How to Buy a Car: 5 Basic Steps


We’ve mentioned before that we’ve made every effort to buy our cars with cash. And I can say cars (with an “s”) because we’ve bought two cars and two scooters in our six years of marriage, thankyouverymuch. Pretty much car buying experts here, folks. You should see us at parties. If we so much as hear the mention of “cars” or “buying” in the same sentence, Johnny’s all like, “Let me tell you everything I know about buying cars because I’ve bought two in six years!” and I’m all like, “Oh hey, new best friend, I eat car salesmen for breakfast!” Talk about a dynamic duo. It’s a huge hit every time.

Okay, so maybe we don’t do that at parties. And, okay, we’re not experts. Not even close. But we do take car buying rather seriously. I mean, it’s the most money we’ve ever spent on one thing ever. And so when we bought our cars, we narrowed down the process to five fundamental steps. One of these steps by itself would help point us in the right direction. But combining all of them helped us safeguard our car buying decision so that we were sure to make a good choice — despite being total noobs.

So if you’re in the market for a car (aren’t we all sooner or later?), here are five steps to help you through the process.

  1. Know what you can afford. Decide how much you are going to spend (out the door) before you even begin looking. Johnny and I decide on our budget first and foremost because we don’t trust ourselves to keep cool budgeting heads later in the process.  It’s easy to see a nicer car than we had originally anticipated and and to let our emotions run wild. But if we have an out-the-door price (car + sales tax, DMV fees, doc fees) in mind, it helps us to not even entertain the idea of cars out of that range.
  2. Narrow your search to three makes and models. First, decide what kind of car you need. Will you be using it to commute? To haul around three dirt-stained little boys? To drive in the snow? All three of those things? Once again, logic — not emotion or what the Jones’s are driving — should take precedence. Once Johnny and I have made this decision (and realized, begrudgingly, that at some point the answer might be a minivan), we narrow it down to three makes and models. How how do we do that? Well, it partly depends on looks. We all want a pretty car, right? But we mostly check which makes and models have good reliability and good value by checking consumer reports. We try to think in terms of lifetime value and cost, not just the upfront cost. Getting a car that’s cheap upfront but is known for being unreliable over time is probably not a wise choice. And I know I’m preaching to the choir here, but used cars are always a better financial choice than brand new cars.
  3. Find out what you should be paying. So you’ve decided what car you want. Now’s the time to see what you should be paying for it versus what the dealer or owner is asking. Johnny and I use a few different sites to determine the value of a car: Clearbook, Edmunds, and Kelley Blue Book. Many different aspects of a car affect what it’s worth: the condition, the extra features and upgrades, whether it’s for sale by owner or by dealer, and so forth. Buying a car is no small purchase, and knowing that the cars we buy are actually worth what we’re paying, gives Johnny and me a lot of peace of mind.
  4. Check the car’s history. If the price of a car looks like it’s too good to be true, it probably is. More than likely that car has been in some sort of major accident or flood, and it has a salvaged title. Johnny and I have made sure to get a get a vehicle history report with both of our car (and scooter — don’t forget those!) purchases. Knowing where a car has been driven or whether it was a fleet vehicle are biggies. And the biggest, of course, is the accident history. Also, knowing whether it’s had routine maintenance is another way to ensure it was taken good care of by previous owners. If you buy from a dealer, they should have a free vehicle history report for you. If you’re buying from a private owner, demand that they print off a Carfax for you to see.
  5. Pay with cash. The last but most certainly not least step is to pay with cash if it all possible (although, obviously, some people’s individual circumstances warrant getting a loan). When Johnny and I bought our current car just over a year ago, the dealer was so put off when he found out we were paying with cash. “Now why would you want to do something like that?” Admittedly, saying goodbye to a bunch of cash we’d worked long and hard to save up was not the most appealing prospect. But staying away from the Debt Monster was more appealing. And knowing none of that money was going toward paying off interest was another clincher that made us stick to our guns with paying cash.

And that, my friends, is the extent of our car buying wisdom. Now, fly, little bird. Go out and spread those little car-buying wings. Those last two sentences are my cue to end this post right. now.

How is your car-buying process similar or different from our own? Are there any other fundamentals you’d add to this list? Can anyone tell me where I can find a light pink Mary Kay Cadillac? I’m asking for a friend…

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  • Reply Travis @debtchronicles October 3, 2013 at 7:52 am

    This is timely, as we’ll be in the market for a new vehicle within the next 6-8 months. We’re trying to save up cash for it, but in the event that we DO need to take out a loan, the worst thing someone can do is tell the salesperson how much of a monthly payment they can afford. We did that once, and ended up with a 72 month loan. YUK.

    • Reply Johnny October 7, 2013 at 2:53 am

      Ugh, yuck indeed. Give those guys an inch and they’ll have you shopping Vettes and Stangs.

      Look forward to hearing about your near-future car purchase!

  • Reply Michelle October 3, 2013 at 8:25 am

    These are all great tips. Also, time for car buying if you can. If a dealership needs to meet their quarterly quota but they are not close, they will take BIG losses on cars.

  • Reply Jordann @ My Alternate Life October 3, 2013 at 8:43 am

    I love this post! It’s so great and no nonsense – while providing real advice. I bought my very first car two and a half years ago, and I learned all of this stuff through extensive googling . I had zero cash on hand and needed to get a loan, BUT I did get a used car so the loan was very reasonable, and I’ve almost paid it off already.

    I will definitely be applying these principles to my next car purchase – especially the cash part.

  • Reply Insourcelife October 3, 2013 at 9:23 am

    I bought several cars on Craigslist and saved a lot of money vs. buying from places like CarMax or used dealer lots. Also got a much better price selling cars myself on CL as well. Of course, you need to know a little bit about cars or at least have a friend who will go to check it out with you. But that’s a good idea even if you are buying used from a dealer as most of them are shady. Ebay’s “Completed Listings” is a good place to research what cars are selling for in the real world. And of course, start with buying used and try to always pay in cash. If you are taking out a loan, you can’t afford it – it’s as simple as that. I’d MUCH rather drive a 2,000 dollar beater than something with a 300 per month payment.

    Don’t forget that depreciation is what kills you, so even if you are bragging about your 0% financing you are bleeding thousands of dollars per year in depreciation being masked by that elusive new car smell. Hence, buy used!

    • Reply Johnny October 7, 2013 at 2:55 am

      Awesome tips!

      I definitely second the Craigslist route. You definitely need to be more careful, but we’ve gotten the most out of buying and selling this way.

  • Reply Jake @ Ca$h Funny October 3, 2013 at 12:14 pm

    Great advice. I’ve never really bought a car for myself so the entire process is a bit foreign to me. I for sure would follow all of the steps you mentioned above. Having the cash and a max budget are really important to me because I don’t want to spend so much that I need to take out a loan.

  • Reply Jess October 3, 2013 at 1:11 pm

    I purchased my first vehicle at age 17. I paid $2000 down from part time gig at a grocery store and paid off the remaining $3000 over a six month period. It helped to build my credit and I am so happy I am 23 and still have the same car that is totally paid off. I may need to purchase a replacement vehicle in the next year or two and I plan to do the same thing if I’m not able to completely pay in full. But I hope I can pay in cash because that would be awesome!

    • Reply Johnny October 7, 2013 at 2:57 am

      Few things have felt better in our life than paying in cash. It sucked to look at our bank account after, but the important thing was that we still had our emergency fund and most importantly, no more debt.

  • Reply Becky @ RunFunDone October 3, 2013 at 1:37 pm

    I paid $3500 for my car 8 years ago. And the thing is still running with minimal repairs. (Though, it makes weird creaky noises when I turn, and LOOKS disastrous). Some day (likely soon) it will need to be replaced. It’s been so long since I bought a car, I’m feeling uncomfortable imagining what buying will be like!

  • Reply Tara @ Streets Ahead Living October 3, 2013 at 3:54 pm

    Our ’02 Corolla has 174,000 miles and counting and as it wasn’t as well maintained as it should have been by previous owners (I’m the 4th, it is a family car) I am hoping it holds out in spite of the lack of TLC.

    As far as minivans go, you should scope out the Mazda 5. I am in love with that car as it’s a small minivan with 6 seats but still is a little sporty. It’s like a cross between a station wagon and a minivan. Even though we don’t have kids, I do drive around people and cargo a lot so I’ve already decided on that car next.

    • Reply Johnny October 7, 2013 at 3:01 am

      I’m a big fan of the Mazda 5. I have no idea what the numbers look like on it, but at first blush, that’s definitely our image of a hip minivan.

  • Reply Best of the week - October 5, 2013 October 5, 2013 at 6:00 am

    […] Back to Basics: Buying a Car […]

  • Reply Miranda October 11, 2013 at 1:16 pm

    These videos are a gold mine of car-buying info. Made me feel much more assured about going into a dealership and possible scams to watch out for…the first one is short and funny and the second is a whole series of videos from a guy who really knows his stuff…

    • Reply Johnny October 14, 2013 at 1:39 am

      Awesome! Thanks for posting these!

  • Reply Heidi October 17, 2013 at 12:28 pm

    So- not to be a party pooper but it actually is *NOT* always cheaper to buy a used car in the long run. My first car was a Ford Focus, but when I went to replace it with a Toyota Corolla the resale values were so crazy that I could buy a car brand new, or with 35-50k miles on it for the same price (weird, no?) Also, the new cars were available with 0% interest financing- which helped improve my credit score for buying my first house for free.

    My biggest tip is if you are thinking about buying a new car in the near future: I took print-outs from price listings with cars of the make and model with the options I wanted- that way when the dealer said Oh this is our starting point, I pointed out that another local dealer was a couple thousand dollars lower (and since I printed out the options that other car included, the dealer couldn’t just say their car was nicer!)

    • Reply Johnny October 24, 2013 at 1:46 am

      That’s a very fair point. Used prices are and have been fairly inflated through the recession. I was looking at Toyota Tacomas a year ago and the best deal I could find was a 2001 with 70k miles for $10,000. $10,000!!!! That’s insanity for a 10+ year old car with that amount of mileage.

      Good tips on the print outs. That would certainly eliminate a lot of the stress of haggling, too.

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