A car is one of the largest purchases that most people will make in their lifetimes, other than a home and higher education. Because of the size of this investment, mistakes can be costly, both immediately and in the long run. Whether you want to purchase a new car or a used one, doing extensive research prior to walking into a car dealership is imperative for both your finances and safety when you hit the road.
During the car buying process, you should have a plan before you start searching for cars, during the search process, and a plan for while you’re at the dealership. These are some key steps to take to help you get on the road with your new ride.
Plan your purchase
Before visiting a car dealership, take time to reflect on your needs and budget. Consider what type of vehicle fits your lifestyle and think about your future plans. For example, if you’re starting or growing a family, a larger vehicle, such as an SUV or minivan, may be ideal for extra space. Likewise, if you have a long daily commute, you might prefer a fuel-efficient or electric car to save on fuel costs over time. Safety should also be a high priority. Look for models with top-rated safety features to help prevent accidents or reduce injury risk.
Once you’ve assessed your needs, set a realistic budget that includes all auto-related expenses. Remember, the cost of owning a car goes beyond the sticker price. Factor in monthly payments (including principal, interest, and loan terms), fuel, insurance, and maintenance costs. To estimate how much your insurance will cost on the vehicle, check major providers like Allstate, GEICO, Progressive, or State Farm. You will also want to get a sense of how much maintenance will cost. Tools like Kelley Blue Book can help you gauge the average maintenance costs for specific models.
Your credit score will play a major role in what loans you are eligible for, and ultimately, that impacts the type of vehicle you can afford. A higher score typically qualifies you for lower interest rates, signaling to lenders that you’re a responsible borrower. Check your score through your banking app or major credit bureaus like Experian or TransUnion. If possible, consider getting preapproved for a loan through your bank or credit union. Preapproval strengthens your negotiating position and speeds up the process.
Find the best offers
After determining your budget, start searching for vehicles in your area. Narrow your list to one to three models that fit your needs, then compare prices and mileage across dealerships. For new cars, look for purchase incentives such as low-interest financing, rebates, or attractive lease deals. Timing matters, as dealerships often offer discounts during slower sales periods, like winter, or at the end of the month or quarter when they’re trying to hit sales targets.
Don’t limit your search to local dealerships. Using online tools like Autotrader, Cars.com, CarGurus, or TrueCar, you can compare prices nationwide. If you are considering a used car, explore certified pre-owned (CPO) programs through the car manufacturer, which often includes extended warranties and thorough inspections. Before negotiating, research invoice prices or use tools like Edmunds’ True Market Value to understand fair pricing.
If you’re considering an electric vehicle, check for state-specific tax incentives. For example, states like Illinois, Connecticut, and Delaware offer EV credits to qualifying buyers. Keep in mind that some programs have income-based restrictions, so verify eligibility with your state’s DMV. It’s also worth noting that federal EV tax credits expired on September 30, 2025, following a provision in the One Big Beautiful Bill.
Check vehicle history and condition
Once you’ve narrowed your choices, dig into the details of the car, especially if you’re buying used. Start by checking the vehicle’s history using services like Carfax or AutoCheck to see if it has been in any accidents or carries a salvage title, which can impact insurance on the vehicle.
Review maintenance and service records thoroughly. These records provide insight into how well the car was cared for and whether routine services, such as oil changes, brake replacements, and tire rotations were performed on schedule. Consistent maintenance is a strong indicator of a reliable vehicle, while gaps or missing records may signal neglect or potential mechanical issues. In your review, you should look to see if any major repairs, such as transmission or engine work were made, as these can affect long-term reliability and resale value. If records are incomplete, ask the seller for receipts or documentation, and consider having an independent mechanic inspect the car before purchase to uncover any hidden problems.
Also, confirm whether any recalls have been addressed by searching the VIN on the National Highway Traffic Safety Administration (NHTSA) website. Check if the car is still under manufacturer’s warranty or if extended warranties are available.
Mileage and ownership patterns matter, too. While low mileage can be appealing, extremely low mileage on an older car may indicate long periods of inactivity, which can lead to mechanical issues.
Test drive and negotiate smartly
The final step in the car-buying process is visiting the dealership to inspect the vehicle and discuss pricing. If you’re leasing or buying a car, always request a test drive before sitting down with a salesperson. During the test drive, pay attention to how the car performs, especially when accelerating and braking. If the dealership is near a highway, take the car on both highway and city streets to compare performance at different speeds. Use this time to ask the salesperson questions about features, handling, and overall performance.
If you decide to move forward after the test drive, you’ll begin the negotiation process. For leases, negotiations focus on monthly payments over a set term. It’s crucial to understand key lease terms, such as MSRP (manufacturer’s suggested retail price), capitalized cost, residual value, and buyout price—because they determine your upfront and long-term costs. While MSRP is fixed and non-negotiable, other elements like capitalized cost, fees, and mileage allowance can often be negotiated. If you have a trade-in vehicle, use its value to reduce your overall cost.
If you’re purchasing a car, especially a used one, remember that the price is almost always negotiable. Factors such as mileage, cosmetic flaws, or upcoming maintenance needs can give you leverage to ask for a lower price. Being prepared to point out these details during the conversation can help you avoid overpaying.
Finally, don’t feel pressured to accept an offer on the spot. Compare quotes from multiple dealerships before committing. Taking time to shop around can save you hundreds, or even thousands, of dollars.
Secure your financing
There are two primary ways to finance a car: through direct lending or dealership financing. If you choose direct lending, you’ll secure a loan from a bank, credit union, or finance company before visiting the dealership. This approach eliminates the middleman and often gives you more control over the loan terms. By seeking preapproval from multiple lenders, you can compare offers and select the most favorable terms. After preapproval, you’ll apply for the loan with your chosen lender. Direct lending frequently results in lower interest rates compared to dealership financing, and that can save you money over the life of the loan.
If you prefer a more streamlined process, you can opt for dealership financing. After negotiating the vehicle price, the salesperson will refer you to the dealership’s Finance and Insurance (F&I) department. It works with a network of banks, credit unions, and other lenders to arrange financing on your behalf. While convenient, dealership financing often comes with higher interest rates than direct lending. However, if you want a one-stop solution and plan to purchase add-ons like extended warranties or GAP insurance, this option may be appealing.
When reviewing loan offers, focus on the APR (annual percentage rate) rather than just the monthly payment. APR reflects the total annual cost of borrowing, including interest and fees. A lower APR means less interest paid over the life of the loan. Loan terms typically range from 24 to 84 months, with the average term around 69 months as of 2025.1 Longer terms reduce monthly payments but increase total interest costs.
Ultimately, your decision should align with your budget and financial goals. Always review the paperwork carefully and use an auto loan calculator to understand your total costs before committing.
Final thoughts
Buying a car is a major financial decision, and preparation is key to avoiding costly mistakes. If you’re unsure about setting a realistic budget or deciding whether to lease or buy, consider working with a financial advisor. An advisor can help you evaluate your overall financial picture, determine what fits your long-term goals, and guide you through the pros and cons of leasing versus purchasing. With the right plan and advice, you’ll be better equipped to walk into the dealership and make a confident, informed decision.
1. Winters, M. (2025, November 11). More car buyers are stretching out their auto loans—but longer terms come with trade-offs. CNBC. https://www.cnbc.com/2025/11/11/more-buyers-are-stretching-out-their-car-loanshere-are-the-risks.html
