AAA's step-by-step guide to buying a car

Buying a car is a very different process today from the way it was even 10 years ago.

The biggest change is that now almost all research—data about cars, financing, getting insurance quotes—can be done on your computer, tablet, or smartphone. More recently, subsequent steps in the buying process have evolved so that they require much less person-to-person contact. These trends are likely to continue; studies by the auto industry confirm that customers prefer the new ways of doing business. Here’s a breakdown of the process: 

1. Do your research

Decide which cars you’re most interested in. List the make, model, trim level, accessories, color, and so on. Then use search engines to see what cars are available.

You’ll be able to see available cars, prices, and sometimes whether a price is a good deal. Also, check dealer and automaker websites for incentives and promotions. Review dealer inventories and “build” the car you want to your specifications. Look up online car reviews, including AAA's.

RELATED: Read AAA's online car reviews

2. Set a budget

When you know how much the car you want will cost, think about what you can afford. Experienced buyers will know intuitively how much they want to spend, but less experienced buyers should keep the 20/4/10 rule in mind: Put down at least 20%; finance for 4 years or less; and keep your monthly vehicle expenses—car payments, insurance, registration, fuel, and maintenance—at 10% or less of your gross annual income.

Lenders sometimes encourage car buyers to sign up for long loans—60 months or more—a good deal for them but a bad idea for you. You’ll pay a lot more interest, and when you’ve paid off the loan, your car could be worth very little. You may even owe more than it’s worth.

4. Arrange financing

Dealers often offer great interest rates—such as 0.9% for 72 months. But that doesn’t mean you’ll qualify for that rate. So arrange financing with a bank, credit union, or online source beforehand. Then you can compare it with the dealer’s offer or use it to negotiate a better deal.

6. Take a test drive

Taking a test-drive is one of the most important elements of the car-buying process. Contact the dealer that has your ideal car—the right price, color, and features—or one as close to it as possible. Tell them you want to take a test-drive, and make an appointment so you know the car will be available.

As much as possible, drive the car in conditions that approximate the kind of driving you do most of the time—on the freeway, around town, in stop-and-go traffic. Salespeople usually have preset routes to take customers on. But if the route isn’t long enough to give you a good sense of the car, or if it’s not the kind of driving you normally do, insist on a different route or more driving time. You don’t want to lock yourself into a car you don’t like to drive.

At the end of the test-drive, the salesperson will probably want to move toward closing the deal. Don’t let yourself be pushed into anything; take your time.

It might be smart to thank the salesperson for their time, but to say you need to think about it, and you’re considering other cars— all of which might be true. Employing this tactic signals that you’re not a pushover, and it might help you get a better deal.

Keep this in mind: Always be willing to walk away. There are plenty of great cars for sale. But if you want to move toward making a purchase, make sure it’s your decision.

7. Establish a trade-in value

Before you review an out-the-door price or further negotiate, establish a price for your trade-in, if you have one. The main point is: Keep the negotiations regarding your trade-in and your new car separate.

You may get a better price from a used-car outlet like CarMax, which buys used cars outright. By getting a second opinion, you can verify that the dealer’s offer is fair. If it’s not, you can sell your car yourself.

8. Finalize the deal

Review your contract. Take advantage of available rebates or incentives. Be alert when you meet with the finance and insurance (F&I) folks, which happens after you’ve reached a deal with your salesperson. It’s their job to convince you to add some “extras” to your monthly car payment, such rustproofing, paint and upholstery protection, and extended warranties.

Some of these items are of dubious value; others may be worthwhile but overpriced. Do your research ahead of time so you’ll have a basis for comparison.

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