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Are you in the market to buy a new (or new to you) car? Considering that my family is from Michigan, the automotive capital of the world, it seems like someone is always buying a new or used car.

My family also has a long history with automakers. My dad retired from General Motors, my grandfather retired from Ford, and several of my husband’s family members worked for Chrysler. When my brother graduated from college, he worked at a car dealership. I even worked on a General Motors assembly line building transmissions for a summer when I graduated high school – not my ideal job. Cars have always been a huge part of our family. Suffice it to say that we know a thing or two about buying (and building) cars.

If you’re thinking about buying a new or used vehicle, there are a few things that you should consider first. These are my family’s best tips for buying a new or used car.

What you need to know before buying a car

Know your financial options before you buy a car

Whether you plan on taking out a loan or paying for your car in cash, you have different options. Make sure you understand all the details and fine print before you purchase your car.

Car.

If you’re buying a car on credit:

If you need to get a loan for your car, you’ll want to make sure you have all the details. Car dealerships often offer financing options, but check with your bank or credit union first. Credit unions in particular often have great interest rates.

Before getting a loan, make sure you ask about the following details:

Interest rate: New and used cars often have different interest rates. Make sure that you’re quoted the correct rate based on the vehicle that you want to purchase. It’s often helpful to provide your lender with a vehicle identification number (VIN) so that they can provide you with an accurate estimate of your loan options. Also, make sure that you know your credit score. Many lenders will list a low interest rate that only applies to the top tier of credit scores.

Length of loan: The length of your loan will affect your monthly payment amount and possibly even your interest rate. Shorter terms (three years instead of five, for example) typically have a lower interest rate because they’re considered lower risk loans for the lender. Even so, shorter-term loans will have a higher monthly payment because you’re paying off the full balance of the vehicle in a shorter amount of time.

Fees (origination fees, late payment terms, and prepayment penalties): Be sure to read the fine print before signing your loan paperwork. Ask about loan origination fees (the cost of the loan) and whether it will be financed or if they want you to pay the fee at the time of signing. Also, find out if there are any prepayment penalties, in case you want to pay off the loan early. There will most likely be late payment terms included in your loan paperwork. Read the fine print to make sure that your interest rate won’t increase or the loan won’t be terminated if you pay late or miss a payment.

Discounts: Your lender may offer discounts for various things, like credit union membership, clubs you may belong to, etc. It doesn’t hurt to ask when you’re getting information about your loan.

If you’re leasing your car:

Leasing a car is similar to getting a loan for a new car, but you don’t own the vehicle at the end of the loan. When you trade the vehicle back to the dealer at the end of your lease term, you’ll need to make sure certain conditions are met, like the shape of the car. You’ll pay extra for dents or scratches, damage to the interior or exterior of the vehicle, and even things like regular maintenance to the tires, oil changes, etc.

Some lease plans offer a maintenance option to ensure that you get regular checkups on the vehicle, but not all vehicles will come with this plan. Before signing your lease, make sure you know what is included.

When you lease a vehicle, make sure that you put down the least amount of money possible. Your monthly payment may be higher, but if you wreck the vehicle, you will lose any money that you already paid. By taking a higher monthly payment and making a smaller initial payment, you’ll save yourself some heartache. Also, make sure that you get gap insurance in case your loan is for more money than the value of your vehicle at the time of the accident.

If you’re paying cash for your car:

Don’t be so quick to pull out your wallet if you’re paying cash for your next vehicle. You may be able to get a discount for paying cash. Especially if you’re buying a vehicle from a private owner, it doesn’t hurt to ask if they’ll offer you a discount for cash.

Decide what kind of car (and options) you want

Buying a car is a huge decision. Even if you’re not picky about the color or features of your car (I paid $750 for my first car – a Pontiac Sunbird that had permanently raised headlights, a funny odor, and a hanging headliner), there are still a few things to consider.

Car.

Make/Model

Availability: Car dealerships only have so much room on their car lot. If you want a particular make or model of a vehicle, they may be able to do a dealer trade to find you your dream car at a different dealership. If you’re buying a used car, they may also be able to search for vehicles that meet your criteria at dealer auctions.

Popularity: Popular cars rarely get discounted. Dealerships may run periodic promotions (it seems like every October is “Truck Month”), but you’re more likely to pay the full retail price (MSRP) on a popular vehicle. Since dealerships are also told by the automaker which types vehicles they need to stock on their car lot (i.e. 15 trucks, 12 cars, 19 SUVs, etc.), if your ideal vehicle is super popular but not very cost-effective for the automaker, you may have a harder time finding what you want.

Size

Will your family fit: One of the first questions the dealer asked when I was buying my current car (a Chevy Equinox) was whether I planned on having more kids. Two kids fit across the back well, but three would be a tight fit. Even if your family would fit in the vehicle now, make sure you consider the future. Think about car seats and booster seats and whether they would fit in the vehicle.

Will it fit in your driveway/garage: We had to measure both our garage and the length of my husband’s farm truck before we bought it. It fits in our garage with two inches to spare, and we had to put blocks of wood on the garage floor so that we would know where to stop when backing in. You can only open the doors on one side of the truck without hitting the wall, and we can never access the cupboards in the back of the garage unless we move the truck.

Before you buy a vehicle, make sure that it fits! Ours fits (barely), but it’s still a pain to park.

Options

Bare bones necessities: Know before you start shopping which options come standard on your vehicle and which options are paid upgrades. Have an idea of what you need in a vehicle (like a backup camera or cruise control) and what you can do without (heated cup holders).

Preferred options: A great way to negotiate, especially if you’re buying a car from a dealership, is asking for additional upgrades at no cost. If the car that you want is already at the dealership (i.e. they don’t have to order it or do a dealer trade), you may be able to get some extra options at no extra cost (or a reduced cost).

Additional costs of buying a vehicle

After you purchase your car, you’ll also need to pay for some additional items as part of the cost of owning a vehicle. By planning ahead before your purchase, you may be able to reduce some of these costs.

financial analysis concept

Maintenance

Especially if you’re buying a used car, you’ll have to account for maintenance costs. If you’re buying a new vehicle, many maintenance issues (other than normal wear and tear, like tires and oil changes) will be covered under the warranty. I once got my windshield wipers changed as part of the warranty, so don’t be afraid to ask if you think something should’ve lasted longer than it did.

Insurance

Before you buy your car, call your insurance company with your car’s VIN to get insurance quotes. Make sure you add this into your budget. Depending on your car’s make and model, features (such as the number of airbags, anti-theft devices, etc.), and age, you could end up paying more or less. Make sure that you ask about discounts when purchasing your insurance, both for the cost of the insurance itself (you can often get discounts for having a good credit score, belonging to a club or association, etc.) and for the vehicle’s safety features.

If you finance your car instead of paying cash, you’ll probably have to get full coverage insurance. You may also want to ask about gap insurance to make sure that the full value of the vehicle is covered in case of an accident.

Full coverage insurance can be expensive, but if you’re buying an older vehicle, you may want to consider getting a reduced coverage plan. With full coverage on a used vehicle, you’ll end up paying for the cost of the vehicle several times over. If you’re buying a used vehicle (especially an older one), consider getting reduced coverage insurance and creating your own “self-funded” insurance plan. Each month, pay for the reduced coverage plan, but set aside the difference in cost between the full and reduced coverage in a savings account. If you ever get in an accident or need to pay for repairs, use the money you saved.

Registration

Be prepared to pay for the vehicle registration as part of buying a new or used vehicle. You may be able to transfer your license plate to the new vehicle, but you’ll probably have to pay additional fees.

Buying a new car can be a fun and exciting time, but there are a lot of things to consider, especially if you’re financing or leasing your new vehicle. Make sure that you consider your budget and buy a vehicle that will suit your family’s needs for a long time. Happy travels!

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