How to Buy a New Car

I want to start this out by saying that if you have any credit card debt,  you should not even consider buying  a new car.  You should also save up and pay cash for whatever vehicle you purchase, but I know that’s not always going to be the case.  If you can though, you should save the same amount you were planning on spending per month for a new car before you actually start looking for a car.  It’ll let you know what you can actually afford, and help build up a down payment (or the entire purchase price). With that being said, buying a new car can be a really fun experience, as long as you go about it the right way.

Most personal finance experts will tell you to always buy a used car, and I partially agree with them.  If you do it right though, buying a new car can be just as cheap (if not cheaper) than a used car with 20k or so miles on it.  I got my truck for $7500 off the sticker price, which was cheaper than I could find a used one with 35,000 miles on it.

Buying a new car gives you all sorts of advantages that buying used doesn’t.  You can specify the color, options, etc. on your car, and get exactly what you want.  You can talk to all the dealers in your area (and even further out if you wish) and get multiple responses back about the same type of car, but each dealer has their own, even with the exact options you want.  And as long as you keep your car for a long time (at least 10 years), buying new makes sense financially.

If you’ve determined buying a new car is right for you, here’s how you should do it:

  1. Figure out how much you can spend on the car.  If you saved up prior to purchasing, this is easy.  If you will have to take out a loan, I would make sure you can pay it off in 3 years.  Don’t just pick an amount you can afford on a monthly basis and tell your dealer that’s what you can afford.  They’ll stick you with a 60, 72, or 80 month payment!  Make sure you can pay it off in 36 months, and you’ll be in much better shape.  After that 36 months, take the amount you were spending, and put it toward saving for a new car later down the road.
  2. Research last year’s models.  The best time to buy a new car is in the fall, a month or two after the new models come out.  You can get great deals on the previous years models, and they are still brand new.  My truck had 11 miles on it, and I bought the previous year’s model.  Narrow down what type of vehicle you want to a handful of makes/models, then test drive them.  Driving makes a big difference on what you’ll decide.  Test drive them multiple times to see what you like, and cut out the ones you don’t.  Make sure you tell the salesman you’re just in the early stages, and don’t plan on buying for a while (you don’t want to deal with them for your buying purchases).  Look on sites like,,, etc. to read reviews about your favorite models, and use this information to help narrow down your choices.  Between all this information, you should be able to narrow down to one specific model.
  3. Figure out the options you want and can afford. Go back to and check out the invoice price and the average selling price for the model you picked.  Add in the options you like, and keep the price to what you determined you can afford in step 1.  You can figure to spend around the invoice price for purposes of this discussion (you should actually get under invoice by a few grand in the end though).  Now you know exactly what you’re looking for, and are ready to start the buying process.
  4. Email all the dealers in your area with the exact options and color you want to purchase, and ask them for their “bottom line price.”  You can email them right from  It takes a little while to email all of them, as you have to do it one at a time, but it’s well worth it.  Just copy the description and paste it in every email.  Mention that you’re emailing all the dealers in the area, and are looking for the best price.  Also be sure to ask for the mileage on the vehicle.  You don’t want one that has over 100 miles on it.  Picture how most people test drive vehicles.
  5. Wait for the emails to come rolling in.  You’ll get responses from almost all the companies within a day.  Delete the emails that ask you for the same information you already gave them.  You don’t want to deal with those dealerships.  You’ll get more than a handful that will give you a price.  I put all the responses in a spreadsheet with all the detailed information (contact info, dealership location, options, price, etc.), so I could stay organized.
  6. After a few days, respond via email to the 2nd and 3rd cheapest options (leave the cheapest one alone) and tell them you found the same model for the cheapest price you found.  They should counter with a cheaper price.
  7. Take the cheapest response, and go back to the original person who gave you the lowest bid, and tell them what your new lowest price is.  Continue this process until you get deals that come out to be close to the same, if not exactly the same amount.
  8. If you are taking out a loan, contact your local credit union to get the cheapest rate for your loan.  Credit unions are typically the cheapest route you can go.  Get a quote from them on what sort of interest rate they can give you.
  9. It is only at this point that you actually go into the dealership.  Contact the person with the lowest offer, and tell them you want to come look at the car, and test drive it.  You already have a dirt cheap price.  Now you are just making sure that the vehicle fits what they already told you.  Once you test drive it, ask the dealer if they can beat the interest rate quote you received.  If so, go with them.  Otherwise, tell the dealer you want to go with the loan through your credit union.  They should work with the credit union to get you that rate.
  10. Sign all the paperwork, and drive home in your new vehicle!  Your hard work has finally paid off.

Now you know how to buy a new vehicle.  Never just go to the dealership and purchase right from them.  That’s how you end up with a ton of debt, and higher payments than you can afford.  Follow these ten steps, and you will be happy about your purchase for years to come.

9 thoughts on “How to Buy a New Car

  1. This is the best comprehensive look I’ve read so far. It’s certainly a new age in car buying. Great research will make sure you’re not a remorseful buyer.

  2. This was an excellent read, J.D. – a very clear, step-by-step breakdown of how to buy a new car. I work for small startup in New England – – where we’ve built a platform designed to simplify/automate the same competitive bidding process you described in steps 4-7. We let dealers compete on price in an open marketplace – you can see all of their best offers, and they can see each others – and we give buyers the option to lock in the best price, right then and there.

    We’re keeping it local for now, but so far, the prices are landing well below KBB’s Fair Purchase Price – an encouraging sign.

    • Hmm.. That’s an interesting concept. Where do you get your numbers from to make sure they are getting the best deal? Following my steps, you should be able to get a better deal than the average price paid, which seems like what your site shows.

  3. JD, I really appreciated this article, since I plan to purchase a car very soon, using the same method. However, I was hoping you would address the point you made at the outset, that “You should also save up and pay cash for whatever vehicle you purchase,” since that is exactly what I plan to do. My understanding is that dealerships are not as cooperative with the consumer if they know you are paying cash, since the way they make their money is through financing. Would you please outline the best way to handle the deal when paying cash?

    • Sure. Just don’t mention how you are paying until the very end, if at all possible. I would work with multiple dealerships to get the lowest price. If one dealership is only going to get you a good deal if you finance, you can look at others on your list. If they ask you throughout the process how you plan on paying, just mention that you are undecided. Based on my experience though, they don’t really care how you pay for it. With my last new car purchase, I wrote a check. They didn’t even ask how I was going to pay for it until I got there to sign the paperwork.

      But I have heard of some dealerships that will give you a better deal if you get a loan. Run the numbers yourself, and make sure there’s no pre-payment penalty for the loan. If it does actually come out as saving you money to take out a loan, take out the loan. You might have to make 3-4 payments if they require you to keep the loan for 3 or so months to get the better deal, but just pay off most of the loan in the first payment and make two or three smaller payments to finish it off. I’d only go this route after running the numbers and finding out it will end up saving you money though.

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