Be a Smart Shopper: How to Plan Your Car Purchase Step by Step

Of all the festive events in February, there’s one that, if taken advantage of wisely, could save you a huge chunk of money. President’s Day falls on the third Monday in February and is traditionally a popular day to buy a car. 

If you’re considering recent models, January and February are good months to buy as sales are usually slow and inventory is plentiful. Some dealerships may also offer lower prices for “leftover models” from the previous year. 

The process of buying a car, however, can be tedious and overwhelming if you’re ill-informed or indecisive on how you’re going to pay. Here's some basic knowledge of car-buying and how to avoid a few common pitfalls.

Know What You Want

First, start researching the style of vehicle you'd like and what it costs. Part of that will be deciding what additional features are important to you. Many car dealers push add-ons—tinted windows, paint protection, and anti-theft devices—because they're profitable, said Laura Adams, Safety and Education Analyst. If you're willing to pay more, or if those items are already on the car you've selected, they may be worth it. 

"But don't get talked into buying extras you don't want," Adams advised. "Ask to have them removed or negotiate for a lower price. You might call dealers to ask if they have the vehicle you're considering without any add-ons. Taking time to shop and negotiate is key for getting the best deal on a new car."

Make a Budget

Next, figure out what you can afford long-term. Be sure to account for additional costs throughout your ownership of the vehicle, such as insurance premiums, oil changes (unless you're buying electric!), regular maintenance, and unexpected repairs. There are plenty of online tools, such as's Price Comparison Tool, that can help you research vehicle types and local sales events and prices. Once you've selected a vehicle, deciding how you’ll pay is the next hurdle.

Unless you can pay for the entire price of the car in cash, you'll probably need a car loan. For this, it's important to know how much you want to spend on the car and what kind of loan period you’re looking at. Then, you’ll need to review your resulting car payments and whether that monthly cost will be something you can afford. 

There are generally at least 5 items lenders look for when deciding whether to approve a car loan: 

  1. Documented monthly income of $1,600 or more
  2. Living at the same address for at least 6 months
  3. Employed by the same company for 6 months (or if you can provide tax records for the past 2-3 years if self-employed)
  4. A minimum of 1 year of established credit with no black marks
  5. Credit score of 680 or higher to get the lowest interest rates

If you can meet these requirements, you’re off to a great start. Next, get an idea of what your monthly costs will be. Online auto loan payment calculators can help you estimate what that would be while accounting for interest costs. Take a look at that final amount: Is this something you can afford? Now, let’s look at the other costs to take into consideration.

Consider Insurance and Maintenance Costs

Unfortunately, with insurance, the driver's age is a huge deciding factor in premium prices. Young drivers usually pay on average $2,500 a year, depending on their state, which tacks on another $200 in a monthly car budget. To keep premiums at a minimum, young drivers can take a driver safety class to get a safe driver discount, keep good grades, install a car alarm, bundle up with other insurance policies, and buy a four-door car. Find out what you can do by speaking with your insurance agent.

Lastly, don’t forget maintenance costs and fuel (or power). Gas is only getting more expensive: In an average sedan with a 10-gallon tank, if gas is $5 a gallon, filling up your tank just once a week will be $50. That's yet another $200 a month to account for in your budget! Oil changes are typically about $30 but can cost half that if you do it yourself. For electric vehicles, you'll need to pay for power at home, or through charges at a station. And if you’ll happen to need a new set of tires, that can cost anywhere between $400–$600. Together, gas (or power), oil, and tires can be very costly.

Car shopping isn't just about getting the car. It's also about budgeting and smartly anticipating the expenses that will come down the road. Just remember not to bite off more than you can chew—if gas and maintenance costs are too much, consider a cheaper car.

SAVE BIG on Auto Insurance!