10 Tips: How To Buy a New Car

We buy a lot of new cars here at Inside Line. Usually about six to 10 per year for our long-term test fleet, including our most recent purchase, a silver 2010 Chevy Camaro SS. Buy that many cars and trucks and you learn how to do it right. You learn how to make the deal and not get burned.

Fact is, buying a new car isn't always as fun as it should be. It's stressful. And the majority of us would rather go to a dentist than the car dealer. Well, we're here to help.

Here are 10 time-tested new-car buying tips culled from Inside Line's collective experience, which includes buying hundreds of new cars both professionally and as individuals — not to mention some experience working inside dealerships. It's not quite as good as having, say, Roger Penske as your first cousin, but it's a start.

Follow these tips and purchasing your new car just might be as fun as it should be.

Tip #1: Always Be Ready To Walk Away
Don't let the car dealership take your current car to be "inspected" as a potential trade-in. Don't let them take your driver license before a test-drive. Always be ready to walk, run, drive or fly away from a prospective deal the moment you're uncomfortable with it.

One good thing about new cars is that they're still being made and they'll still be for sale tomorrow. Walking away is your ultimate power in negotiating with any dealer; don't be afraid to use it. After all, there are lots and lots of dealers.

Tip #2: Shop for the Money Before Shopping for the Car
A car loan is a consumer product, just like the car you're buying with it. And as with any consumer product, it pays to shop around. Talk to your bank or credit union and know what loan rates they're offering instead of just relying on the goodwill of the dealership to carry you through.

Plus you'll be able to avoid attempts to turn you into a monthly payment buyer, which will keep negotiations focused on the total cost of the car (more on this later). You can calmly assess what you can afford, rather than feeling pressured to sign on the bottom line.

The Fair Credit Reporting Act guarantees everyone access to one free credit report from the three major credit-reporting agencies — Experian, Equifax and Trans Union — every year. That's "free" as in you don't have to sign up for any other services or memberships to get the report. The Federal Trade Commission's sole authorized source for your free annual credit report is AnnualCreditReport.com. Use that site and accept no substitutes — no matter how much you like their goofball singing commercials. Knowing your credit rating means you won't be surprised when it comes up later.

Once you know what rates are available from other sources and what your credit rating is, you're ready to listen to what a dealership can offer. Maybe the dealership's loan package is the best deal, but you'll never truly know what the best deal is if you don't shop for the money.

Don't sign any loan agreement that includes provisions for prepayment penalties. Most states allow prepayment penalties (others ban them), but it's always in your best interest to pay off your car quicker than the loan schedule if you can. So don't set yourself up for the privilege of doing exactly that.

Or, of course, you can also just pay cash.

Tip #3: Research the Car
Since you're reading Inside Line, you're obviously a discerning automotive enthusiast. And you already have a good idea what car you want to buy. But be diligent; consider alternatives and be sure that before you settle on any one car, you've taken into account practical needs and not just irrational desires.

Both Inside Line and Edmunds.com are solid research tools. Read road tests, look at the specs and delve into the various available options. By the time you go to a dealership, you should know exactly what car you want, right down to options, colors and fragrance.

Yeah, there are other car sites. But why bother with anything but the best?

Tip #4: Research the Price
Once you have a good bead on what car (or cars) you want, it's time to figure out how much it costs. This is where Edmunds.com's pricing tools are absolutely invaluable.

Besides reporting both list and dealer invoice pricing, Edmunds will tell you what manufacturers' incentives are available, what dealer hold-back money is around, and with Edmunds' unique True Market Value (TMV^®) system, what similar vehicles are actually selling for.

You should also research applicable taxes and registration fees. The Web site for your state's department of motor vehicles can be of help here. Or use a payment calculator on Edmunds.com, which estimates taxes and DMV fees.

When it comes time to negotiate a price, this is how you know what price to negotiate.

Tip #5: Know Your Car Insurance
Amazingly, it costs more to insure a brand-new Lamborghini Murciélago than it does a 10-year-old Toyota Tundra. So if that's the trade-up you're contemplating, ask your insurance agent how much the extra coverage is going to run you.

There's nothing worse than making a good, well-informed deal on a new car only to find out you'll be financially crippled trying to carry the insurance. Be prepared for the hit. And make sure you bring proof of insurance to the dealership.

Tip #6: Make Your Test-Drive Count
It's unlikely any salesperson will tolerate you going ten-tenths through the twisty bits with their demonstrator. But that doesn't mean there isn't a lot to be learned during a test-drive.

Before you even get in the car, scout out a short route around the dealership and keep it in mind. A route that includes both pavement and cement roads is good. Throw in a set of train tracks and some speed bumps to cross, too. Of course you'll want some time at freeway speeds, but also throw in some parallel parking to check low-speed steering effort and visibility.

Adjust the driving position to exactly where you like it — if you can't, you should probably be looking at another car. Does the driver seatback hold you in as you like? Does the bottom cushion support your legs adequately? Can you read all the instrumentation and operate all the gadgetry? Can you tolerate looking at that upholstery for the next 10 years?

And don't just drive the car. Take a ride in it, too. Do the ride motions make you nauseous? Do you fit comfortably in back? Is the interior lighting adequate? Will your aged-but-beloved matron aunt be able to get in and out? Or maybe now is the time to get the Vette and accept being excised from her will. Turn the radio off and listen to the noises the tires, exhaust and engine make. If you buy this car, you'll be listening to those sounds for years.

Don't fear asking yourself some very practical questions. Will your back tolerate lifting cargo up over that high trunk sill? Does that mile-long door weigh so much you'll get a hernia hauling it in? Are there enough cupholders available for your car-based dining lifestyle? Is the upholstery likely to survive your inherent slovenliness?

Finally, it's best (though not always possible) to schedule two test-drives. Take one daytime drive, and then another at night. You know, to see if the headlights work.

Tip #7: Negotiate Price: Not Payments and Not Your Trade-In
It's the question every car salesperson asks every pigeon: "How much do you want to pay per month?" And your only answer ought to be, "Zero."

When you're negotiating the price of a car, only deal with the price of the car. Don't talk about your trade-in, and don't let the sales staff steer the conversation to what the low, low monthly payments will be. If you've done your research, you know what a fair price for the car should be and you should be working hard to beat that. It's in the dealership's interest to confuse you and make up its profit by low-balling you on the trade-in or extending the length of your financing so that the car isn't paid off until after you've bankrupted Medicare. Make your deal based solely on the price of the car.

Of course you'll usually be able to make a better deal on a car pulled from a dealer's inventory rather than one that's special-ordered. And yeah, any car that's about to be redesigned or replaced will likely be easier to whittle down in price. But no matter what, keep the deal simple and negotiate strictly on price.

Sometimes the best strategy is just to sit down at a computer, call up the dealer locator on a manufacturer's Web site and just call all the dealers within, say, 100 miles and ask for their best price. Ask them to fax or e-mail the deal to you. Then you can call another dealer and ask them to beat that. Your goal here isn't to make friends with car dealers; it's to save money. You can also use Edmunds' dealer locator and get dealerships to submit bids.

Tip #8: Negotiate Your Trade-In
Don't want the hassle of selling your old car yourself? Then go ahead and trade it in. But you should already know how much your trade-in is worth (Edmunds.com has plenty of used car valuation tools), and then negotiate the best deal there, one that's totally separate from the deal you made on your new car.

Of course you're likely to get more money selling your old car yourself. And then you can just take that money and buy down your new car loan. Pre-payment penalties are legal in many states, but you didn't sign a loan agreement with such onerous provisions, did you?

Tip #9: Be Ready To Deal With the F&I Guy
Once you've set a price for your new car and cleared away what you're going to do with the trade-in, you're inevitably going to be shuttled into a back office to deal with the...F&I Guy.

Yeah, some F&I Guys are women, but the job is always the same — to sell you more stuff. While cruising through all the paperwork, your F&I Guy will casually mention how, of course, you need the $300 upholstery protectant (buy a $10 can of Scotchgard instead). And $500 worth of undercoating. And an extended warranty that runs into the 22nd century. And how about a prepaid service plan? All of these are high-profit items for the dealership, and the F&I Guy would love to throw them into your financing package. "It's just a couple extra bucks a month."

Skip them all. There's virtually nothing the F&I Guy is selling that can't be bought cheaper elsewhere.

That doesn't mean you can't opt for a set of rubber floor mats if your kids are prone to carsickness. But dealer-installed accessories should have been negotiated during the car purchase. And there's no harm in listening to the dealership's financing options — as long as you've already researched alternatives. But the F&I Guy isn't there just to guide you through the process of registering your new car; he's there to make money.

It's also vital that you inspect all your paperwork. Be aware of charges that are unexplained. The F&I Guy ought to have a good explanation for every one of them. If not, even at this late point in a car purchase, you should walk away.

And what does "F&I" stand for? Well, there are several legendary explanations. But the only one that doesn't involve an obscenity is Finance and Insurance.

Tip #10: Don't Second-Guess
Once you've bought your new car, enjoy it. Don't cruise Craigslist looking for a dealership that's beating your deal. Don't believe your "friends" who tell you that their deal was tons better. Just consider it a done deal and get on with living your life. Second-guesses are sure to make you miserable.

After all, buying a car is supposed to be fun.