How to Buy a Car: The Definitive Guide to Success
From shopping to financing – everything you need to know.
Published Tuesday, June 24, 2025 to Advice
Let’s talk about everything a car symbolizes.
The automobile has always been the ultimate symbol of freedom. It represents the ability to go anywhere life takes you – or anywhere you want your life to go.
But, more importantly, it’s how you get to the grocery store, or the pharmacy, or to see your friends and family. Your car is important for getting everywhere you need to go.
That’s probably why 92% of American households own at least one car, according to autoinsurance.com.
When it’s time to buy a new car, you’ll find that tends to be a large expense – especially if you’re simply looking at price on the window sticker. But with a sound negotiation strategy and the right financing, your next vehicle could be more affordable than you realize.
Now, let’s talk about everything you need to know to buy your next vehicle.
In This Guide:
- Select A Type of Vehicle
- Set Your Budget
- Get Preapproved for Financing
- Go Shopping
- Finalize Your Purchase and Get on The Road
Select a Type of Vehicle
There are many ways to start the process of buying a car. But in most cases, determining what type of vehicle you need is the best first step.
Your car’s purpose may seem simple: it gets you from point A to point B. It’s not always that simple though.
A vehicle is often like a tool and, depending on your lifestyle, different vehicles have different purposes. It’s important to have the right vehicle to fit your needs.
Let’s look at the following examples:
If it’s just you, and you’re just going around town, a small sedan or hatchback may do the trick.
If you have a family with children, you may need to look for an SUV or a van.
If you’re hauling equipment, like a boat or camper, you may need a larger SUV or a pickup truck.
Other considerations include things like gas mileage, safety ratings, features and more. When deciding on a type of vehicle, make sure you look at your lifestyle to make sure you shop for one that suits your needs.
Here are some other things to consider during the early stages of car shopping.
Your Car Buying Budget
How much you can spend on a car payment each month will impact what type of vehicle you can buy. We’ll talk more about setting your budget in the next section.
New or Used
You’ll have to decide if you want to buy a new vehicle or a used one. There are advantages and drawbacks to both options.
A new vehicle will be more fun and dependable, and will have more of the latest features and technology. However, new cars are likely to cost more and depreciate faster than a used car. Plus, a new car typically comes with a factory warranty, which adds peace of mind to your purchase.
A used vehicle will probably have a lower price tag than a new one but may end up needing more repairs sooner. When shopping for a used car, make sure you get a copy of the repair and maintenance history for each vehicle you’re interested in. Most dealerships can provide these to you.
Set Your Budget
Once you have an idea of the type of vehicle you want, it’s time to determine how much you can afford to pay each month. As a rule, we recommend spending no more than 15% of your income after taxes on all your vehicles.
When setting your budget, it’s important to consider the “true cost” of owning a vehicle.
What Is the “True Cost” of Owning a Vehicle?
This refers to the additional costs beyond what you see on the price tag. Here are some of those additional costs you’ll need to account for:
- Tax, title and license fees – these should be considered when negotiating your price with the dealer.
- Annual registration fees.
- Maintenance costs for things like oil changes, tires and repairs.
- Auto insurance.
- Fuel expenses.
Value Your Trade-In
If you have a vehicle you want to trade in, do some research to find out how much a dealer should give you for it. Use a site like Kelly Blue Book to get started – just provide some information about your vehicle and it will give you an estimated trade-in price range.
The value of your trade-in will impact your budget. A higher trade-in value may allow you to buy a more expensive vehicle or save more on your purchase price or monthly payments.
Pro Tip: You can also use a site like Kelly Blue Book to determine a fair purchase price for a vehicle you’re interested in!
Get Preapproved for Financing
This step is not mandatory, but we highly recommend it. Preapproval can determine how much you can spend before you go shopping and help you stick to your budget.
What is a Preapproval?
To get preapproved, you go to your favorite financial institution and apply for an auto loan before you even go shopping. A loan officer will review your credit score and history and determine how much you can qualify for on an auto loan.
In many cases, you can work with a loan officer to determine how much you want to pay each month, and they can find a purchase price that works with your credit.
The benefit to this is that you know your maximum purchase price before you go to the dealership. This will give you leverage in negotiations.
Pro Tip: Veridian can help you get preapproved before you go car shopping!
Go Car Shopping
You’ve decided on a vehicle type, you’ve set your budget and now you’re preapproved for an auto loan. Let’s go car shopping!
Start your search online to find some dealerships in your area that have cars you’re interested in that fit your budget. Then, head out to those dealerships to go for a few test drives.
You may also opt to look for cars for sale from private sellers.
Once you’ve test driven a car you love, it’s time to step into the office and negotiate with a salesperson. Remember to use your preapproval and any other price research to your advantage during negotiations. You’ll likely have a chance to negotiate the purchase price of the car you’re buying as well as the value for your trade-in.
Pro Tip: Don’t show your hand too early. Try to negotiate a price lower than your preapproval amount.
Finalize Your Purchase and Get on the Road
Prequalified: check!
Vehicle: chosen!
Price: negotiated!
Now it’s time to finalize your purchase and drive your new (or new-to-you) car off the lot. This is where you’ll finalize your financing.
If you are preapproved, let the dealer know at this time. If the purchase price ends up being lower than your preapproved amount, the payment from your financial institution will reflect that.
In some cases, however, you may need to go to your financial institution to get a check to bring back to the dealership.
If you are not preapproved, no problem! Most local dealerships partner with financial institutions and will be able to handle all the details right at the dealership.
Ask who the dealership partners with. If they don't partner with your requested financial institution, you will most likely be asked to provide a Purchase Agreement to finalize your loan or be asked to finance your purchase with one of their partner financial institutions.
This is also the time to make a down payment if you are choosing to do that. Doing so will help keep your monthly auto loan payments lower.
If you're buying the vehicle from a private seller, secure your financing first, then arrange for your financial institution to pay the seller.
Remember to get auto insurance as soon as possible. In some cases, you may need to provide proof of insurance before the dealership will let you drive the car off the lot. Check with your insurance provider, as well as your local and state laws for details.
Pro Tip: Veridian Insurance can provide a free quote.
Frequently Asked Questions: How to Buy a Car
Our Final Thoughts
A vehicle may be a big expense, but in most cases, it’s a necessity for your daily life. When you work closely with your preferred lender and a trusted dealer, the car-buying process can be easy, and your payments affordable.
Let us help you get on the road with the right auto loan. Learn how Veridian Credit Union can help you through the whole process of buying your next vehicle.