The Smart Way To Buy A Car New cars today have more safety features and technological gadgets than models from a decade ago. And, let's be honest, trading in a beat-up clunker with filthy seats is enticing. However, many Americans make costly mistakes when purchasing automobiles. Consider new car purchases that include a trade-in. A third of buyers carry an average of $5,000 in debt from their previous vehicle into their new loan. They're paying for a car they no longer use. Ouch! That is not a winning financial strategy. Enquire now for choosing the Best authorized New & Used Car Dealership. Before you set foot on a dealer's lot, get preapproved for a loan For one thing, he claims that getting a loan from a lender other than the car dealership forces buyers to consider a critical question. "What kind of car can I afford? You want to do this before a salesperson convinces you to buy the limited model with the sunroof and leather seats." According to Reed, getting preapproved also reveals any credit issues. So, before you go car shopping, you might want to improve your credit score or remove inaccurate information from your credit report. Also, shop around for the best deal. "People are being charged more for interest rates than they should be based on their creditworthiness," says National Consumer Law Center lawyer John Van Alst. According to Van Alst, many people are unaware that the dealership is allowed to raise the rate it offers you above what you actually qualify for. With your credit score, "you might qualify for an interest rate of 6%," Van Alst says. However, he claims that the dealership may not inform you of this and instead offer you a 9% interest rate. If you accept that bad deal, you could end up paying thousands more in interest. According to Van Alst, the dealership and its finance company "will split that extra money." Also, shop around for the best deal. "People are being charged more for interest rates than they should be based on their creditworthiness," says National Consumer Law Center lawyer John Van Alst. According to Van Alst, many people are unaware that the dealership is allowed to raise the rate it offers you above what you actually qualify for. With your credit score, "you might qualify for an interest rate of 6%," Van Alst says. However, he claims that the dealership may not inform you of this and instead offer you a 9% interest rate. If you accept that bad deal, you could end up paying thousands more in interest. According to Van Alst, the dealership and its finance company "will split that extra money." So, according to Reed, having that preapproval in hand can be a valuable card to have in the car-buying game. It may assist you in negotiating a lower rate. "The preapproval will be used as a negotiating tool," he says. "If you're preapproved for 4.5 percent, the dealer may say, 'Hey, you know, I can get you 3.5 percent.' 'Are you interested?' And it's a good idea to accept it, but make sure all of the terms, such as the down payment and loan term, remain the same." One word of caution about lenders: Van Alst claims that there are numerous shady lending operations operating online. Reed advises choosing a mainstream bank, credit union, or other lender whose name you are familiar with. Maintain simplicity at the dealership When buying a car from a dealership, concentrate on one thing at a time. Also, don't give the salespeople too much information. Remember that this is a game. And you don't hold up your cards and say, "Hey, everybody, look — I have a pair of queens," do you? So, according to Reed and Van Alst, the first step at the dealership is to begin with the price of the vehicle you are purchasing. The salesperson at the dealership will frequently ask if you intend to trade in another vehicle and if you intend to obtain financing through the dealership. Reed advises not answering those questions! That complicates the game, and you're up against professionals. If you negotiate a really good purchase price on the car, they may raise the interest rate to make more money on you or undervalue your trade-in. They can keep all of those factors in mind at the same time. You do not wish to. Maintain simplicity. Once you've agreed on a price, you can discuss a trade-in if you have one. However, Reed and Van Alst advise doing your homework there as well. A little online research can tell you roughly how much your trade is worth. Reed suggests visiting Edmunds.com, Kelley Blue Book, and NADA for free pricing guides. You can also see what people in your area are asking for your car model on Autotrader. "You can get an actual offer from Carvana.com as well as by taking the car to a CarMax, where they will write you a check on the spot," he adds. So, if you feel the dealership is undervaluing your old car, he and Van Alst advise you to walk away or buy the car at a good price without the trade-in. There are plenty of other good options available these days.