How to Save Money When Buying a Car

Print Tell a Friend

Buying a car is one of life's necessary evils. Most of us need a car, and many of us would happily acknowledge that they love their car. But how many of us would say that we love shopping for – or buying – one? The good news is that buying a car doesn't have to mean spending too much money. And it certainly doesn't have to mean going home feeling swindled.

Be Educated

• Understanding financing options. Car dealerships make the majority of their money on financing. While most dealerships operate on an entirely professional and ethical level, you still need to protect yourself against those less-than-savory characters out there who prey on the uniformed. Bring a calculator with you to the dealership and ask to see all of the data used to determine the rate you're being offered. Don't worry about offending anyone; you've got a lot of money riding on these calculations! If your dealer balks at showing you the fine print, take your business elsewhere.
• Do your homework. It's also important to know as much about the car you're buying before you talk to a sales person. Read as much as you can, write down every detail, and be ready to ask questions about the car's features, options and drawbacks.
• Time your purchase effectively. When it comes to buying a car, timing really is everything. Sales people work on commission, and they need to fill a quota every month. That means that they're much more eager to sell you a car at the end of the month than they are on the first. The beginning of the month is a good time to go test drive the vehicle. The sales pitch won't be as aggressive, giving you some time to ask questions and think about your purchase. When you're ready to buy, come back at the end of the month, when the dealership employees will be more interested in making you a deal.

Know Your Credit Score

• It's your money! You've got a lot to gain by getting the best possible interest rate on your auto loan. One percentage point can save you thousands of dollars over the course of your loan, especially considering that most auto loans run at least three years. That's why it's essential to fully understand your credit report and your corresponding FICO score. Obtain a copy of your report and score prior to applying for a loan. If there is anything untrue on your report – an account you don't recall opening, a former address you don't recognize – contact the credit bureau immediately to open an investigation. If your credit score is lower than 700, you may want to wait to purchase a new vehicle until you've had a chance to repair your credit. You can do this by paying down credit card debt, paying all of your bills on time, and paying down or completely paying off installment loans.
• FICO is more than just a number. Staying on top of your credit report can save you money on nearly every major purchase you make and can be the deciding factor in approving you for an auto loan, home mortgage, or student loan. If you don't understand how credit works, visit one of the three major credit bureaus' web sites, Experian.com, TransUnion.com, or Equifax.com. All of them offer free information about how to read your credit report and how to go about improving your overall score.

Work Within a Budget

• How much will maintenance cost? This may seem obvious, but there is a lot more to paying for a car than just being able to afford the monthly payments. Luxury vehicles, imports, and vehicles with new technology like hybrid engines, built-in DVD entertainment centers and GPS devices can be extremely expensive to maintain. For example, did you know that a new headlight for a 2005 Lexus RX330 can cost as much as $1600? And that's just the part; it doesn't include the labor, or the frustration of finding a local auto repair shop that is licensed to work on luxury vehicles. Many mechanics won't even take a look.
• In addition to high maintenance costs, you'll likely pay more for insurance for a higher-priced vehicle. Because the technology is expensive to replace, an insurance company is more likely to declare a luxury car totaled in the event of an accident, meaning a higher payout to the insured. That means higher premiums for you.

Does all of this mean that you should completely give up the dream of driving a luxury vehicle? Not necessarily. It simply means that you should be prepared to pay more than just your monthly car payment. If you're not, you could find yourself in over your head. No matter how much money you have, no one can afford to throw money away.

Buying a car is a big deal. It's a huge commitment and a huge expense. By being an informed consumer, you can save yourself thousands. There's no reason to pay too much for a vehicle. You can find a quality car for less by simply shopping around and asking the right questions.