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Key takeaways
- Plan for the total costs of car ownership.
- Choose a vehicle that meets your daily needs.
- Get preapproved, negotiate the car’s price and review the paperwork.
More than 90% of American households have at least one vehicle, according to the Bureau of Transportation Statistics, but the car-buying process is often considered harrowing. Knowing what to expect can help you save money and feel less stressed.
1. Clarify your budget and funding needs
Determine how much you can comfortably spend before you start shopping. The average new-car price hit an all-time high in July 2026, passing $52,000, according to Automotive News and Catalyst IQ. This is due in part to automakers focusing on higher-end models and discontinuing less expensive vehicles.
If you plan to get an auto loan, putting money down and avoiding long repayment terms can help keep your finances healthy.
“We recommend putting at least 15% down when you buy a vehicle, 20% to 25% if you can afford it,” said Keith Barry, senior autos reporter for Consumer Reports. “Avoid 84- or 96-month loans. While they might mean lower monthly payments, you'll pay significantly more in interest overall.”
Use online calculators to run different scenarios. Some calculators help you consider total ownership costs, including insurance, fuel, taxes, maintenance and repairs.
2. Determine your preferred vehicle type
Before falling in love with a fancy red sports car, consider how you’ll use the vehicle most of the time. Do you want a daily commuter for the city or a farm truck? Either way, the car should meet your needs.
It doesn’t have to meet all your needs all the time, however.
“I have two kids, so I have two enormous car seats,” said Joseph Yoon, consumer insights analyst at Edmunds. “Whenever we visit my mother-in-law or she visits us, we have to take two cars to go anywhere. It feels so inconvenient in the moment, but it’s for two days out of the year.”
Instead of buying a large SUV for the sake of the annual family vacation, consider a smaller one that satisfies your daily needs and use two vehicles on the rare trip or rent a big car once a year.
3. Compare lenders and get preapproved
Don’t rely only on a dealership for financing. Dealers often recommend the loans that benefit them the most. Lenders might pay “finder fees” to dealers or let them mark up your annual percentage rate (APR) and take the difference as profit.
“Shop around beforehand and have something to compare the dealer's offer against. You could save yourself a lot of money or at least rest easy knowing that you're not overpaying,” Barry advised.
See what your bank and local credit union offer, review the best auto loan rates and get at least two preapprovals from the lenders of your choice.
4. Begin your shopping experience online
See what’s available online before you visit a dealership. In general, the three factors you can change in your search that affect a car’s price are its size, age and features.
Larger and newer cars have more features and are more expensive. If you want a hybrid vehicle but new ones are too pricey, look for a smaller or older model. You can find safety ratings from the National Highway Traffic Safety Administration and reliability ratings from Consumer Reports and Kelley Blue Book once you have a couple of cars in mind.
Starting online also lessens in-person sales pressure. You can conduct research at your convenience and talk with a partner, friend or family member. If you're comfortable with the idea, see whether anyone in your network is selling a car or check websites where individuals list vehicles.
“You can usually get a better price if you buy a car directly from its owner,” Barry said. “Dealerships typically tack on hundreds of dollars in dealer fees, negotiable/optional add-ons and nonnegotiable fees that wouldn’t apply in a private sale.”
The caveat is that you’ll likely want to know how to look over a car (or take someone who does) to ensure everything is in working order. You’ll also need to do all of the legwork to find, complete and submit the paperwork. When you purchase from a dealership, the dealer will do all of this for you—for a fee. The median dealer documentation fee ranges from $75 to $899, depending on your state, according to Edmunds.
5. Test drive, inspect and choose your favorite
Visit a dealership or contact a private seller when you’re ready to see a car in person.
Avoid going to a private seller’s home driveway. A public parking lot is more neutral ground. Meeting at a bank can be ideal since it likely has good lighting and security cameras. You might also take advantage of notarization services, and the seller could immediately cash a check. If you’re financing the vehicle, compare private-party auto loans beforehand.
While test driving, put the car through its paces. Try braking hard in the parking lot, and accelerating fast on the highway on-ramp to get up to the legal speed.
“Listen for any unusual squeaks or rattles. Pay attention to how the brakes feel and how smoothly the vehicle accelerates. Also, check for any musty odors, as that's a sign that the car might have been involved in a flood,” Barry said.
6. Negotiate your financing details
You potentially have three numbers to negotiate when buying a car: the price of the vehicle, the value of your trade-in and your auto loan rate. Dealers often focus on the payment because they find it easier to convince you to purchase extras, including extended warranties, when you look at monthly cost.
The average monthly payment is $770 for a new car and $531 for a used one in early 2026, according to Experian.
Research values on Kelley Blue Book and J.D. Power to ensure you get good prices on the vehicle and trade-in. You can also see what the same or similar models go for at other dealerships.
For the loan, ask the dealership to beat your preapproval. Dealers typically have huge financing networks and might find a lower APR for you. Especially if you buy a new car, dealers have access to promotional rates from automakers. Having a preapproval is vital, however. Knowing the rate you can get directly from a lender means the salesperson or finance manager likely won’t be able to mark up your APR.
7. Sign the contract to complete the purchase
When buying from an individual seller, you’ll likely need them to sign over the title. You also might have to print out, sign and file the documents for the transfer of ownership based on where you live.
The person guiding you through the paperwork at a dealership is typically a manager in the finance and insurance (F&I) department. You won’t need to find, print or file the documents yourself, but you should review them before signing. The F&I manager will probably try to sell add-ons, such as warranties and service plans.
A common sales tactic is to welcome you into the office and say: “Congratulations! They were able to get the monthly payment you wanted, and it includes a three-year warranty. Sign here.” Even if you are tired after test driving and making a decision and want to go home, request an itemized breakdown first. You could end up buying a $2,500 add-on without realizing it otherwise.
Once you’re happy with the numbers, from the total price to the monthly payment, sign your name and enjoy your car.
