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Depending on your situation, you may have to follow some of these steps out of order or at the same time. What’s important is that you consider each one and prepare as much as you can before signing on the dotted line.

  1. Figure out how much you can afford

Take a hard look at your budget and figure out the answers to some key questions. Ask yourself:

  • How much can I get for my trade-in?
  • Do I have enough for a down payment?
  • How much is a monthly payment I can afford?
  • How is my credit?
  • How much do I need for taxes and registration?

Unless you’re paying cash, your budget for a new car probably affects your monthly payment. Each monthly payment is a combination of interest, fees, and your principal debt. Once it comes time to buy, you want to pay as little as possible over the long term.

  1. Pre-qualify for a car loan

If you’re financing your next vehicle purchase, the smart play is often to get pre-qualified or pre-approved for auto financing through a bank, credit union, or online lender before you start shopping.

Pre-qualification is usually less intensive. Think of pre-qualification as an estimate of what type of loan you may qualify for. Getting pre-approval is a more thorough process.

  1. Research cars

It’s smart to figure out what vehicles you’re interested in before you start shopping. Think about your needs and consider how you prioritize things like:

  • Vehicle configuration
  • Passenger capacity
  • Performance specs
  • Safety ratings
  • Reliability scores
  • Available features

Once you have an idea of what you’re looking for, start by checking dealers’ inventories and online car buying sites to find the right one for you.

  1. Compare prices

Comparing actual vehicle prices is a safe way to make sure you’re getting a good deal, and it can also help you set expectations for car values in your area.

These comparisons can even help you when it’s time to negotiate the price of a car later.

  1. Go for a test drive

Getting your hands on the wheel of a new car is crucial to knowing if it’s the right one for you.

Many online car buying sites now offer extended trial periods where you can return your new vehicle if you don’t like the way it drives.

Here’s a quick checklist of what to evaluate during a test drive:

  • Comfort
  • Ergonomics
  • Acceleration
  • Steering
  • Handling
  • Braking
  • Visibility
  • Noise

While you’re at it, try out all of the features you can and inspect the vehicle to look for any defects or damage.

  1. Sell or trade in your current vehicle

If you’re buying a new car, you probably want to either sell or trade in your existing ride:

  • Selling your car privately often gets you more money, but it’s a more involved process.
  • Trading in a car at your dealership is a much simpler process, and can be used towards your new car and could qualify you for discounts.
  1. Get your insurance ready

Each state sets its minimum insurance requirements, but it is recommended to go with a stronger policy than what is required.

  1. Seal the deal

Before you make it official, verify the terms of the contract you’re about to sign. It can be intimidating, but this last step might matter the most.

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