16 Things You Should Know If You're Thinking About Buying A Car (Especially During The Pandemic)

For starters, don't rush into it.

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Buying a car is a big decision that can feel overwhelming at times. Should you buy new or used? Purchase from a dealer or a neighbor? And, perhaps most importantly, how big of a car payment can you actually afford?

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These questions are a sure sign of adulting. While buying a car might be complicated at times, it doesn't have to totally suck — and knowing the ins and outs of the car-buying process can certainly help.

So, to make things a little easier, I gathered some expert tips and bits of advice that'll help you feel like a car-buying pro (even if you've never stepped on the lot before).

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To get the skinny, I chatted with Jeff Rose, a certified financial planner and Avis Car Sales spokesperson who knows a thing or two about how to make buying a car a smart financial decision.

Just keep in mind that this advice isn't one-size-fits-all, so take it with a grain of salt and keep your current financial situation top of mind.

Here are 16 helpful things you should know if you want to buy a car without breaking the bank:

1. New car prices are on the rise, but there are still deals to be had.

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People aren’t traveling or going out to eat, but some are still buying cars — especially SUVs and trucks. And that demand has pushed the average price of a brand-new vehicle to over $40,000 for the first time ever. So, while now may not be the best time to splurge on the latest and greatest model, you might still be able to find a deal on a used car.

According to Rose, buying a used car “will save you 20–30% off the sticker price or MSRP [manufacturer's suggested retail price].” That means that just by buying used, that same $40,000 car could be priced at around $28,000 — which is still a lot of money, but any savings helps.

2. A new car isn't necessarily more reliable than a used car.

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Rose says people tell him they want to buy new because they’re looking for a reliable vehicle — an argument that Rose says just doesn’t add up.

“The justification that you need to spend 20–30% more to have ‘reliability’ — that just doesn’t work.” He adds that, when it comes to reliability, “Most [used cars] still have the original warranty from the manufacturer…and if you are saving $100 to $300 a month because you bought a used car instead of a new car, then what can that money do for you?”

3. If reliability is a major concern for you, consider a certified pre-owned car.

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If you’ve never bought a used car before, or you need a car that’s *ultra* reliable, it may make sense to search out a certified pre-owned vehicle. These cars have to pass inspection checks to ensure they’re mechanically sound. Then, they’re resold for a fraction of their original price with a factory-backed limited warranty. Dealerships and even car rental companies sell certified pre-owned cars that come fully inspected with extended warranties.

4. Then, take an honest look at your finances and come up with a budget that includes any monthly car-related expenses.

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Rose says he can’t stress enough the importance of answering this question: “How much of a car payment can you afford?” He says you need to come up with a simple budget that shows “what you have coming in and what you have going out and what you can afford on a monthly basis.” Typically, it's recommended that your car payment should stay below 10% of your take-home pay, and regular expenses — gas, maintenance, insurance — should equal another 5%.

5. Make sure you’re prepared to pay unexpected and one-off vehicle expenses, too.

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In addition to regular car-related costs like gas and insurance, don’t forget you’ll also be responsible for paying for sales tax, emissions tests, registration fees, and the title. Plus, you’ll also want to put aside money for any major maintenance your car might need along the way.

6. Check your credit report and get your credit score in line before you buy.

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Before you apply for a car loan, check your credit scores — either through one of the credit bureaus like Experian or with your bank. If your score is low, it could be worthwhile to wait to buy a car until you can get it back up or you've saved enough to buy one outright. Why? Because your credit score determines the annual percentage rate (APR) or interest rate attached to your car loan, which could impact your payments for years. If your credit score is lower, your interest rate will likely be set higher — so you might end up paying thousands more for the same car.

Rose says that knowing “where you stand with your credit score and understanding what you need to fix on your credit report” can help you out in the car-buying process because a good credit score allows you to shop around with various lenders and can be used as a bargaining tool for a low interest rate.

BTW, if you're trying to improve your credit, Experian offers a free feature called Boost that could give your FICO credit score a lil' bump by adding any eligible, on-time payments for regular bills (like utilities or your Netflix account) to your Experian credit report. It works best for people with thin credit files, but if you're looking for ways to get your credit score up, it might be worth testing out.

7. When you're ready to shop around for a car loan, make sure you understand if the rates you're being offered are actually high or low.

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Rose says that a loan with an interest rate of 3% or lower is good, while anything over 6% is on the high side. Also, keep an eye on the length of the loan. A longer loan may reduce your monthly payments, but you'll wind up paying more interest by the time you've fully paid it off than you would have with a shorter term.

8. You can also keep your monthly car payment low by putting down money upfront.

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While you can buy a car without paying any money upfront, your debt and monthly payment will be lower if you can.

“The general rule of thumb is to put down at least 20% when purchasing a new car. For a used car, it really depends on how much you can afford. You don't want to clear out your emergency fund just to lower your car payment," says Rose. "On the other hand, if you have the ability or resources to put more down so that you are not taking on more debt, then by all means, put as much cash as you can afford.”

9. And if you have a car to trade in, that can help too.

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If you have the option, trading in your old car could help you get a lower car payment on your new one. And while it’s usually easier to do the trade-in at the dealership that you’re buying your new car from, it isn't always the best option. When you trade in at the dealership, Rose says, “they'll take care of all the paperwork on your behalf, they'll also take the lead on paying off your existing loan, and you can save on sales tax since the trade-in value will be deducted from your new car's price.”

On the other hand, he warns that “the dealership most likely won't give you full market value for your trade-in.” That being said, Rose says if you’ve researched your car on Kelley Blue Book and know what it’s worth, let them know. "They will typically always balk and say that they can't do any more, but if you stand firm, you'll be surprised on where they're able to meet you.”

You'll likely make more money off your old car if you sell it yourself, but it won't be as easy as simply dropping it off at the dealer.

10. Do some research before you commit to a car loan, and shop around for the best deal.

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If you’re buying your car from a dealership, that doesn’t mean you have to finance your loan through them. Sometimes you might be able to find a lower interest rate if you borrow money from your bank or another institution.

Rose suggests car buyers “call the bank, another online vendor, and whoever you’re looking to purchase the car through” to find out who can offer you the lowest interest rate and loan terms.

11. Make sure you understand how your monthly car payment is calculated — then figure out the total amount you’ll pay when all is said and done.

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If you haven't bought a car before, chances are you've never really thought about how that monthly car payment is calculated. A monthly car payment is made up of three things: the loan amount, the interest rate, and the loan term.

Rose warns that while it can be easy to just look at the monthly payment, you should “really focus on how much you’re going to be paying for this car for the life of the loan.” For example, signing up for a loan with a high interest rate or a long term (number of years) will drive up the total amount you end up paying for the car.

12. Remember, it's really, really important to only commit to a car payment you can afford. If you miss a payment, you’ll be hit with fees. And if you miss several, your car could be repossessed.

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You might really want (or think you need) that fancy ride, but if you aren’t 100% positive you can cover the monthly payments for the duration of the loan, you might want to look at a different model.

Rose says, “Whether you intentionally missed a car payment or not, it can have a negative impact on your financial health. You most likely have to deal with late fees, a negative impact on your credit score, and potentially an increase in your loan rate.” In addition, he notes that if you miss more than one payment, your car could be repossessed.

13. If you can afford it, buying a car upfront is usually less expensive than taking out a loan.

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Buying a car upfront and in full isn’t doable for everyone, but if you can afford it, it can be a smart option. And it might be more doable than you think if you're willing to settle for an older car with more miles. One big perk of buying a car outright is you don’t have to pay interest. So if a car is priced at $10,000, you only pay $10,000 — not an additional 4% interest every year for five years (or whatever the loan terms are).

Rose notes that, “The longer you drive it, the less it costs, which is also why selecting a well-maintained and cared for vehicle to start is so important.”

14. Before you step on the lot (or look for a car online), come up with a car wish list.

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Since buying a car is such a big decision, it's a good idea to get clear on what you really need in a vehicle. For some, non-negotiables may be a high safety rating, low gas mileage, a hybrid motor, or a low number of miles (if you’re buying used). For others, it may be the fancy extras — like DVD players in the back.

“I know for us, as a family of six, when we bought my wife’s used car — a [GMC] Yukon — we were like, we’ve gotta have DVD players. That was a requirement,” said Rose. So it helps to figure out exactly what you want to have in your dream car before you talk to a seller.

15. And if you're buying a used car, check it out on Kelley Blue Book and ask for the Carfax report. If you're buying a car off a site like Craigslist (or direct from the owner), you might want to have a mechanic check it out before you commit.

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When Rose buys a used car, he says, “I'll just request the Carfax so I can see if there's anything with the vehicle that I need to know. I'll also want to do a quick search on the Kelley Blue Book value.” Kelley Blue Book is a car valuation and research company that tracks auto prices, and Carfax reports give you a detailed record of a used car's history, including past accidents.

If you’re buying a car directly from the seller or one that isn't certified pre-owned, make sure to get it checked out by a mechanic you know and trust. They’ll be able to let you know if they notice anything off or foresee any big fixes in the near future.

16. And if you're worried about safety while car shopping, you might be able to go through the entire car-buying process — including the test drive — contact free.

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Yep, you read that right. Rose says that “you can apply, get approved, and receive the documentation in the mail, making the transaction contactless, easy, and safer.”

Due to the pandemic, some traditional dealerships are offering contactless test drives and more online assistance, and some might even bring the car to your door and sanitize it before you take it for a spin. But if you plan to trade in your old car, you may still have to go down to a dealership and handle that transaction at their office. If you think you'll need to go in to a dealer, make an appointment in advance to reserve a safer time to shop.

What's helped you save money when buying a car? Share your tips in the comments below, and check out more of our personal finance posts.