How to Buy a New Car

I’ve been waiting a long time to buy my new car. My trusty Toyota Corolla had just turned thirteen-and-a-half when the mechanic informed me that three of the four engine mounts were broken. It would cost $538 to repair it. I already planned to buy a car in November, so my husband and I decided to bump up that timetable rather than pour more money into the old car.

Researching New Cars
I know a lot of frugal experts recommend buying a used car, but that’s not my philosophy. I’d rather buy one brand new, thereby getting the free maintenance they usually offer and the full warranty. Then I keep the car at least ten years, instead of having to buy a new used car every seven or eight years.

My first step was to decide what kind of car I wanted. I wanted a hatchback for less than $25,000, but nicer than the starter-level hatchbacks.

By using new car research sites, I created a list of four cars: the Hyundai Elantra Touring, the Toyota Prius, the Mazda 3, and the Volkswagen Golf. I added the Honda Fit because a friend recommended it, but I sort of knew it wouldn’t meet my needs.

Before taking test drives, I read reviews at and checked Consumer Reports for reliability ratings and common issues. I also looked at owner’s forums to see how happy people were.

Test Driving New Cars
I test drove the five cars in one afternoon. It took about three hours. Dealerships tend to be clumped together, so choose the area with most of the dealerships you’re considering. It was a bit grueling toward the end, but I wanted to get a feel for the cars back to back.

I went home and rated each of the cars on my personal scale. That knocked out the Volkswagen and the Fit. The Fit was too small, and the Golf was nice, but it didn’t wow me enough to make it worth an extra $4,000, especially given its mixed reliability history.

Next I made up a chart with the three remaining cars. I listed the following:

Consumer Reports Reliability score
Personal Rating (1-5)
Fuel costs per year
Dealer financing offers
Bank financing rate
Payments with dealer financing
Payments with bank financing
Total cost over ten years (Fuel and loan, maintenance is too hard to predict over ten years.)

Interestingly, the three cars were within $1000 of each other.

Next I went for my second test drives of the three cars, this time with my husband. I insisted on testing all three cars on the freeway. The first Toyota dealership I visited refused, so I found one who would let me take it on the freeway.

Based on that test drive, I narrowed it down to the Prius or the Elantra. The next day, I settled on the Elantra because it was $6000 cheaper and I hated looking through the Prius’s back window.

Finding a Price
I was already approved for a car loan through a bank, but this would have been the time to apply if I wasn’t. I also set about getting dealer quotes. I simply emailed a bunch of dealers through the websites. Initially I was looking for a 2010, but they were selling out fast, so I switched to 2011. I got several prices that way. Next I tried the Costco auto buying program and got a low price, but not the lowest. Finally, I used the American Express auto buying program and got the best price. That dealership was 30 miles away, but a dealer 1 mile from my house matched the price, which was $1450 below invoice (including rebates). If you’re not an Amex member, visit to see who else offers their discount program.

Arranging the Deal
My husband and I went down to the dealership Saturday morning where my car was waiting for me. The dealer matched the lower bank financing rate (it was only .2 percent lower, so not a big negotiation point), so I financed through them. In exchange, I get free car washes once a month.

Now that we had settled on the price, we talked about the trade-in. I’ll admit, I probably could have gotten more, but I’ve never traded in a car before. Next time I’ll know better. I didn’t want to deal with selling it myself.

Finally, we went into the financing office to sign all the papers and transfer the title. We listened to their various sales pitches. I did accept the alarm offer, and they “threw in” VIN etching. Here’s a little tip: the car was ready the moment we stepped out of financing, which means that VIN was already etched, whether we’d been willing to pay for it or not. The alarm was also already installed, but they wouldn’t activate it unless we paid.

We rejected the hard-sell for gap insurance (insurance for the difference between the car’s value if it’s stolen or totaled and the loan balance.) The alarm already provided that coverage if the car was stolen. If someone hit me hard enough to total my car, you can be sure that we’d get more than the gap. We have the cash on hand to cover the gap should anything happen. The financing guy tried to argue that we’d still buy auto insurance if it wasn’t mandatory, but that’s a false argument. There’s a huge difference between auto insurance to protect us from financial ruin if we were to cause an accident and gap insurance that costs $500-$1000 and only covers $3000-$4000.

We also rejected the hard sell on an additional warranty with paint and upholstery coverage.

Getting My Car
We got the keys, the dealer reviewed the maintenance schedule with me, showed me how to work a few features, and then we took my new car home.

Leave a Comment

Your email address will not be published. Required fields are marked *