Buying a new vehicle can be a bit daunting and overwhelming for most of us. From all the makes, models, and prices, it can seem impossible to make the perfect decision for you and your family. However, with a bit of preparation and the right strategies, you can drive off the lot with confidence and a great deal. Here's a guide to help you through the process, from initial research to sealing the deal.

Define Your Needs and Budget

Before you even glance at a shiny showroom floor, take time to clarify what you truly need and what you can realistically afford.

  • Needs Assessment: Think about your lifestyle. Do you need a spacious SUV for a growing family, a fuel-efficient sedan for your daily commute, or a rugged truck for weekend adventures? Consider seating capacity, cargo space, fuel economy, safety features, and technology. Make a list of your "must-haves" versus "nice-to-haves."
  • Budgeting Beyond the Monthly Payment: Your budget isn't just about the car's sticker price. Factor in:
    • Down Payment: A larger down payment can reduce your loan amount and total interest paid.
    • Monthly Payments: A common rule of thumb is to keep your total monthly car expenses (payment, insurance, maintenance, gas) to no more than 15-20% of your take-home pay.
    • Additional Costs: Don't forget sales tax, registration fees, title fees, and ongoing insurance premiums. Use online calculators to get a clear picture of these expenses.

Do Your Research

Every car may look like a winner from the outside, but they may not be in your price range or have all the capabilities you will need for the future. Some key things to consider when researching vehicles are pricing, equipment options, safety capabilities, vehicle quality, and ratings. This process coincides with knowing your shopping habits. Ask yourself, “will this car fulfill all my needs to put my mind at ease?”  Consider these important steps:

  • Model Research: Dive into manufacturer websites, read independent reviews (from sources like Kelley Blue Book, Consumer Reports, Edmunds), and compare different models and trim options. Look at reliability ratings, safety features, and the estimated total cost of ownership over five years. Do an internet search on, “know problems for (auto year, make, model),” and see what issues the car you are considering is having based on feedback on forums and car sites.
  • Invoice Price vs. MSRP: Understand the difference between the Manufacturer's Suggested Retail Price (MSRP – the sticker price) and the dealer invoice price (what the dealer paid). Websites can help you find the invoice price, giving you a better baseline for negotiation.
  • Read Dealership Reviews and Prices: Check online reviews of local dealerships. A dealership with a reputation for transparency and good customer service can make the process much smoother. Check online prices for the vehicle you are considering and look within 75-100 miles outside of your market area. Sometimes, the best deals are not in your local market but may be at rural dealerships, potentially saving you hundreds or thousands of dollars.

Leasing vs Buying

Both leasing and buying come with their own advantages, but also disadvantages. Leasing a new vehicle can be great, on one hand you can have lower monthly payments and almost no money down, but on the flip side, there are restrictions on how much mileage you can put on the vehicle per year and required upkeep on the vehicle. Buying a new vehicle allows you full ownership to do what you please with the vehicle but that convenience may come with higher monthly payments.

Finance Option - Pre-qualify Your Rate and Term

Reach out to BankIowa to pre-qualify for an auto loan rate and terms before you head to the dealer. Getting pre-qualified may help your negotiating power and give you a better picture of your planned payments. Plus, pre-qualifying rate and terms with us can save you time at the dealership by bypassing financing options. Also consider getting Guaranteed Asset Protection (GAP) Insurance through BankIowa rather than a dealership. Our price will nearly always be better.

Make the Most out of Your Test Drive

Get personal with the vehicle by inspecting the tires, looking under the hood. When test driving the vehicle, drive on both backroads and the highway. Focus on how the vehicle accelerates and brakes, whether the engine is loud or quiet, and if maneuvering the car on streets and parking lots easy to do. Most importantly, focus on the comfortability of the car. Do not feel you are taking too long and wasting anyone’s time. Buying a new vehicle is a major purchase that shouldn’t be taken lightly. Have a checklist of features you want to test and questions to ask.

Smart Negotiation

This is where many buyers get tripped up. Focus on the "Out-the-Door" Price.

Negotiate the Total Price, Not Monthly Payments: Dealers often try to focus on monthly payments to distract from the overall cost. Assuming you already have a pre-qualified rate and term from BankIowa, always negotiate the "out-the-door" price, which includes all taxes, fees, and the vehicle price.

  • Separate Negotiations: If you have a trade-in, negotiate the price of the new car first. Dealers will ask early on if you have a car for trade-in. Tell them you are undecided, and you are not taking that into consideration for the deal. Once the “out the door price” is settled, then discuss your trade-in value. This prevents confusion and ensures you get a fair deal on both.
  • Be Prepared to Walk Away: This is your most powerful tool. If the deal isn't right, or you feel pressured, be willing to leave. Dealers often call back with a better offer.
  • Inquire About Incentives: Ask about any manufacturer rebates or dealer incentives that could lower the price.
  • Watch videos on new car negotiation: There are many videos on YouTube posted by retired auto dealers who will tell you their secrets on auto pricing and negotiation. Learn what you can through these videos to help boost your negotiating power.
  • Beware of Add-ons: When purchasing a vehicle, be aware that dealers often try to add unnecessary and overpriced products or services, known as "add-ons", to the final sale price. These can include extended warranties, VIN etching, rustproofing, and more, often with high markups. It's best to decline these extras unless you've researched them and determined they genuinely offer value and are priced fairly.
  • Review All Paperwork: Before signing anything, meticulously review every line of the purchase agreement. Ensure the "out-the-door" price matches your negotiated price and there are no unexpected add-ons or fees.

Conclusion

These tips will help you feel more confident and prepared in the car buying process. Remember to do your research, compare prices and options, and take your time when test driving different vehicles. Knowing what you want to accomplish with your financial and personal goals will have you driving home with peace of mind and the perfect vehicle!