How to Buy a Car

Colorful Car Stock Photo - Author welcomia

2022 is shaping up to be one of the most challenging years during which to buy a vehicle. With unprecedented parts backlogs, a pandemic closing key ports and factories in China, shortages of semiconductors, glass, batteries, and other key components, inventory is at a critically low point.

The craziest part is that dealers and manufacturers are still making profits, and they are in no big hurry to return to the days of piling cash on the dash to help you make a buying decision. Your dollar no longer packs the same punch it did just three years ago, either. Inflation approaching double digits has weakened America’s buying power at the exact time vehicle shortages removed incentives and made prices skyrocket.

With the doom and gloom now out of the way, let’s also note that the total volume of new cars being sold isn’t that far off from historic highs. Deliveries have been reduced by 10 to 20% depending on brand and model. Also, used car prices have started to soften over the past few months. There is light at the end of the tunnel.

Buying a car in 2022 requires a few things many of us struggle with when buying a new car; Patience, flexibility, and an investment of time. For many, buying a car can be very emotional. We spend quality time talking to friends and family, cruising social media vehicle sites, and of course, reading about and watching video clips highlighting our favorite models. We then fall in love with a specific brand, model, and even trim. Next, we head out hoping to find one available at a great price we can drive home in. In 2022, this model of shopping no longer applies.

Research Process

Buying a new car starts with research, and the great news is researching a new or used car has never been easier. There are endless online resources at your disposal. Unless you are buying a high-performance or serious off-road vehicle, we suggest starting with Consumer Reports. This resource offers two great ways to evaluate a vehicle. First, reliability and satisfaction charts based on owners surveys. Second, driving impressions and reviews by colleagues we trust. Car Complaints can also help you avoid a known lemon make and model. Want to read reviews by Car Talk contributors? You can start with our reviews section by clicking here.

Let’s say you have your heart set on a mid-trim Toyota RAV4 as your top pick. We suggest you phone three or more local Toyota dealerships and speak by phone to a sales representative. Ask them how the buying process works. Do they actually have any test-drive vehicles? If so, go drive one. Do they have inventory on hand for immediate sale? If so, ask if they are being sold below, at, or above MSRP and by how much. If they do not have any in stock, call more dealers. If none have any in stock, inquire about how the ordering process works.

If no inventory is available now, dealers can assist you in ordering a vehicle from the manufacturer for delivery through their dealership. That can take months if you want a vehicle presently in short supply like a Ford Mustang Mach-E. If you do opt to order a vehicle, be sure to ask the dealer if the price you agree to is final and will be honored at the time of delivery. We see posts on social media daily from consumers dismayed to learn that their ordered vehicle has finally arrived and the dealer now wants $5K or $10K more than MSRP.

Some dealers can pre-sell you a vehicle. These dealers have an inventory flow they trust and can do the transaction in advance of delivery. It’s like an order, but you are not actually specifying every single detail. When a model of your choosing arrives, they will phone you with all the details, such as colors and options. Mazda dealers have been doing this near Car Talk’s headquarters with pre-orders having a three or four-week lead time.

Car Talk also suggests that you consider a backup model from a different brand. Shortages have impacted different manufacturers in different ways. Subaru’s Forester deliveries are now down by about 70%. Meanwhile, deliveries of the similar Mazda CX-5 are at all-time highs. Both are built in Japan. Ford is having a lot of difficulty with its imported from Mexico Mustang Mach-E, but American-made F-150 deliveries have been more steady. There is no rhyme or reason to the shortages.

Financing, Loans or Cash

Paying for your new car can take place in multiple ways. If you pay cash, don’t expect the dealer to jump for joy and offer you special treatment. The opposite is often true. Dealers profit from financing new and used cars. Finance commissions are part of the profit they rely upon to meet profitability goals.

If you need to finance, you can do it at the dealership. The new car dealer of your choosing will have multiple finance options and will likely steer you to the one that makes them the most commission. If you wish to obtain your own financing package, do it before you shop for the car. Your credit union or your bank and many private lenders are happy to provide you with a loan. In many cases, you can obtain the financing commitment and then shop the dealer’s finance package to see which suits you better and saves you money. Pre-approval in the auto loans industry is a smart choice.

Read more on the topic of Auto Loans here.

Trade-In

Trading in a car is a very easy way to sell your current vehicle. Although dealers typically provide the lowest possible price for your used car, the ease of trading in at the time of your new purchase has some value and possibly some tax benefits. Do some research to learn the value of your trade-in before you shop. There are endless valuation tools from companies like KBB and Edmunds that will help you to estimate the value of your used vehicle. Note that the valuations often provide multiple scenarios and that “Trade-In” is the lowest value.

Clean up your car and make it presentable for trade-in. Doing much more than that won’t help you save money. Dealers don’t value your prior maintenance paperwork as much as a private party buyer would, but be sure you have it pulled together for review by the dealer.

Buying a Car “Online”

None of us like the process of buying a car from a dealer. With that in mind, companies have emerged that will help you to “buy a car online.” These digital retailers are hoping to sell you a used car that they will then deliver directly to your driveway. If you shop for cars by the pound, this may work for you. If you like to test drive and consider the fine details of a car you plan to buy before deciding it likely won’t suffice . New car brands are hoping to avoid the car dealer model altogether. Tesla, Rivian, and Lucid are well down the path of setting up their own retail network online and even offer design centers where you can order your car with the help of an associate or by using a kiosk.

If you do opt to purchase a car using a website, be sure you check the company’s references and reviews. Vroom was one of the pioneers of online car buying and the company has an F rating by the Better Business Bureau, a 1.25-star out of five customer review average, and is being investigated by two state attorneys general for a variety of issues.

Test Drive

Test driving a new vehicle in 2022 will be a very big challenge. Not all models, and certainly not all trims of those models, will be on hand for test drives. Call around before you visit a dealer and ask if they have any vehicles for test drives of the type you wish to try. This will save you a lot of time. Remember, you need not buy from that dealer. You can always do the test drive, confirm your decision, and then start actually shopping.

We are the lucky devils who test new cars each week. Over the years, we’ve learned a few things about how to most quickly form an opinion about a car on a test drive. Surprisingly, a proper test drive is a bit like painting a room. Preparation actually saves you time.

You’re going to be itching to get out on the road and feel that baby purr. That’s fine, and we may not be doing you a favor by telling you to first dive into all the details before you drive a car. But at least take the time to learn how the transmission controls work. It is rare that we see a PRNDL shifter anymore of the type we all remember fondly. Expect buttons, levers, and little goofy do-dads (Prius we’re looking at you!). Possibly, all of the above. Your dealer salesperson can help you understand how it all works in just moments.

Unless you already own that same brand and same infotainment system in another car, expect the infotainment system to seem odd and frustrating. That’s because it is odd and frustrating - at first. We strongly suggest exploring this critical part of the vehicle ownership experience while parked. Have a dealer helper walk you through the menus and ask them to explain why there is no volume or tuner knob. Always bring a charging cord. Sync your phone and use Android Auto or Apple CarPlay. Try out your favorite streaming music service (Apple, Pandora, Spotify.) See how the screen toggles from phone mirroring back to the vehicle controls and vice versa. It’s not that hard if you have a helper. Keep an open mind. Modern infotainment systems are generally quite good, but they don’t operate like your old AM/FM radio, basic built-in Nav, and CD player anymore.

Pop the tailgate or trunk. Is there a compact spare tire? Do you really want to buy a car without one? Every top-selling model in America comes with a spare standard. The RAV4, The Ford F-150, The Chevy Silverado, Camry, Civic, we can keep going. Don’t let your dealer tell you that “No cars come with spares anymore.” It’s just not true. There are models without them. Mainly EVs and sports cars. Think about your plan on a snowy Christmas Eve if you get a flat far from home. Is Uber really an option to get your family to Grandma’s house after the tow truck takes your car away?

Modern vehicles have shifted away from geared transmissions, but they still exist. All Mazdas use geared transmissions, most trucks, and sports cars. However, all Subarus, most Hondas, most Nissans, and many other brands now use continuously variable transmissions. Many brands such as Hyundai now use dual synchronous gear transmissions which feel a bit different from classic geared transmissions. We suggest you have an open mind. There are good reasons why many manufacturers moved away from conventional automatics.

If you're buying an electric vehicle, talk about how it can be charged before you drive it. There are four different charging connectors in America. A RAV4 Prime can use only one. Some cars use two. Learning a bit about this before you shop will save you time.

Pricing, Discounts, Comparison Shopping

Aside from buying a home or paying for college, buying a car is one of the largest purchases most Americans make. Time spent shopping for prices is always worth it. It’s 2022, so you are not going to see cash-on-the-dash deals and deep discounts on new vehicles. However, you still need to shop around.

Many if not most dealers are now selling above MSRP, and that includes direct-to-consumer Tesla, which adds more than one fee on top of what they post as the vehicle “price.” Your goal in shopping in 2022 is to try to move the needle back to MSRP if at all possible. If you are shopping for a popular model and want it quickly, be prepared to pay full price.

Many manufacturers, Ford and GM, in particular, have loyalty and friends and family programs. In our research, we have found that these loyalty programs help quite a bit when shopping today. Dealers are more likely to honor MSRP as a starting point if you are using a brand’s loyalty or friends and family discount.

Toyota and other brands also offer special discounts directly from the manufacturer. For example, Toyota offers a recent college graduate discount. Many brands offer discounts to those who have served in the military. Discounts for educators and other types of special groups are also available. Do some research online before you shop to see which brands might help you.

Read more on the Best Time to Buy a Car here.

Leasing vs Buying

With inventory so dramatically reduced in 2022, one would assume that leasing and buying may have changed significantly, but both options are still on the table. If you opt to lease, be sure the lease allows for a purchase of the vehicle at the lease’s end period. That was a standard part of lease agreements, but we’ve seen reports that some leases are now excluding that helpful option.

Buying with cash is always the best way to buy a car. If only we could all afford it! Leasing is not always the bad deal your uncle Jebadiah warned you about based on his one neighbor who had a bad experience ten years ago. For those who receive reimbursement from an employer for the use of a vehicle for work, leasing almost always works. Those in college and those who have recently graduated may also find that leasing can work well.

When comparing a lease to a financed purchase, compare your situation at the lease-end. How much equity will you have in the vehicle at that same point in time if you finance? It could be zero or less. If so, a lease may make sense financially.

Read more on the topic of Leasing vs Buying a Car here.

If Buying Used, Have Trusted Mechanic Check The Car Out

Times they are a changing, and used cars can now cost more than new ones. Our colleagues at iSeeCars.com publish a monthly list of those that do. Demand is crazy for used vehicles, so the idea that you can ask a seller to let you take the car to your mechanic before you commit may no longer fly. We hope it does. Whenever possible, have your mechanic check out a used car before you buy.

Image of an estimate receipt
Image by John Goreham

We recently helped a friend buy a 2005 Prius with 213K miles and three warning lights illuminated. We advised her to take the car to a trusted local mechanic. For just $60, they put the car on the lift, ran it through a complete safety check, test drove it, evaluated it to see if it could earn a Massachusetts state inspection sticker, read and translated the engine fault codes, and gave her a full accounting of what the Prius needed to be made safe to drive and possible to register.

Customer estimate safety check form
Image by John Goreham

If you cannot take the car to your mechanic, perhaps you have a gearhead in the family who can come along for the test drive with an OBD2 scanner? That is a device that reads the engine’s error codes to see if anything is amiss. You could also ask if the vehicle can be sold on the condition that it passes your state safety and emissions inspection. That’s not ideal, but better than nothing. Some states require a smog test before a sale can be completed, but others have a hands-off approach. If the used car you are considering has recently passed a state inspection consider that a big plus.

Review Your Deal

The hardest part of buying a car from a dealer is negotiating terms with the dealer’s business manager. Who you will only see or speak to if it benefits the dealer. Your salesperson is not usually empowered to finalize a deal. The team at the dealership works together to play on your emotions, look for gaps in your purchasing process knowledge, and exploit them.

If there is one piece of advice we can offer it is to not negotiate based on a “Monthly payment.” That is often tricky to avoid if you plan to use long-term financing, but your dealer holds all the cards if all you care about is how much you pay each month.

Do your level best to slow down the process as you near the end of the purchase negotiations. Ask for a simple breakdown of the deal in a format that is understandable to you. Try to ignore the noise the dealer will create on the worksheet showing discounts and incentives and ask to see the final purchase price of the vehicle you are paying the dealer including the following:

  • Vehicle buy price
  • Destination, freight, or delivery fees the dealer is charging you
  • Documentation fees the dealer is charging you

The sum of these above is your actual purchase price.

Worry about taxes and registration fees from your state and your state DMV separately. Those are not negotiable.

The value of your trade will be deducted from your purchase price, and in most states, it will offset the sales tax if your state imposes one. Never shop for an extended warranty when you buy. It bogs down your purchase and extends your day when you need your energy the most. You can always add one later if you wish. Say no to all forms of dealer upsells for wheel and tire protection, protective films, and any nonsense related to paint treatment and interior protection. You can always add that stuff later if you wish.

Close the Deal

Once you fully understand the purchase you are making, be ready to say “yes” to a deal that meets your needs. It is often hard to do this if negotiations were long and drawn out. If you need a break, take one. Go for coffee. Take a walk outside. Clear your mind. Your dealer will at this point be pushing you to sign on the dotted line. “Ten minutes to closing.” “We are not open tomorrow.” All that jazz.

After you have signed the deal, collect your paperwork for later review. Keep everything.

Pick Up and Drive Home in Your Car

When buying new, you will almost never drive home the vehicle you bought the day you sign all the paperwork. In 2022, you may wait weeks to months for your vehicle to arrive. Once you get the call that the vehicle is ready ask for the following to be verified:

  • Review all aspects of the car’s specification like trim, colors, and options.
  • Ask if the car has been fully prepared by the dealer.
  • Verify the car has all the keys it should, usually two fobs and a third valet key. Your manual (online) will explain the keys and what should be included. Never leave the lot with one key.
  • If you are buying an electric vehicle verify that the battery will be fully charged when you arrive to pick it up.
  • Verify a dealer employee will be available to tutor you on infotainment system operation.
  • Bring your phone charging cable.

When you arrive at the dealer to pick up the car, move the car to a spot with good lighting and look it over carefully. Look at the gaps between the panels. They should be uniform side to side. Look at the wheels and tires carefully. They should be perfect with no scuffs. Inside, the car should have any extras you paid for like a cargo liner or weatherproof mats. If your vehicle is supposed to have a spare tire, lay eyes on it, and ask the dealer to point out where the tire-changing tools are stored in the vehicle.

Accept the dealer’s offer of a tutorial on how everything works. Watch carefully as the dealer helps you to sync your phone. Ask the dealer questions about the infotainment system. For example:

  • Ask how the door locks and lights operate.
  • Ask to see the audio settings for bass, treble, etc.
  • Ask how to program the radio station presets.
  • How long is the free satellite radio subscription (if any)?
  • Have the active driver safety systems like forward collision prevention and lane keep assist explained to you. There are often settings from which to choose.
  • If you are not familiar with adaptive cruise control ask for a tutorial.
  • Ask if your vehicle has a fuel door latch and see where it is. Many newer models don’t have one, but some still do.
  • If you are buying an EV, ask about charging, and be prepared to explore the charger settings in the infotainment setup.
  • If you bought a vehicle with included maintenance, ask about scheduling and how it works.

If you have questions or concerns about your new vehicle, phone your dealer. They are often more than willing to talk you through an issue. The Car Talk Community is one resource where you can find help, or join a few social media groups that focus on your model. Buying a new car is scary but also very exciting. We wish you the very best of luck.

Read more on the Rookie Mistakes Consumers Make When Shopping for Cars here.

FAQ

What is the first step when buying a new car?

The first step to buying a new car is establishing a budget and organizing your funds. If you need to finance, you can do so before you shop. Try a credit union or your bank. Your dealer can offer financing if you need it as well.

Do I have to finance through the new car dealer I use?

No, you do not. However, dealers often pressure buyers to finance through the dealer’s finance partners because they profit from such deals.

How can I find a car to buy in today’s tight market?

Start by making phone calls to the local dealers for the brand you wish to buy. Ask about inventory and lead times if you need to order or pre-purchase.

Do I need to buy an extended warranty when I buy a car?

No, you do not need to buy the extended warranty on the day that you purchase your vehicle. You can purchase it from any of that brand’s dealers and you can shop the price of the extended warranty. Car Talk has a wealth of information pertaining to extended warranties.

Can I buy a car online?

You can buy some brands online. Tesla, Rivian, and Lucid can sell online in some states. You can also research your purchase and use a local dealer’s digital retail site to arrange your purchase.

Which brand has the most reliable vehicles?

No single brand has the best reliability across all models. Toyota and Lexus have long been seen as safe bets. However, Genesis, Kia, and Hyundai have emerged as reliability leaders in recent years. Some Honda models and some Buick models also earn solid reliability scores from third-party quality sites.

Should I lease or buy?

There is no single right or wrong answer about whether to lease or buy. If you plan to buy and pay cash, that will be your best financial move in most cases. If you plan to finance most of the car over many years, a lease may be a good option. Be sure you understand mileage limitations, and always insist on a lease with an end-of-term buy-out provision.

Editor's note and disclaimer: Car Talk is supported by our fans, readers and listeners. When you click on some of the links on our website, we may receive referral compensation. However, you should know that the recommendations we make are based on our independent editorial review and analyses.