BBB Tip: Buying a new car

Buying a car, whether a new one or a used one, can be scary and overwhelming. But it doesn't have to be! Remember these tips from the Better Business Bureau to make the process as easy and successful as possible.

Before going to a dealer

You can do a lot to get ready before you even set foot in a dealership. Here are some things you should do so you are an educated and prepared consumer:

• Consider payment options. Take time to consider your payment options. You often have two options: pay for the car in full or finance over time. Choosing to finance the vehicle over time may mean less money upfront, but it increases the overall cost if you are paying interest. If you decide to finance it, be sure you completely understand the terms of the financing agreement before you sign. For example, ask if you will have to pay any fees if you pay off the loan early. You can shop around for the best loan through third parties like banks and credit unions. Consider being pre-approved for a loan so you have something to compare to the dealer financing. Having an offer in hand will also give you a bargaining point.
  
  
• Set a budget. Do not automatically spend whatever you qualify for in a loan. Decide how much money you can spend based on the maximum amount you have saved up to pay or the maximum down payment and monthly payment you can afford if you are financing the car through a loan.

When calculating the cost, be sure to include the price of the tax, title, registration, fees, and insurance. As the purchaser of the car, you are responsible for insurance, and the dealer is not obligated to cancel a contract because you find out later you cannot afford to pay insurance.

When evaluating the impact of owning a vehicle on your overall budget, consider factors like how much gas the car will use and how much maintenance and repairs will cost.

• Leasing? Determine whether buying or leasing the car provides the best value for your money. A lease offers lower monthly payments, little cash upfront, and restricted mileage. At the end of the lease, you return the car and the process repeats. Buying a vehicle requires monthly payments and more money upfront, but once you pay the loan off, you own the car – which is great if you plan to keep it for the life of your loan. However, if you are the type that always wants a new car every two or three years, leasing may be a good option for you.

 

• Choose a make and model. Check out various brands and models to determine the safest, most reliable, and most suitable for your lifestyle. Research and think about the car's equipment and options, the safety features you want, the conditions you will be driving in, and any other needs you have in mind for yourself or your family. Will you use it for commuting short distances or taking long road trips? How many passengers must fit comfortably? How long do you want to keep it?
  
  Consult unbiased resources like Consumer Reports and consider additional factors like fuel economy (see below), warranties, and operating costs. Also, look into theft statistics, as those can impact your insurance rates. Investigate different cars' accident history and recalls.
  
  Narrow your choices to several vehicles. Do not make the mistake of having your heart set on one car -- it may reduce your bargaining power.
  
  
• Gas or electric? One of the most important decisions when considering a vehicle model is whether it runs on gas, electricity (EV), or hybrid. There are even different types of hybrids, like plug-in hybrids (PHEVs) and hybrid electric with a battery (HEVs). Do your research on which type of car you would prefer. Check the laws in place where you live regarding when and if cars will be required to be electric-- plus any applicable tax credits for purchasing an EV. Consider the costs associated with each option as well as the location of charging stations near you. The U.S. Department of Energy and Environment and Climate Change Canada have resources and information.
  
  
• Compare prices online.  Look up the prices of different cars on websites like Kelley Blue Book and Edmunds. By comparing a few models, you can see what each vehicle offers for what price. This process will also help you determine the value of your trade-in if you have one. Obtain updated price lists to compare to the dealer costs displayed on the window sticker once you get to the dealership. It is important to know the difference between the invoice price (the price the dealer paid for the vehicle) and the car's sticker price (the desired price the dealer wants you to pay).
  
  When comparing prices, consider different warranties, the length of the warranty period and what items are covered by the warranty (this may vary). Check if the warranty includes parts and labor and for how long. Ask if there are preconditions that you, the buyer, must maintain to qualify for the terms of the warranty.
  
  
• Look for rebates. Many rebates are available to all consumers, but some carry eligibility requirements like loyalty bonuses, military status, or trade-in bonuses. Make sure you understand these qualifications to avoid disappointment later.
  
  
• Find a dealership. Ask friends and family members for dealerships nearby that they trust and that provide a pleasant experience. Read Business Profiles at BBB.org to see BBB Accreditation status, ratings, reviews, and complaints. Search online for the dealers' names and "complaints" or "reviews" to see what people say about them.
  
  The dealer should not be pushy. You want a dealer who will make you feel comfortable and informed about all available options. Be on the lookout for reviews that mention any bait-and-switch tactics.

At the dealership

Remember that an ethical auto dealer will give you the time you need to make a conscious and thought-out decision on this major purchase. If someone is rushing you and putting pressure on you, you may not want to do business with them.

Here are some things to do during your visit to the dealership:

• Take your time. Tell the dealer upfront if you don't want to decide on your first visit. Let them know you want to take a test drive and will be making your decision on a purchase later.
  
  
• Go on a test drive. It's one of the most important things to do! Drive each model you are considering and try to do so in various conditions (driving through traffic, on a highway, and on back roads). Take a test drive checklist with you to examine the car's essential characteristics and check out all its features.
  
  While driving, carefully check the brakes, steering, outward visibility, and gear shifting. Turn off the radio and listen to the engine for any noises. Try parallel parking to ensure good visibility and the ability to adjust all mirrors as needed. Ensure all dashboard lights are on and the instrument panel is easy to read. Test the back seat for comfort for passengers and the trunk for ample space and easy access to the spare tire.
  
  Don't be afraid to ask questions. If anybody else will be driving the car regularly, take them with you to test it.
  
  
• Keep all negotiations separate. After you have settled on a price for the car, consider questions about financing, service contracts, warranties, trade-ins, or other extras. You can let the dealer know you have a trade-in to initiate the appraisal process, but keep the focus on the new car first.
  
  
• Determine the price for the vehicle. The MSRP (manufacturer's suggested retail price) sticker price taped to the car window is the amount the dealer is seeking and may be about 10-15% more than what the dealer paid for the car. Tell the salesperson exactly what car and options you want, and ask for the best price. You may be less likely to get a good price on a more popular car in short supply. Make sure you discuss all the options you are interested in and that you are clear on any additional costs. If the dealership allows it, consider bargaining for a better deal, and always get the final figure in writing. Shop around and see if other dealers will offer you better prices. Be patient when purchasing a new car. If the first or second offers are not desirable, you must be able to walk away.
  
  
• Decide if you are buying from stock or ordering from the factory. Sometimes, you will get a better deal for a car already in stock because the longer a vehicle sits on the lot, the more expensive it is for the dealer. These cars may have costly options that you neither need nor want. Ask the dealer to remove the option -- and reduce the cost -- or sell you the vehicle without charging for the option. Sometimes, the better deal will come with ordering a car. Discuss all possibilities to see which works best for you—factor in the time you have to wait for a vehicle from the factory into your decision-making.
  
  
• Discuss your trade-in. Once you have finalized the price for your new car, move on to discussing the trading in of your old car. Keeping that negotiation separate from the price of the new vehicle will help you stay focused on the actual price of the new car.
  
  
• Ask about warranties and service contracts. Make sure the information on your warranty is detailed and includes whether the warranty is full or limited, what is covered, who covers it, and for how long. Read all the details about additional service contracts and ensure you understand them completely before signing anything.
  
  If you are considering an extra-cost service contract, closely compare it to your warranty to check for duplication. Unless the service contract offers complimentary scheduled maintenance or other services, having a service contract while the warranty is in effect may not be economical. If you decide to buy a service contract, do some comparison shopping. For instance, purchasing a service contract through an insurance company may save you money.

Signing the contract

While some dealers may write a three-day cancellation into your contract, there is no blanket three-day cancellation rule (unless your purchase falls within the door-to-door rule because you received a promotion to go in for a test drive). Once you sign the contract, you are legally bound to buy the car unless the contract specifically states any options to cancel, so it is imperative that you read and understand everything before signing.

Make sure all the features you want are listed on the order and pay attention to any extras or fees. The dealer may offer you extras such as rustproofing, fabric protection, and paint sealant. Make sure you weigh the added expense for such items against their necessity. Dealer preparation fees, such as for cleaning the car before you pick it up, may also be charged. Check the window sticker of the car. If the fine print reads, "Total vehicle price includes manufacturer's recommended pre-delivery service," or "Manufacturer's suggested retail price of this model includes dealer preparation," the preparation fees have already been charged. A document preparation fee may also be charged. Remember, this may not be a mandatory fee and may be considered part of the negotiable final price.

If a clause concerns you, ask to have it explained or changed. Double-check all the figures to make sure they are what you agreed to. Make sure there are no blank spaces on the contract and all verbal agreements are in writing in the contract, as oral promises may not be enforceable.

At the time of the purchase, make sure you take with you the bill of sale, purchase agreement, loan agreement, and registration papers. Make sure all guarantees, warranties, or service contracts are in writing and that you understand them. If there is a deposit due at signing, ask whether it is refundable and under what circumstances, and be sure that is spelled out in the contract.

Before you drive away

Before you sign any final papers and drive away from the dealership in your new car, take a few minutes to inspect it carefully.

Check over the exterior of the car for any damage, such as "dings" or scratches. Look for a glossy and even finish and check that body panels are aligned evenly and the trim is secure.

Confirm that the spare tire and equipment are where they should be, that the tire is inflated to manufacturer specifications, and that all the hubcaps and body moldings are in place. Ask the salesperson to demonstrate each accessory -- such as setting the clock or turning on the bright lights. Also, ask how to check the oil, coolant, transmission fluid, and battery. Check that all electrical items function properly and take the car for a quick test drive.

Check the Vehicle Identification Number on the car to ensure it matches the one on the contract. Make sure you have the owner's manual, warranty forms, and all legal documents.

After the sale

Be sure to keep all of your paperwork for the vehicle, including the warranty and loan papers, in a safe place.

Maintain a file of every repair order, receipt, and letter of complaint. There is no rule that you can return a car within 30 days if you are unsatisfied, but if your car needs constant repairs from the time you buy it, you may have some recourse.

In the United States, you may be protected by "lemon laws" in your state. You can contact your state's Attorney General's office to find out about the law where you live. BBB Auto Line also has information on the lemon laws in each state, as well as a dispute resolution program to help you with your lemon law complaint.  

In Canada, there are no 'lemon laws,' but purchasers of new and late model cars can access CAMVAP – the Canadian Motor Vehicle Arbitration Plan. You can find more information about qualifications and exclusions for this binding arbitration program. 

For more information

See the BBB Auto Resources page.

Find new car dealers near you.

Always look for businesses that follow BBB Accreditation Standards and BBB Standards for Trust.