How to Buy a New Car in 5 Steps

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When it’s time to get new wheels, it’s helpful to know the best way to go about it. Getting it right is important when you consider that automobiles are the second biggest expense in most people’s lives, right after what you pay for housing.

In this article, we’ll look at five key steps you need to take in order to pick the right vehicle, get the best auto loan and secure the best price for your new car.

How to Buy a New Car in 5 Steps

  1. Prequalify for a Car Loan
  2. Begin Your Research
  3. Get Instant Price Quotes Online
  4. Do a Rental Test Drive
  5. Close the Deal

Before we go any further, money expert Clark Howard wants you to know that getting into heavy debt for new wheels doesn’t have to be a given in life: It’s a choice you make — and one you can avoid.

Understand that if you buy a new vehicle, you’re going to have to eat the cost of depreciation. For this reason, Clark recommends keeping new vehicles a minimum of 10 years once you buy them.

Team Clark can show you the best way to buy a new car. Our expertise is based on decades of working with people who’ve had both good and bad experiences buying new cars. Our process can make the car-buying experience as painless as possible.

With that in mind, here’s how to buy a new car:

1. Pre-Qualify for a Car Loan

The first step is to see if you can pre-qualify for a car loan through a credit union or online bank.

By doing this, you’ll know how much car you can afford before you start shopping. You’ll also know what type of monthly payment you will have to include in your budget.

We can’t stress it enough: This is a critical first step! It helps you know what your parameters are before you fall in love with a ride that’s just too expensive for you.

You’ll also want to heed this warning from Clark:


“If you cannot afford the payment per month on a 42-month loan, you’re buying more vehicle than you can afford. Taking out a longer loan to get a more affordable payment is a big, fat warning that you’re hurting yourself, harming your finances and limiting your options in life.”

Keep in mind that dealers will typically mark up a loan by 1% to 2% on the average car purchase if you don’t prearrange your financing elsewhere. That’s why Clark recommends so strongly that you secure financing on your own when you’re looking for the best way to buy a new car.

2. Begin Your Research

Next, for each of the vehicles that you’re considering, you’ll want to check out the price of the car, its reliability and the cost to insure it.

The annual April auto issue from Consumer Reports has a list of recommended new car buys. This should be one of the first resources you check.

Clark also puts a lot of faith in the annual new car reliability study from Consumer Reports.

For 2020, Lexus, Mazda and Toyota each have three entries in the Top 10. You can see other makes and models that are flagged for reliability (or lack thereof) here.

Finally, when it comes to determining the cost of insuring a new vehicle, most big insurance companies make auto insurance coverage calculators available on their websites. That way you can start to get an idea of what you’ll pay to protect your potential new wheels.

You should factor in the cost of insurance when you are looking at what you’ll pay monthly to drive your car.

3. Get Instant Price Quotes Online

Now that you’ve narrowed your search to one or two vehicles and have the approximate cost of ownership for each, you should shop online for instant price quotes.

Compare quotes from the following sites to see if any deals stick out:

If you prefer not to buy online, you can still use the online price quotes as a guideline. Then call around to local dealers to see if they’ll match the price.


You can also avoid dealing with salespeople in person by emailing the internet department at a dealership and negotiating with them over the computer.

Here’s another option to consider: Costco has a car-buying program with pricing that has already been negotiated. In many cases, you’ll save money doing it this way, plus the process of buying will be faster and easier because there’s no bargaining. You might want to check out the Sam’s Club car-buying program too.

4. Do a Rental Test Drive

Next, remember that it’s important for you to feel comfortable with what’s going to be a very large purchase. One way to do this is to look at cars when a dealership is closed, so there’s no salesperson to pressure you. Another way is to set up your own zero-pressure test drive:

“The best way to test drive a car is to rent it for a day or two,” Clark says. “That’s the ultimate test drive.”

Whatever you do, don’t skip this step. It’s an important part of learning the best way to buy a new car — especially if you are going through a lot of the process online.

5. Close the Deal

You’ve almost crossed the finish line!

When you get to the dealership to sign the paperwork, make sure that what you read in the purchase agreement is the same thing you’ve agreed to previously by phone or email.

If it’s not the same, do not go through with the deal. The best way to protect yourself in a dealership is to be willing to walk out. With that in mind, let’s wrap up the loose ends:

Check your financing one last time. If the dealership can beat the lowest financing rate you’ve secured on your own and all the other loan terms are the same, go with the dealer’s financing.

Consider skipping the extended warranty. Cars are built so much more reliably today than they were a generation ago, so you should be able to skip buying the extended warranty. But we realize not everyone feels comfortable doing this.

Here’s Clark’s thinking on the question of extended auto warranties:

  • If you can afford the potential cost of car repairs, you should never buy an extended warranty.
  • If you can’t afford them, you may want to consider buying the vehicle manufacturer’s warranty.
  • Never buy an extended auto warranty from a third party. If trouble happens, the manufacturer is probably going to be there to stand behind its warranty. A third-party company may not.

Watch out for last-minute junk fees. These so-called “packs” can include phony add-on fees for documents, vehicle etching, fabric treatments and things of that nature. It may sound silly, but you could be charged $300 or more just for paperwork or for the dealership spraying some stuff on your car seats. Push back on anything that seems outrageous and ask to have it removed.

Final Thought

Clark’s systematic approach to buying a new car puts the power back in your hands as a consumer — not the dealership’s.

And remember that this is a big purchase. If you buy a new vehicle, he wants you to keep it for at least 10 years.

If you’re not convinced that you’re ready to pull the trigger on a new car, you may be interested in checking out our How to Buy a Used Car in 7 Steps.

Want even more info about how to buy a new car? Listen to Clark discuss the car-buying process on The Clark Howard Show podcast.

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