6 steps to make car-buying easier

Whether you hope to upgrade to a car with newer technology or worry your current vehicle is on its last legs, these six steps can ensure your trade-in and car-buying process go smoothly.

1

Know the value of your trade-in

If your current car is clean and in working order, it may have value you can apply toward the purchase of a new vehicle. Resources like Kelley Blue Book and the National Automobile Dealers Association can help you determine your current vehicle’s worth before you start your negotiations.

2

Consider your budget

Ask yourself these important questions: How much are you comfortable paying each month for the car? Have you considered additional costs—such as maintenance, insurance, gas and repairs? Can you afford a down payment, or do you have a trade-in to use as a down payment? You may be required to put down a certain percentage of the car’s price to secure financing, and paying more up front means you pay less interest in the long run.

Tip: Using an online calculator, such as Bank of America’s car payment calculator, can help you estimate how much you can afford.

3

Review your credit

Your credit history is one of the most important factors that lenders consider. The higher your credit score, the better interest rate you’re likely to get. Review your credit report (or score, if you have access to it) and make sure the information is correct so you can get the best possible loan rate. You can get one free copy of your report from each of the three major credit bureaus annually by visiting AnnualCreditReport.com.

4

Decide on new or used

For many people, buying a used car is a better choice than buying a new car. The first owner of the vehicle has absorbed the biggest portion of the vehicle’s depreciation (the decrease in value), so you tend to get more value for your money. But there’s more to consider than depreciation.

Used car pros and cons. Pros: Lower purchase price, Less depreciation, Cheaper registration and license fees (these are usually tied to the value of the vehicle), Potential for lower insurance premiums. Cons: Car may be less reliable than a newer model, Potential for higher maintenance costs (such as replacing tires, battery or brakes), Reduced or no manufacturer's warranty, Potentially higher interest rate on auto loan or lease.

Dealers must include a buyer’s guide with every used car, which will include detailed information about the warranty (if the car has one). Keep in mind that if you purchase a used car from a private individual, it’s generally an “as-is” transaction. Learn more about purchasing new versus used cars.

Tip: If you decide to buy a used car, be sure to check the mileage carefully and make sure the car is in good mechanical condition.

5

Shop for a loan and get approved in advance

Buying a car can go more smoothly if you research financing options before going to the dealership. The terms of your loan—the interest rate and length of repayment—affect what you ultimately pay. Make sure the terms of your car loan comfortably fit your budget.

Tip: If possible, get approved before visiting the dealer. Knowing your approved interest rate can help you negotiate your deal.

6

Research any car you’re interested in

Knowledge is power when it comes to negotiating a deal, so consult a variety of websites and visit multiple dealers to learn what you should expect to pay for the car you want. The Bank of America dealer network may also serve as a valuable resource.

Visiting dealerships and taking test drives are important parts of buying a car, but you should also read as many vehicle reviews as you can find. Know whether the car you’re considering has been given high marks for safety and is reliable in terms of needing repairs, among other factors.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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