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Buying new cars can be a scary experience.  But, if you do your research, read the car reviews and learn new cars' prices before you go to the car dealership, you can be assured of getting a good deal on your next new car.

Buying a new car can be a good experience or a bad one.  It's up to you and how you handle the situation.

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Getting the best price when buying a new car

A good deal isn't the lowest selling price, but the lowest final cost on a car that meets your needs.

If you have never purchased a new car before, some of the aspects may seem scary and the car terms confusing, but with a little information and work on your part, it can be exciting and fun. You need to understand some things before you actually go to your local dealership. We are going to give you the definitions, how to shop, how to get the best deal and about financing.

When you are going in to buy your new car, you should be relaxed and patient as opposed to scared and frenzied. Buying a new car can be a great experience and shouldn't make you panic or even be nervous.  We want to help you get a good deal.

Step 1 - Use the Internet. 

Locate a dealership nearest you that has the car you want.  For service and warranty work you don't want to be stuck all day in a dealership a hundred miles away, Find the dealer nearest you on the Internet that has the exact car you want. I would check back with my local dealer to make certain his inventory is up to date. I would also ask the local dealership what their "dealer-trade" policies in the event I elected to let them trade with another dealer for my car. I would put up a small deposit but sign no papers. Getting information ahead of time makes the shopping much faster and much less trouble than driving from dealership to dealership searching for the car and the price you want.  T

Don't put special credence in ads that offer vehicles at "dealers-cost". Dealers cost is variable. Ads offering deals at "dealers-invoice" would make sense if you could be certain of the invoice amount.  When you arrive at the dealership you have chosen and find that the car you were quoted is no longer there, you may be a victim of bait and switch.

You can protect yourself by consulting  Kelly Blue Book and Edmunds for cost of the base vehicle and accessories, They also provide information about rebates and dealer incentives. Armed with this information you can take care of yourself.

Step 2 - Know Your Credit Score

It is important to know your credit score before shopping. The zero interest rates and low interest rates offered by the factory financing is based on a minimum credit score. You might be told that your credit does not justify the reduced interest rate. You may inquire as to the criteria and compare to what you already know.

The finance department employees are paid based on the amount of interest rate over and above a minimum the factory has established. With this in mind, realize you are still going to have to negotiate your way to a final deal that is satisfactory to you.

You can find out your credit score online and free with many banks.  Some offer to let you check it once per month. 

Don't have every dealership you go into run your credit, because this will actually lower your credit rating.  Don't let them run it until you are ready to buy and have seen the car you want.

To qualify for the 0% interest you see advertised on TV, you have to have a credit score of 680 or higher. If you get close to this number you might still negotiate your way into the 0% deal.

There are car ads around now offering no money down, 0% interest for 72 months. This a lose-lose situation. At 3000miles per month. You will have 252000 miles by the time you pay it out. You will have 180000 miles after 5 years. A five year old used car with 180000 miles that you still owe 2 years on will not bring what you owe. The above numbers may not fit your diving habits. But, do consider these things before getting the least payment you can. You may need to pay more per month, or back down to a less expensive car.Itto buy something that is currently on the lot.  It may not be the exact car and equipment you want, but it could be the smartest purchase for you.

Step 3 - Look for Rebates and Incentives

Rebates usually are the most prevalent at the end of the year and at the end of summer as the new models are appearing. 

During December, people are normally focused on buying gifts and not on buying themselves a new car.  Car dealers are more motivated to cut the prices down to make a sale and improve their sales record before the end of the year.

Starting in July, new car dealers begin to mark down last year's models in order to make room on the lots for the new year models.  There should be factory-to-dealer incentives that reduce the prices and consumer rebates which can add up to big savings if you don't mind buying a car that is already considered to be a year old.  Some factory-to-dealer incentives may be several thousand dollars.  These are not advertised.  So, when you see an advertisement for a car selling for less than cost, this is one way that can be done and the dealership still makes a profit.  The dealership will share this incentive with you, making the car cost less, and they still make money. Weigh the number of months vs. mileage you drive and consider the outcome when you drive away in a year old car.

If given the choice, you may want to increase your down payment with the rebate money.  Consider the interest savings vs. the rebate. It only takes a calculator to determine this. It is usually better than getting 0% APR, because of the lower the amount financed.  You need to figure it both ways to see which is the better deal. If you are going for the longest term, take the 0% interest. Long term financing on $30,000.00 could run as much as $9,000.00. Weigh your options.

Step 4 - Find Out What Your Trade-In is Worth

Go to an online website, such as Kelly Bluebook or Edmunds,  to find the trade-in value of your car if you plan on trading it in.  If the dealer doesn't offer you a fair price, you can sell it yourself.   It will take more time, but you will have money in hand to use as a down payment.  The allowance for your trade-in is another negotiating encounter. Let friends and co-workers know of your intentions to trade. Their Used Car Center is another income stream so you don't have to take the first offer.

Consider the mileage on your car as well as the overall condition and needed repairs. Kelly Blue Book and Edmunds can help you with this.The pricing sites can tell you pretty close to what your car is worth.  Remember, very few cars are in excellent condition.  Be honest.  Yours is probably fair or good.

If you owe money on your trade and do not have an equity. That is, you owe more than it is worth you are looking the negative balance being added back to your new contract. Your payments are definitely going to go up unless you put money down to cover the difference.

Step 5 - Find the Best Price on Your New Car

Before you even begin thinking about the fun things (do I want a super-fast sports car or a jacked-up monster 4X4), you should slow down and concentrate on your BUDGET. Be realistic.  You should set a reasonable price for the car the maximum you are willing to spend and stop dreaming about cars that are above your price range.  If you budget can handle a $25,000 car, do NOT look at $60,000 cars. This will just make you depressed when the car you can afford doesn't park itself or have heated, leather seats!  Don't try to buy a car that is out of your price range. Gasoline is high and you want to have money left to put fuel in your new car!  Plus, no one knows for sure what the economy will do.  Don't stretch yourself too thin.  Be smart.

When thinking about a new car, you should decide what your needs are.  Do you need a fuel efficient car?  Tow a boat? Haul six kids around and their stuff? Need all-wheel drive for bad weather?  You need to figure out what you need in a vehicle and set your goal on buying that type of car, van, truck or SUV and then begin looking for the best price, fuel economy, warranty, options, etc.

You should narrow your search down to a handful of new cars that meet what you need and are in your price range.  You may want to test drive the different ones to see which one is really the best for you.  But, do not get excited and let the salesman talk you into buying before you are ready!

Go to several pricing sites to get the best idea of the average price on your new car and your trade-in.

You should remember that if you leave yourself open as to the options, color, trim levels, etc., you may get a better deal than if you go in to the dealership with a very specific car that you want.

You can find out what the dealer's cost is on the new car and each of the options too. 

Step 6 - Getting Ready to Go to the New Car Dealership

Before you head to the dealership, you need to get all your ducks in a row.  You will need to take a copy of your credit report (in case they come up with a report with a lower score than you actually have!), title to your trade-in, your checkbook, registration and proof of insurance.

BUT, this doesn't mean you are obligated to buy.  It just means you are ready.

Step 7 - The Salesman

You may want to call different dealerships to see if they have what you want.  You may already know he has the car you want, but you might want to see how the salesman acts on the phone.  If he is too pushy, hurried or just not friendly, you probably don't want to have to go in and deal with him one-on-one.

Step 8 - The Deal

The thing that makes most car buyers nervous is that they know they are going to have to negotiate. Don't be afraid of negotiating. If you go into the dealership with a very good idea of what you want and what you want to pay, the negotiating is up to them, not you. You've done your work and now the dealer has to work to get closest to the price you want to pay.

The dealership should come down between somewhere between the Monroney sticker price and the invoice cost price.  That is why it is important for you to know that number before you negotiate the deal on your new car.

During the negotiation, do not give the salesman or the sales manager your driver's license or your social security number.  Remember, it is illegal for a credit check to be run unless you give your permission.  Be wary of a car dealer who would do this.

Do not discuss your trade-in until after you have negotiated the price for your new car.  Otherwise, they will just play with the numbers and you will not get the full market trade-in value you should for your car.

Do not accept a car without a window sticker.  It is illegal for a new car to be missing the MSRP window sticker or an invoice sticker on the window.

Do NOT forget that you will have to pay sales taxes, licensing, documentation fees and registration fees that will be added to the buying price.

One common dealer scam happens after you have decided to buy the car. At this point, the car salesman may start asking you to pay a variety of extra charges. This can mean hundreds or even a thousand or so dollars. Don't fall for these tactics. You agreed on a price and you should stick to it. Don't be afraid to walk out of a dealership if you feel that you are being treated unfairly. The bottom line is it's your money and you don't want to lose it because you didn't speak up

Think you are done?  NO WAY!!

Step 9 - The Finance Department

Do you need the extended warranties, undercoating, alarm systems, window etching, etc?  This is why you may spend hours in the finance office after you negotiated a buying price with the salesman and sales manager.

You may really want to consider getting pre-approved for a loan through your bank or credit union before you go shopping for your new car.  This way, you can avoid much of the aggravation involved in a new car purchase.  But, you can't get up on Saturday morning and just run out and buy this cool car if you have to wait until Monday morning to talk to be bank for financing.  You will have to plan ahead.

It is often easier, and more convenient, to just finance with the dealership and good deals are possible, but make sure you know what you are doing and what you should be paying. Be very willing to dicker over the percentage rate.

Don't sign the paperwork until you are sure that all of the numbers are correct. Make sure that your down payment is on the paperwork.  Make sure the interest rate you agreed to is fixed for the term of the loan.  Make sure there are no prepayment penalties. You may want to pay extra each month and reduce the time you pay on the car.  You should understand that the important thing is how much you are going to pay for the car and not what the monthly payment is. A low monthly payment usually means more payments.  Almost any payment level can be reached if the loan term is long enough.  Pay attention to the number of payments.  Normally, the longer you pay on the car, the higher the interest rate.  With the prices of cars soaring, 72 month loans are becoming more popular.  Paying your car off in less time will make your payments higher, but your interest rate may be lower.

A warranty is a contract that provides maintenance if your car has any mechanical or other problems that are covered by the plan. Decide what kind of extended warranty you want, if any, and how much you are willing to pay for it before you arrive at the dealership.

An extended warranty may not be necessary.  Most cars come with a manufacturer's warranty that covers many things.  Some manufacturer's have a 100K/10 year warranty on the motor and drive train.  Check this out before you go shopping.  If you do want an extended warranty, you might shop online. You may save more money.

GAP insurance is designed, in case your car is involved in a wreck and is declared a total loss by the insurance company. The GAP insurance will cover the difference in what you owe on the car and what the insurance company is will to pay If the amount they pay is less than the balance owed on your car, the GAP insurance covers the difference that you would otherwise have to pay. You may want to buy GAP insurance if you paid down less than 20% on your new car.  GAP insurance is usually relatively cheap ($1.00-2.00 each month) and may save you thousands.

Do not let the dealership run a credit report if you are paying cash!  Every time your credit report is run, your credit score can decrease. Some dealerships may say it's their policy to always run a credit report on potential buyers -- even those paying cash. Don't let them. They will sell you a car without it.

Step 10 - Try to Enjoy the Experience of Buying a New Car

Remember, the bottom line is that you will feel great in that new car if you get a good deal on it.

If you go into the dealership armed with knowledge, you can get a good deal and it will be a much easier experience than it would be otherwise.