in a short period of time, not all have this buffer."
16. Don't Neglect Research
Do your homework. Preparation is not the fun part of buying a car, but it might be the most important. Read reviews and look into brands, models and financing options online before you ever visit a dealer.
"Do research," said Sean Worthy, director of auto sales and business development with Pentagon Federal Credit Union. "Doing too much is never a bad thing when preparing to buy a car."
17. Choose Quality Over Price
For most people, price is a major determining factor when buying a car — but don't let it be the only factor. Sacrificing quality for price is likely to cost you more money in the long run.
"The biggest mistake people make when purchasing a car is they buy for price — not for quality," CarMax said. "Make sure the vehicle has gone through a rigorous quality inspection so you can feel confident it will last for the long haul."
18. Ask Questions and Know What You're Signing
Before you sign anything, make sure you've asked enough questions so that you're not unsure about every aspect of the deal. It is natural to resist asking "stupid" questions to avoid looking uninformed, but you should know every aspect of your contract before you apply your signature. If the dealer is at all reluctant to answer questions or you feel like you're being rushed into signing, walk.
"People don’t always take time to completely understand the financing," Balser said. "For example, a payment schedule with a low interest rate might sound like a good idea. But if the low rate comes with a short repayment term, the payments might be a budget buster. Take time to understand all terms of the loan, including the total loan amount."
19. Consider Total Cost of Ownership
Every car costs more than the sticker price indicates. It is up to the buyer to know every fee and cost associated with the vehicle he is considering.
"Consumers should look at the total cost of owning or leasing the car, including auto payments, fuel, insurance, maintenance and commuting costs," said Susan Fitzpatrick, director of communications at Ally Financial. "A general guideline is to keep those total costs below 20 percent of your monthly take-home pay."
20. Buying Online Can Improve Selection and Save Time
Many shoppers are hesitant to buy online because a car is something they want to see up close before they decide. But buying online can open up an enormous range of options that no dealer could fit in a lot.
"People should consider buying online — even buying online through a dealership — so they can save time spent in dealerships," Balser said.
21. Ask About Promotions and Rebates
Dealers might be able to offer special incentives or deals that they haven't advertised. You might get special savings just by asking, and the worst they could say is "no."
"Manufacturers often offer cash rebates or discounts," Fitzpatrick said. "Consumers should check the financing section of the automaker’s website for a list of rebates and discounts, or ask their dealer for information on promotions or rebates. Be sure to ask about that before deciding on one loan."
22. Exercise Patience
Car buying can be an arduous, difficult process, and it is natural to get frustrated and settle for something that is "good enough." This will almost always lead to buyer's remorse.
"Don't rush the purchase," Montoya said. "Many people want to do it all in an afternoon. Test drive one day, compare prices another day, then close the deal on the third day."
23. Work Your Contacts
Word of mouth is still the most reliable form of advertising. Leverage your networks in real life and on social media. Many people will be more than happy to share their good experiences — or vent about their dreadful ones.
"Buying a car is like searching for a job," said Sanjay Salomon, staff writer for Boston.com. "When you’re looking, you should turn to your network of family, friends, and co‐workers. Maybe someone in your circles can connect you with someone who can help you make the best possible decision for getting the right set of wheels."
24. Buy at the End of the Year
As the year winds down, dealers are looking to dump their remaining inventory in anticipation of receiving the new year's models, which makes early winter a great time to shop for deals. This is especially true for high-end German cars.
"Most bargain hunters know the end of the year is a good time to get a deal on a car," said Christian Gulliksen, senior editor of CarsDirect. "But if you're buying a Mercedes-Benz or a BMW, there is another reason to put off a purchase until December. For the last few years, this is when the sales battle between Germany's premium brands has climaxed in a burst of incentives."
25. Don't Rely on Dealership Financing
Dealers often make money through their financing departments, which will usually be your loan application's first stop. But shopping around for financing is just as important as shopping around for cars.
"Dealership finance offers are typically several points higher than what you can receive from an auto lender like a credit union or a bank," Worthy said.
26. Test Drive More Than One Vehicle
Don't fall in love at first sight. When you test drive a car, it might feel like the perfect fit — but you have no frame of reference if you don't compare it to similar models. Remember that they aren't doing you a favor by letting you take more than one test drive.
"You can test drive several cars before entering into the financial negotiations at a dealership," Gray said.
27. Don't Show Your Hand
Like a game of poker, don't reveal your cards until you have to. If you tell the dealer what you hope to pay each month, you hand the leverage over to the seller.
"It is never a good idea to reveal the payment you are looking for at the dealership," Gray said. "This will almost always lead you to take a loan on for more years than is viable."
28. Don't Automatically Doubt the Dealer
Although your bank might be able to beat the dealer's offer, that doesn't mean dealership financing is a bad option.
"The dealer/manufacturer financing (also known as 'captive financing') are usually very competitive with any outside finance you can find," Gray said. "This is because the manufacturer has studied the finance market and has made their deals highly competitive. This is typical, but you should always compare to find out for sure."
29. Figure Tax and License Fees Into the Loan Price Beforehand
Don't learn about extra fees after you sign. It is your job to factor "hidden" expenses in beforehand.
"Tax, title and license fees can possibly add thousand of dollars to the amount you finance," Gray said. "After you get quotes for the price of your car, do the research on the cost of licensing in your state, the sales tax in your state, city and county and the documentation fee — which also varies from state‐to‐state. After that, you'll know the real amount you'll be financing."
30. Consider How Long You'll Keep Your Car
The value of your car drops the moment you drive it off the lot. But that doesn't mean that's when it's worth the most to the owner.
"The truth is, it’s never worth more to the owner than when it’s paid off, because only then do you reap the return on the investment you made by financing it," Wiesenfelder said. "Repair costs can be troubling because they’re unpredictable and come as lump sums. But the reality is that $2,000 a year in repairs for a car that’s paid off is still considerably cheaper than a new-car note."
A lot goes into buying a new car, but by following these guidelines, you'll walk away knowing you got the best possible deal on the perfect car for you.
This article originally appeared on GOBankingRates.com: 30 Biggest Dos and Don’ts of Buying Your First Car