Buying a Car: What You Need to Know

When you’re ready to buy a car, it’s not always as simple as going to the car lot and driving away with the perfect model.

It can sometimes take a while to shop around, arrange your budget and talk to car dealerships. Make sure you budget plenty of time in your schedule so you get the right car for you.

Let’s take a look at the steps you can take to buy a car so you’re thrilled every time you reach for your keys.  

Steps to Buying a Car

Let’s take a look at the steps you can take to buy a car. Note that you might want to do some of these steps out of order, such as checking pricing guides and setting your budget. For example, you might want to do these two steps at the same time.

Step 1: Set a budget.

How much can you spend on a car? Carefully examine the amount you bring into your household every month, your monthly debts and expenses before you even enter a car lot.

  • Monthly income: How much income do you bring to the table? Consider side hustles and other income as well.
  • Total monthly debts: How much monthly debt are you working to pay down? For example, maybe you already have a car loan. Maybe you have student loan payments, debt from credit cards and other debts. Whatever debts you have, make sure you factor those in so you can afford to add a car payment as well. 
  • Expenses: Consider all other expenses as well, such as the amount you spend on piano lessons for your child, caring for an elderly parent or medical expenses for a special needs child. Take a look at your bills to categorize recurring monthly expenses.

When you budget, you prevent yourself from buying a car that’s out of your price range. It’s a good idea to start here because then you know what kind of numbers you can work with.

Don’t forget to consider these other car-related expenses in addition to your regular monthly expenses: 

  • Auto insurance: The national average cost of car insurance amounts to $1,592 per year, according to NerdWallet. However, that figure may change depending on your specific factors, such as crash and credit history. Shop around at various insurers to get the right price for you.
  • Maintenance: The average car maintenance cost tallies up to $1,000 per year, according to The Balance. This could include oil changes, windshield wipers, batteries, brake pads and replacement parts. (And that’s just for the basics.) It could cost a lot more if a major part of the car (like the engine) tanks.
  • Registration: Tax, title and registration costs vary depending on the state in which you live. Check out this list of fees from Autolist and make sure you incorporate this into your budget. 

Step 2: Get preapproved ahead of time.

If you plan to finance a vehicle, get preapproved ahead of time. This way, you can prove to a dealer that you can’t go above a certain price point. In addition, they have to beat the deal you finagled from another lender if they want to be the ones who finance your new or used car.

You don’t just have to look into your local bank. Ask credit unions and other lenders for preapprovals. 

Step 3: Research the right kind of car to buy. 

What kind of car makes sense for you and your family? Make sure you research practical considerations. Ask yourself the following questions:

  • How many passengers do you normally have in your car every day?
  • Do you have a long commute and prefer a fuel economy vehicle?
  • Do you need four-wheel drive for snowy winters?
  • What kind of features do you want? Leather seats, DVD player, other features? 
  • Do you want built-in safety features, such as blind-spot monitoring, lane departure warning and other safety features?
  • What kind of towing capacity do you want?
  • Do you have room for a full-size vehicle in your garage or will you need to opt for a compact car?

Consider all the features you need. You may want to write them down and divide them into “must have,” “would like to have” or “can do without” categories. This way, you can draw a line in the sand if a dealer tries to upsell you.

Step 4: Research dealerships. 

Next, you’ll need to know what kinds of cars dealerships offer. Shop around online first so you don’t fall head over heels for a shiny red convertible with black leather seats! Shopping online first takes the emotion out of it, and calling ahead of time often beats a quote from the car lot or showroom. 

However, note that if you call for a price, many dealers will require you to make an appointment to come in and wiggle their way out of giving you an actual price.

The bottom line: Do your best to do as much research online at multiple dealerships around your state or in the region. Casting a wider net will give you more options. Going to the same dealership you’ve always gone to may not necessarily always give you the best deal around.

Step 5: Test drive cars.

Once you identify a potential vehicle from an online search, drop in at the dealership or make an appointment.

Before you test drive a car, understand the dealer’s test driving policy and insurance — find out whether you’re covered by insurance if you inadvertently get into an accident while test driving. 

Ask the salesperson to explain where everything is located in the car, particularly if you’re facing inclement weather. Not knowing where the windshield wipers are can affect your test drive!

Drive on the same types of roads you normally use when commuting to work, for example. Get a feel for the car, including how it rides, goes over bumps and whether or not it’s easy to steer. 

Try everything in the car — the radio, the windows, the DVD player, the heated or air conditioned seats, the safety features — everything. If something is broken or missing, the dealer may knock some dollars off the asking price.

If you’re handy, check the car all over. If you have someone who’s handy if you’re not, bring him or her with you so they can check to make sure the vehicle runs correctly. 

Step 6: Check pricing guides.

Vehicle pricing guides shouldn’t become your only reference when you’re looking into buying a car, but they offer quite a bit of valuable information when you’ve honed in on the type of car you want to buy.

Kelley Blue Book, NADAguides and Black Book, for example, some of the most well-known pricing guides, use a plethora of sources to determine costs based on the condition, features, mileage, geography and other features of many makes and models.

Don’t forget to figure out how much it’ll cost to maintain a particular type of car! Think oil changes, broken alternators and long-term repairs. Know the costs and availability of replacement parts as well. Check out Edmunds True Cost to Own — it gives you a great way to estimate these parts and pieces of owning a vehicle.

Step 7: Talk price with a salesperson.

One of the most important things you can do involves making sure you know your stuff when you buy a car. You want to know exactly how much the car you’re considering is worth based on your research and pricing guides. (Don’t forget about your careful budgeting and preapproval as well — they arm you during this “game.”)

Auto salesmen love to talk about payments, not price, to make the vehicle seem like a “sweet deal.” Do your best to turn the direction toward an overall price instead.

Look into cash rebates, low-interest financing or subsidized lease deals. Find out if cashback deals or rebates exist to lower the car price. Low-interest financing deals may also reduce or get rid of the interest rate on a car loan.

Finally, make the car salesperson an offer. Explain that you’ll drive off the lot with the car if they can meet that amount. Make it clear that you won’t budge — it’s your final offer. 

Step 8: Make a decision.

Be okay with walking away. If you and the salesperson can’t come to an agreement, you know it’s time to walk away. 

Take the emotion out of the decision and tell yourself, “There will be other cars. This just isn’t the right one for me.”

Consider walking out of the dealership and say to the salesman, “I’ll think about it.” Salespeople may offer you more concessions later on in the week, particularly if you ask them to stay in touch.

Also, watch out for those “extras” — extended warranties, tire protection plans and more. Dealerships try to make up the amount they might have conceded when working with you on the price.

Arm Yourself with Knowledge

You have every advantage. Remember, you have so many opportunities to research vehicles ahead of time. In this day and age, you could come more prepared to a meeting at a dealership and know more than the salesperson! 

Keep your budget in mind at all times and consider how much deviating from what you budgeted will hurt your bottom line. Remain firm but polite with salespeople at the dealership and you’ll more than likely walk away, happy with your new (or used) vehicle purchase.

Learn more about money matters, money management, saving for college and more on UNest’s blog.




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Ksenia Yudina, CFA, MBA

Founder and CEO

Ksenia is the Founder and CEO of U-Nest, the first mobile app that makes it easy for families to save for college. As an entrepreneur and finance professional, Ksenia has focused on alleviating the impact of student debt on families across the economic spectrum. Previously, Ksenia was a Vice President atCapital Group/American Funds, the largest 529 provider in the U.S. In this role, she played a leadership role in helping parents plan and manage their finances, with a focus on the future well-being of their children. Prior to Capital Group/American Funds, she was founder of a residential real estate company. Ksenia earned her bachelor’s degree in finance from CaliforniaState University Northridge, and an MBA from UCLA’s Anderson School of Management.

Mike Van Kempen

Chief Operating Officer

Mike joined U-Nest in September 2019 as COO. He was previously at Acorns, a financial wellness platform, where he spearheaded the analytics and growth initiatives. Mike successfully expandedAcorns’ paid acquisition strategy, adding over 4.5 million investment accounts. Mike began his career in strategy & analytics at Belly, a Chicago-based loyalty startup in 2012. At Belly, Mike led projects that fueled growth across all aspects of the business, growing the customer base from1,000 to over 11,000 merchants, and accumulating a membership of over 2 million customers.Mike holds a B.B.A. in Finance from Loyola University of Chicago.

Steve Buchanan

Chief Technology Officer

Steve has over 20 years of experience in delivering digital innovations in the financial sector. Steve previously orchestrated product architecture and innovation as a Solutions Architect/ Fintech consultant at Union Bank. Prior to Union Bank, he was Chief Architect and Director of Engineering at Calypso, a Silicon Valley startup, where he architected and built multiple financial solutions. He was also Head of Global Integrations at Globe One in Vietnam where he integrated its Peer-to-Peer lending products into core banking solutions. Steve also built the first ever electronic Equities &Equity Options trading systems for Scottish stock brokers Wood Mackenzie (acquired by CountyNatWest). He is a graduate of Edinburgh University.

Peter Mansfield

Chief Marketing Officer

Peter has built an impressive track record in multiple financial industry segments including payments, credit/prepaid cards and lending. He has played an instrumental role at a succession of financial industry leaders, co-founding companies such as Brand3 (acquired by American Express) and PropertyBridge (acquired by Moneygram), and, as the early stage marketing lead at Marqeta (where he was team member number two), BillFloat and WallabyFinancial (acquired by Bankrate).He has helped fast-growth companies reach an aggregate market value of close to $8 billion. Peter holds a bachelor’s degree in economics from the University of Angila, UK.

Sonya Kidman

Client Relationship Manager

Sonya Kidman is a Customer Success professional with a decade of experience in advocating for consumer through user research and genuine empathy. Sonya specializes in user behavior and regularly attends national and global training sessions in wellness and people analytics tools. Sonya is a true global citizen was born in Russia, grew up in Israel, lived and worked in Canada and NewZealand. That global expertise along with an undergraduate degree in Sociology from Tel AvivUniversity have helped to shape a bullet-prof Sonya's framework to develop a winning customer strategy.

Frank Mastrangelo

Board Member

One part banker and one part technologist, Frank spent his early days with the Annenberg Foundation and PNC Bank. His career path led him to Jefferson Bank, where he led the build-out of its electronic banking platforms, and where he would forge a powerful alliance with The Bancorp co-founder Betsy Z. Cohen. As President and COO of The Bancorp from its inception in 1999 Frank played a critical role in helping the organization become an industry bellwether for branchless financial services and a global leader in payments. For this, he has become a widely respected fintech expert, and thought-leader. Frank was recognized in 2013 by Banking Innovation, a leading industry journal, as an “Innovator to Watch.” and as one of the innovators shaping the future of banking. Frank is a graduate of West Chester University of Pennsylvania.