Money·4 min read

Here's What You Need to Know Before Buying a Car

A person getting in a car to test drive
Design: theSkimm | Photo: Pexels
March 10, 2022

Buying a car can be overwhelming. So we Skimm'd the process to help make it easier. Whether you’re looking to buy your first set of wheels or upgrade your ride, here are five steps to make your car buying journey a success. 

1. Figure out your budget.

Above all else, your car should fit your budget. So, it’s time to figure out how much you can really afford to spend on it. 

Experts recommend spending no more than 15% of your monthly take-home pay on transportation. That includes not just your car payment, but also the amount you’ll spend on insurance, maintenance, and gas each month. (Hint: Car insurance costs around $137 per month, on average, and online calculators can help you determine how much you’ll spend on gas.) 

You’ll also want to consider how much of a down payment you can make on the car. Many experts recommend putting at least 20% down on a new car (just like a mortgage) and 10% on a used car. But if you can pay more upfront, that could lower your monthly payments down the road. 

Also, consider leasing. Which is an especially good option if you plan to swap your car in a few years. Bonus: Leasing generally doesn’t require as large of a down payment as buying. But it may require the first month's payment right away, plus fees. Like an acquisition fee that’s paid upfront. Oh, and there will be a return fee at the end of the lease, too. Plus extra for wear and tear or exceeding the mileage limit.

2. Find a car that fits your budget and needs.

Once you’ve calculated your budget, think about what you're looking for in a car. Three rows of seats? Better gas mileage? Want to go hybrid or electric? Then see what your budget will get you as you start shopping. And figure out what you need vs. what you want. (Need = A car that will fit your budget. Want = A sunroof).

If you’re buying, you’ll also want to consider whether to go new or used. Psst…new cars lose 20% or more of their value in the first year of ownership. So buying a car that’s only a year or two old could get you more for your money.

And take the car you’re considering for a test drive. Even if you’re planning to buy online, a test drive can help you get a good idea of the car's condition, tech, and general feel. 

3. Decide where you want to buy. 

Gone are the days of having to go to a dealership. Now, when it comes to buying a car, you have options. 

Online platforms like Carvana or Vroom could be a good place to start shopping for your new ride. But one big drawback: The price you see is often the price you pay. As in, there may be no room to haggle. 

A better option for bargaining types: a dealership. Where sticker prices and everything else (think: the value of a car you're trading in, financing terms, or even future maintenance costs) are always negotiable.

4. Get pre-approved for an auto loan.

If you’re considering taking out a loan, you’ll want to have an idea of how much you’ll pay to borrow (i.e. the interest rate of the loan). Having an auto loan pre-approval could help give you an idea of what you’ll pay upfront. And later, whether the financing that the dealership has to offer is actually a good deal. 

Before you start shopping for a loan, check your credit report. Spotting and disputing any errors can help make sure you put your best score forward. Some lenders may require a minimum credit score to get an auto loan. Regardless, higher scores will help you get lower rates. Then, check with banks or local credit unions you already have a relationship with. Credit unions often offer some of the better rates. Get a few pre-approvals to find the best one.

5. Seal the deal.

Once you’re ready to buy, make sure to comparison shop. Sites like Kelley Blue Book and Edmunds can help you to see lots of different dealers’ prices in one place. And remember to negotiate whenever possible at every step of the process.


Buying a car can be as exciting as it is stressful. Make it easier on yourself by determining your budget ahead of time and having your financing arranged before you start shopping.

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