New Car, First Car
If you’ve decided that your first car will be a brand new car, there are things you need to know about the buying and financing process that makes it different from buying a used car.
New cars – only from dealers
All new cars must be purchased from state-licensed and manufacturer-authorized new-car dealers. It’s the law. It’s the only way you can buy a new car.
If a car has never been titled or registered, it’s considered to be a new car. Even if you initiate your purchase through an Internet car buying service, or through a buying service at warehouse stores such as Sam’s Club, the car actually comes from a local new-car dealer.
New car pricing
New cars always have a sticker in the window (it’s the law) showing the particulars about the vehicle, including estimated gas mileage, options, features, and MSRP (Manufacturer’s Suggested Retail Price).
MSRP is the “retail” price that is almost always discounted, except for vehicles in short supply and high demand. Very few car buyers pay full retail price. New cars frequently have manufacturer-sponsored discounts, rebates and low-interest financing deals. These are called incentives. You can get online price quotes from services such as Edmunds.com. These prices are already discounted by local dealers and contain any current incentives.
Then there is “invoice price” which is the wholesale price dealers pay, and which you should know when buying a new car. See What to Pay for Your New Car for more details.
The new-car buying process
After deciding on the new car you want, you’ll settle on a price with a dealer salesperson or sales manager. You’ll sign a purchase agreement that specifies the price, other costs, fees, and taxes. If you have a trade-in vehicle, the agreement will show the trade credit you’re receiving. If you’re still paying off your loan on the old vehicle, your agreement form will show that amount as well (see Trade-in Process – How It Works). You will also sign an odometer statement certifying that the displayed mileage on your old car is correct and that you haven’t tampered with the odometer.
About your credit – it is important
Dealers often check customers’ credit rating to weed out those who can’t afford to buy or lease. But it’s the finance company who will do a more thorough credit check and make the final decision on your loan or lease approval.
If you don’t know your most recent credit score, you can get it from Experian where you can see your latest score online. What’s your FICO score? Find out now when you check your credit report for $1 at Experian.com!
The F&I guy
You’ll visit the dealer’s Finance and Insurance (F&I) manager’s office where you’ll finalize your purchase. The F&I manager is responsible not only for getting your paperwork done but to also try to sell you on extended warranties, service plans, paint sealant, fabric protectant, window etchings, security systems, credit insurance, disability insurance, and a host of other products or services that make the dealer more profit. Most such add-on products and services should be avoided.
Buying with a loan
If you’re buying with a loan, the agreement will show your loan terms, down payment, interest rate, monthly payment amount, and total costs. You may also sign a bailment agreement that essentially says that the dealer will arrange your loan financing for you with a finance company or bank of his choosing, and that if the finance company won’t approve your loan, that you must return your vehicle or arrange other terms.
Get auto insurance
Arrange with an insurance company before you buy. Then on the day you buy, call the insuance company and give them the vehicle information they need to complete your policy. If you don’t yet have insurance, see the article, How to Buy Car Insurance.
In most states, you’ll also be asked for proof of insurance and supply a photo ID. You might be asked to complete a registration and tag application form as well. State and local laws may require you to sign other forms that are unique to your area.
Out the door
You’ll write a check for your down payment, taxes, and other fees that are required to paid up-front. You’ll turn over keys to your trade vehicle. You’ll probably be given a brief lesson in operating your vehicle, an explanation of the dealer’s service facilities, a set of owner’s manuals, and your keys. The salesperson will also explain how you’ll be receiving a satisfaction survey from the car manufacturer, and that it’s important that you complete and return it – with a perfect score, or course, for the dealership and salesperson.