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How to Buy a Car

Chapter 1 How to Buy a Car

There’s nothing like driving off the dealership lot or a seller’s driveway with a new-to-you car. You roll down the windows and blast your favorite songs. You post a selfie with your new ride on Instagram. You start brainstorming what to name your new car (because she needs a name, of course). It’s a great feeling!

But how do you get there? Sure, you might have to hop around from dealership to dealership or spend a few hours scrolling through car listings, but that’s all part of the thrill of the hunt. And since buying a car is one of the biggest purchases you’ll ever make, you want to make sure you’re getting the best deal for your new ride.

Rules for Buying a Car

We know how exciting it is to get a new set of wheels. But that excitement has caused a lot of people to make some really dumb decisions.

Here are two rules of thumb to help guide you to a smart car purchase:  

  1. Save up and pay cash for the car. Do not take a car loan or car lease.
  2. Buy a reliable, slightly used vehicle that fits your needs.

The very best way to buy a car is to save up and buy a reliable, slightly used car (with cash). Stay away from new cars. Why? First, the value of that new car will drop like a rock once you drive it off the lot. In about five years, that “new” car will have lost 60% of its value.1 Plus, you can find like-new used cars that are just as safe and dependable as a new car at a much cheaper price. 

The only time you should even think about buying a brand-new car is when you have a net worth of at least $1 million. At that point, a new car will be such a small percentage of your net worth that you’ll barely feel it. Until then, a reliable used car will do just fine! 

The Five Steps to Buying a Car

  1. Set your budget. How much are you going to spend on the car? Remember, you’re going to pay for this puppy with cash. So, if you’ve saved up $8,000 for the car, you’re not going above that! Whether you’re single and looking for a nice little convertible or you’re on the hunt for a minivan that’ll fit the whole family, look for a car that fits your needs and your budget. Write down some of the features (like good gas mileage, safety features or plenty of cargo space) that are most important for you in a vehicle.
  2. Shop for a used car. Now that you’ve set your budget and have an ideal car in mind, it’s time to go out there and find your car! Here are some of the best places to start your search.

    Independent Used Car Dealerships: You might not like the idea of walking into a dealership and haggling with a pushy salesman. We get it. But if you’ve done your homework beforehand and have the willpower to walk away if you need to, you can definitely find a deal at a reputable dealership. Don’t count them out!  

    Private Sellers: Drive around for a while and you’ll likely see a decent used car with a “For Sale” sign in the window parked in someone’s front yard. Yes, it’s riskier to buy a car through a private seller. But you’ll have the best chance at negotiating a great deal if you’re prepared and take the right precautions.You can find hundreds of cars being sold in your area on one of the following sites: eBay Motors,, Autotrader, Craigslist, Facebook Marketplace.

    Online Car Retailers: Places like Carvana and CarMax have a huge online inventory, and their cars go through a rigorous inspection process. So you can feel confident you’re going to get a good car. And you can often browse from the comfort of your own home. That’s the good part. The flip side is their prices are higher than private sellers—and there’s no room to negotiate. You’re basically paying an extra price to skip the hassle.
  3. Check the car’s value. Kelley Blue Book (KBB) uses data collected from actual sales transactions and auction prices to give you an accurate price range. This can help you negotiate and keep you from paying too much for the car you have in mind. You’ll also need to get an idea of how much you’ll spend to maintain the car and what long-term repairs you should expect for the make and model you’re thinking about buying.

    Did you know? We surveyed our audience and found the average age of their car at the time of purchase was four years old and the average age of their current vehicle is 10 years old.
  4.  Inspect the car yourself. When life gives you lemons, you make lemonade—unless that lemon is a car. Then the lemonade tastes like leaking battery acid, and nobody wants that. The best way to avoid buying a lemon is to take these three steps before you buy any car:  

    Go on a test drive. Does the car drive smoothly on flat roads? Do you hear the engine rattle when you drive? And what’s that smell? The test drive is like a first date, so keep an eye out for any red flags.

    Buy a vehicle history report (VHR). Services like Carfax provide details about a specific car’s ownership, accident history, title status and mileage.

    Take the used car to a reputable mechanic. Always have a mechanic inspect a used car, no matter the condition. A good mechanic will be able to tell if you’re about to buy a reliable used car or a headache on wheels. According to the Federal Trade Commission (FTC), you can get a standard vehicle inspection for about $100.2 So don’t get taken for a ride by a mechanic charging a couple thousand dollars to inspect it for everything under the sun.

    For a detailed list of what to look for when you’re checking out used cars, download our used car checklist!
  5. Negotiate to get the best price. Negotiating can be hard for a lot of people. But remember: Most of the time, the seller needs your cash more than you need their car. You have some leverage, so use it! Know how much the car is worth, point out any problems associated with the model, and let the seller know you’re paying in cash to help lower their asking price. But always be willing to walk away if the seller just isn’t willing to budge.