How To Buy a Car

Takeaways:

• Before you start car shopping, carefully assess how much car you can afford based on your budget and costs, including down payment and monthly payments if you take out an auto loan, plus ongoing insurance, fuel and maintenance costs.
• Research how you'll pay for the vehicle. If you plan to borrow money, research auto loan rates and terms.
• Affordable cars can be challenging to find due to limited supply, high loan rates and new tariffs — but deals are available for the savvy shopper. 
• Weigh must-have versus nice-to-have features when comparing options. 

Deciding to shop for a car is just the first of many decisions in the buying process. Will you buy a new or used car? An SUV with plenty of seating, a truck for hauling work materials, or a compact vehicle for easier in-city parallel parking? You'll also need to decide whether to get an auto loan or buy with cash. 

2025 Car-Buying Trends

In the first half of 2025, millions of shoppers sought new-car purchases in anticipation of tariffs, according to Cox Automotive, an automotive services and technology provider. Inventory of new and used vehicles is tight at many dealerships, which is supporting higher prices. 

The past few years made car shopping more stressful than usual for many people, as prices for new cars shot up after 2021, due to pandemic-era supply chain issues, according to the Federal Reserve Bank of St. Louis. Prices for used cars and trucks spiked 48% between March 2020 and March 2022, before declining 11% by March 2025.

In 2025, global and national news significantly influenced the car-purchase process and market due to auto tariffs or EV incentive rollbacks at the federal level. 

The process of sorting through car or truck options, figuring out what you can afford, arranging financing and negotiating can feel complicated and nerve-wracking. Here's how it works.

1. Determine Your Car Budget

Assess Your Savings

Consider how you plan to pay for your new set of wheels. First, review your savings available for a car purchase. Do you have enough money to buy a car with cash, or will you need to borrow money from a lender? How much do you have for a down payment, if you plan to take out a loan?

You may find a vehicle for a cash-only sale, but car prices have undergone significant changes since 2020. 

You'll also need to calculate your down payment for the vehicle. Crunch the numbers to see how a down payment impacts your loan costs. 

Put this new purchase in the context of your overall budget and ensure monthly payments don't put you in the red. For example, BECU's Build a Better Budget interactive tool allows you to create an initial budget to estimate how much you can safely afford.  

Your Auto Loan 

Whether you're buying a vehicle from a dealer, a private owner or off the internet, being preapproved for a loan shows the seller that you're able to buy the car. Preapproval can help you shop with confidence regarding monthly payments and total costs.

And there's some good news for car shoppers in 2025: Loan rates for new and used vehicles are slowly declining from 25-year highs, according to Cox Automotive.  

When comparing loan options, review: 

• Rates: Compare the APR offered by different lenders. A good credit rating will put you in a better position to qualify for a better interest rate. Getting quotes from lenders will likely trigger a hard credit pull, but various loan applications are considered one pull as long as they are within a 14-day to 45-day period, according to the Consumer Financial Protection Bureau, so try to keep your rate shopping within that time frame to reduce the impact on your credit.  
• Fees: Compare any fees charged by lenders for the loan. 
• Insurance requirements: Lenders may have different special insurance requirements for the vehicle, depending on the car, price or other factors.

2. Start Shopping for a Car 

Research Features and Reviews

With hundreds of brands of vehicles and thousands of models to choose from, you might not have a particular car in mind when you start shopping. 

Pricing can help limit your search. Also consider whether features are must-haves or nice-to-haves. If you spend every weekend in the Cascade Mountains, all-wheel drive can help you climb Washington's passes. Miles per gallon, or per charge for electric vehicles, and fuel type may be primary concerns for commuters. Writing down which features are essential and which are optional for you might help you stay grounded as you shop.

Car or truck details that might be important for your search include: 

• Appearance: Exterior and interior color picks, alloy wheels, a sunroof or leather-clad seats.
• Technology: Smartphone integration, premium speakers, satellite radio and navigational tools.
• Safety features: Blindspot detection, automatic safe parking or adaptive cruise control. 
• Comfort and convenience: Keyless entry, heated steering wheels and seats, power doors and liftgates. 
• Interior capacity: Seating for two, four or more — some seats may stow away for an IKEA haul or camping. 
• Age and mileage: Newer cars may still be under the manufacturer's warranty and lower mileage might help the car last longer.

Of course, regardless of the model you choose, reliability and safety are paramount. The Insurance Institute of Highway Safety conducts simulated crash tests and provides safety ratings. Reliability ratings are supplied by publications such as Consumer Reports. 

After you decide which features you need, ask for recommendations from friends or use online tools to choose your make, model and trim, or create a short list using an online search tool's filter. 

Search for Vehicles or Dealerships

Review car inventory at dealers, off the internet, from rental car agencies or through buying services. Credit union members can shop with the AutoSMART Network, an online marketplace for financing and special deals from select dealerships.

If you're sure you want a specific new car, search local manufacturer dealerships first. For used vehicles, you have more options, including online and brick-and-mortar dealers. If you buy online, you may be able to sign up for a trial period, such as seven days with the car. 

View and Test Drive Vehicles

If you visit a dealership in person, let the salespeople know you're interested and schedule a test drive to ensure your vehicle is ready when you arrive. Bring your driver's license and proof of current insurance to satisfy any potential dealership requirements for test drives. 

When inspecting used vehicles, closely examine the interior — is it free of obvious wear and tear to the upholstery, or does it smell like cigarette smoke? Also, look at the exterior. Watch for dents, scratches and any bodywork done after an accident. 

When taking the car for a drive, check to ensure the car is responsive to acceleration and braking and is properly aligned. Ensure all the vehicle's lights and equipment are in good working order. 

Get a Vehicle Inspection and Check CARFAX

When considering a used car, it's essential to ensure that your prospective ride has no deal-breaking flaws or unexpected issues. 

Take your vehicle to a reputable, independent professional mechanic who can inspect the car and identify any significant problems that could be budget-busting after you purchase it. You may even be able to use the estimated repair costs to negotiate a lower car price. 

Some dealers will offer a free CARFAX or Experian vehicle history report. This report will tell you:

• If the car has been in an accident. 
• The number of previous owners and the car's location. 
• The vehicle's history of repairs and maintenance.

The information in this report may affect your decision to keep looking or help you close the deal.

3. Buying the Car 

Get Ready to Negotiate

Whether you're buying from a dealer or a private owner, being as informed as possible can improve your negotiating position. The web is full of resources that can help. Kelley Blue Book, for example, can help determine what you can expect to pay for specific models of new and used cars.

Buyer Tactics

The best thing you can do before buying a car is to prepare. Information is priceless when negotiating with dealerships. Have a solid idea of what the vehicle you're targeting could cost at the higher and lower ends. Also compare the out-the-door total cost with fees considered.  

Other things to keep in mind:

• Get quotes from at least three dealers when buying a new car.
• Remember, almost everything is negotiable at most dealerships — right down to the floor mats.
• Set aside plenty of time for this purchase, so you aren't rushed into a bad deal.
• It's OK to think over your purchase. If necessary, allow 24 hours before finalizing the purchase and signing the paperwork. 

Finally, you're in control. If something doesn't feel right or you feel rushed by a salesperson, just walk away. You'll find another car to drive away soon enough.

Understand Final Costs

The FTC suggests ensuring you understand the following questions about your purchase: 

• What's the exact price ("out the door price") you're paying for the car? This can include purchase price, taxes, licenses, fees, etc.
• What's the APR (which measures the cost of interest as a yearly rate)?
• What is the total sum of the monthly payments, plus the down payment?
• What's the finance charge, or how much your loan will cost?
• How much is each payment and how many payments will you make? 

Signing Paperwork

Once you have decided on a vehicle and indicated your interest, you'll arrange for payment and sign the documents. You'll either bring a personal check to the dealer or arrange for payment via debit card, credit card or wire transfer. If you're financing an auto loan through a lender, they may be able to submit payment to the dealer directly or you may be able to deliver a cashier's check when you pick up your vehicle.

4. Maintaining and Paying Off Your New Ride 

Maintain your car through regular maintenance and oil changes to ensure optimal performance. In the future, you might want to sell or trade in your car for another vehicle. A well-maintained, carefully driven car will maintain more of its value. 

Make sure you pay your car loan on time. Late or missed payments can damage your credit score and potentially result in the loss of your car through repossession. Until you've fully repaid your car loan, your lender holds the title and is actually the car's owner. Ownership transfers to you after you pay off the loan. 

And finally, congratulations on your vehicle purchase.

FAQs

What Is the 20/4-10 Rule for Buying a Car?

The 20/4-10 rule suggests budgeting for your car purchase this way: 

• 20% down payment on the car.
• Four years to pay off the auto loan.
• 10% maximum of monthly income dedicated to transportation costs.

How Much Money Should I Put Down on a Car?

Ideally, you can put at least 20% down on a car, according to Kelley Blue Book. This is just a minimum though. A higher down payment amount can help you get even better loan terms. 

Does the Car Price or Monthly Payment Matter More?

Overall, the best thing for long-term financial health is to focus on car price, according to Consumer Reports. A lower car payment may help you buy a more expensive auto, but it will cost you more in interest in the long run, often through a longer repayment term. 

Do I Need To Get Prequalified To Buy a Car? 

You don't need to get prequalified to buy a car, but prequalification can help you understand how much money you could get for an auto loan.

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