Ultimate Car Buying Guide – How to Save Money on Your New Car Purchase!

Time has come to buy your car. Below I will share my personal experience on how to get the best possible deal on your purchase. There might be other strategies but below is something that I always do myself and so far, it has yielded best results. 

Now this is a purchase guide, lease guide is similar, but I will write about it later on. Another call out is that this guide is for a brand-new car purchase. 

There are a lot of opinions on whether you should buy a new or used car. Most people will advise to buy a used car. My personal preference is a new car, I know that I am losing on the car value and it depreciates significantly first few years, but I prefer new reliable car with warranty and no headache that won’t give up on me in the morning when I need to rush to my job. 

See with the car purchase in order to get the best possible deal all planets need to align, however it’s not as difficult as it might sound, but you have to do your homework. 

Know what you want

There is nothing wrong in test driving multiple cars to figure out which one you like the most, but after you are done with test driving you need to make your choice and stick to it. You need to know which make, model, color and options you want in your car. I cannot stress how this seemingly minor step is important. Let’s say you do your research, know the price you want to pay for the car, know your budget etc. You walk into a dealership and all of the sudden dealer is offering you another option and you agree… By doing so you have just surrendered, remember you only did a research on the car that you wanted to buy. You don’t know anything about the car you are being offered. 

Know your insurance costs

You need to know if your insurance costs will increase and whether you can afford those additional payments. It’s easy to check though, find a car with the options you want to buy in the internet and call your insurance agent or insurance company. Tell them that you are considering buying a new car and give them the VIN number of the car you found. The insurance company will provide you with a quote. This will give you an idea of your new premiums.  

Know your trade in price

One of the areas where dealers will make money is on your trade in. So, while they might give up something on the price of a new car, they will low ball you on your trade in. Of course, you can check your vehicle price on KBB to give you an idea, but unless you are a tough negotiator, it’s quite rare that you get a full KBB value. So instead take your car to Carmax and you will get an offer that is valid for 7 days. This will give you a bargaining power with dealer. If they match or beat the offer from Carmax you are in a good spot, if not you can sell to Carmax and bring cash to the dealership. 

There are few other companies that can buy/appraise your car: 





I have not used any of the services above, however I always use the Carmax service.  

Total Cost of Ownership (depreciation/service)

Its important to know the total cost of ownership of your car. This will give you an idea of the depreciation of the car, cost of maintenance and approximate price you can get for it after 5 years. You can check the cost of ownership of the car at www.kbb.com

Now, unless you really like the car you want to get and it’s an emotional purchase, forget about this step. 

Know you Budget and Car Price

One question that the dealer will ask you is what kind of monthly payment are you looking for? If give the number to the dealer they will play around with your loan terms and will meet the number, however they will not do anything to the car price. That’s not your goal, you should not shop by car payment you should shop by the price you want to pay for something. There are few good places to figure out what is a fair price for your car such as www.edmunds.com or www.carsdirect.com

Once you find out the car invoice price use one of the loan calculators online or on your phone to estimate your monthly payments. You can google interest rate and just take an average. This will give you an approximate idea. 

Remember, you need to negotiate your price and not the monthly payment!

Look for extra discounts and promotions

If you are working in a big company chances are that they are part of the special pricing programs that the manufacturers are offering or they offer discount. My company has multiple programs with multiple manufacturers, so I negotiated a price I wanted to pay and on top of it used the additional discount the manufacturer was offering through partnership with my company. 

Always check manufacturers website. You might come by 0% auto loan or 0.9%. Those are good deals. You will save a lot by getting this deal. You will also see if they offer any additional discounts in the form of brand loyalty discount, recent graduate program etc. 

Arrange financing in advance

Just like with your trade in its of utmost importance to get your financing in advance. It will give you an idea of what is a good vs best offer. See, the dealers make money by marking up the interest they the interest that they give you from their financing partner or through a kick back they are getting from the bank. So, it’s not in the interest of the dealership to give you the best financing offer they get from their partners, rather than the one where they will make a profit. 

Thus, if you can apply for a loan online or through your credit union (they will usually offer the best rate). You know what’s the interest rate you can get. If a dealer offers you a lower rate you are saving money! If the dealer offers you a higher rate, ask them to match or beat the rate that you got! 

Remember, dealerships make most of their money not from the sale of the new car, but through the sale of other add ons, such as extended warranty, financing, gap insurance, prepaid maintenance plans etc. 

Applications / Car buying Services 

There are a lot of services that offer you to buy a car at a fair (cheap) price. One of the services I always used is Truecar. But even though they do offer a good price on your next car they are not always the best. If you hate negotiating and it’s not for you, you can use this service and you get a good deal. But if you like negotiating you can use the service as a benchmark for a price. 

I don’t know if you know but BJ’s and Costco do offer car buying at a discount. It’s a good idea to check what price can you get through them. 

If you have American Express credit card, they also can give you a discounted price. 

CarGurus is relatively new service but they offer good analytics that show if you are getting a good deal.

To make sure you are getting a good deal, I would use some of these services to get an idea of an excellent car price you might get. Then I would contact dealerships within reasonable distance (its different for everyone) and contact them to see if they could beat the price. 

Consider buying an older model

Let’s say you are looking for a new car in 2020. What you don’t know is that you can get a previous year model a bit cheaper. So if there are no major changes in the model and or there is no particular option you are looking for, I would suggest at looking at the previous year models. 

These are new cars that the dealer did not manage to sell. They are still under warranty. Because most of the time dealers finance the car inventory, they sell they are paying interest on the loans. Thus, they want to get rid of that inventory. 

Avoid extras

Its really personal decision, I can not tell you one way or another, avoid these extras or buy. I typically avoid, you might want to negotiate and get a better price, but I think it would make sense to purchase these extras by paying cash and not financing it to avoid interest. 

GAP insurance – GAP insurance covers the difference in case your car was totaled between the amount you owe and the amount your insurance paid your lender. If your car is totaled and you owe more than the insurance paid, GAP will kick in. If you buy this remember you can cancel it by calling your dealership and getting back part of your money. 

Extended Warranty – extended warranty provides additional warranty when your main warranty expires. Depending on how long you are going to keep your car, you can make a decision whether to buy it or not. If you decide to buy it make sure its from manufacturer/financing company. I would go with a private label. Always negotiate!

Prepaid Maintenance – this one might actually make sense if you plan to do factory maintenance with your dealership. Basically, you are preparing for the maintenance of your car and get a discounted price. 

Others – dealerships have multiple programs they want you to buy. Most of the time its waste of your money. But you are decision maker. 

Whatever you end up doing with these extras, whether purchasing these or not do three things: 

  1. Don’t be afraid to say no – you will be under immense pressure to purchase these extras
  2. Negotiate – try bringing the price down
  3. If you buy – buy in cash don’t finance. 


Timing of your purchase is important, as the right timing gives you an extra bargaining leverage: 

  1. End of Quarters – not the best time, but still better than weekends. Car dealerships have sales targets to hit so they will be pressured to close the deals by end of the quarters. 
  2. Black Friday – by this time the car dealerships will know whether they are hitting their annual goals or not and you have a holiday and people want to spend their money. 
  3. December – end of the year, again it’s all about meeting the sales targets and employee bonuses. Try buying a car a day before Christmas or few days before New Year. You will get the best possible deal. 

Of course, I understand that life happens and you might not be able to time your purchase perfectly. In this case try buying your car during weekday and end of the month. 

Dealership fees you can negotiate

Dealership will charge you multiple fees, some of those they have a right and are regulated, some of them are a rip off. 

Instead of listing all the fees dealerships can come up with, its easier to list the fees that you need to pay.

Doc Fee – the fees required to get the car prepared for sale (documents). You will not be able escape, but these fees are regulated in some states which impose upper limit. So, it’s worth researching and comparing around. Different dealerships charge different fees and they differ across the state. 

Sales Tax – you need to pay your state sales tax on the vehicle. 

Vehicle Registration fees – these are the fees you need to pay to register your vehicle in your State. 


The moment the dealerships get hold of your phone number and email they will start bombarding you with messages. Please: 

  1. Don’t fall under the pressure to make a decision
  2. You don’t owe anything to anyone
  3. Take your time to analyze the deals and go with the best one

The key here is not fall victim of this tornado of the communication you will start getting. Reply when you are ready. Or better yet make them work for your deal. Tell them what other dealerships are offering you and see if they can beat it. 

Final Thoughts… 

Try to incorporate if not all at least some of the advice I provided above to get the best possible deal on your purchase. Whatever you do, make sure you don’t bend under the sales techniques and pressure from various dealers. After the sale is done, no one will remember your name and no one will care much. I am saying this because most of the time what I see is immigrants are too shy or intimidated to speak up and can be taken advantage of. You worked hard for your money, so spend it wisely!

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