a woman looking at a car with a salesman

7 Steps to Buying Your Dream Car

Updated January 13, 2022 . AmFam Team

Your dream car is out there, waiting for you. It’s a noisy marketplace, so planning and focus is a must when car shopping. Whether buying a van to haul the kids or a two-seat convertible for cross-country road trips, our checklist can help you save for your dream car.

a happy woman hugging her new car

1. Find the Car You Want

Maybe you need 4-wheel drive and a tow package to haul a boat. Or you want seat warmers and navigation. Use the list below to help determine what you want in your dream car. From there, you can start saving up.

  • Body style
  • No. of passengers
  • Gas mileage
  • Engine (hybrid, electric, gas, diesel)
  • Transmission (automatic or manual)
  • Drive train (4-wheel drive/all-wheel drive, rear-wheel drive or front-wheel drive)
  • Power equipment (windows, heated seats, seat adjustment, mirrors)
  • Towing capacity
  • Audio, Bluetooth and navigation
  • Storage capacity
  • Seat material
  • Exterior and interior color
  • Sunroof/moon roof
  • Safety features

Found your dream car? Make sure you can drive it off the lot by learning what items to bring to the dealership

You've been dreaming of buying a new car, and now you're ready to make that dream a reality.

Before you head over to the dealership, here are a few helpful tips from American Family Insurance to make your car purchase go as smooth as possible.

First, check out car prices online to get a better understanding of the price range for the vehicles you're considering. If you're planning on taking out a vehicle loan, take a minute to brush up on your understanding of financing and loan terms.

Next, get your free credit report from one of the three credit reporting agencies. A higher score can help you get a better loan.

You'll also want to check out financing options from multiple lenders to make sure you're getting the best rate and terms.

It's important to build a budget so you know what you can afford before you fall in love with a car on the dealer's lot. Your budget should include your down payment, how much you'll pay right away as well as your monthly payment.

Don't forget to factor in the cost of car insurance. Call your American family insurance agent or head to AmFam.com to get a personalized quote in minutes.

All right. You've got your budget together. You've found the perfect car and you're ready to buy. What do you need to bring with you to the dealership to make sure you can take your new vehicle home right away?

An up to date driver's license, your payment, whether you're using a check, cash, credit card or loan to make your purchase. If you plan on getting a loan through the dealership, you'll definitely want your most recent pay stubs. Ask if the dealership wants you to fill out any forms online in advance too.

Your credit report. The dealer will pull your credit score and history, but it's great to have your own copy so there are no surprises. If you don't have a great credit score, you may also want to bring a list of references who can vouch for you, a few recent utility bills in your name to prove your current address, if you've qualified for a discount through your credit card company, the dealership, the manufacturer or any other company, bring that complete discount information with you.

Proof of auto insurance. This is mandatory in most states. So don't let a lack of insurance prevent you from driving off the lot with your new ride. Call your American family agent today to see how much you could save when you build your own car insurance policy.

And here's our last two quick tips.

If you're trading in a car, be sure to bring your current certificate of title, current vehicle registration, any service records you have and the vehicle itself preferably cleaned and ready to go.

If you're buying a car out of state, there might be additional fees and paperwork for things like safety inspections or smog test. So it's a good idea to look up that state's requirements to avoid any last minute surprises.

And there you have it. By being prepared and knowing what to expect, you can be ready to buy your new car with confidence.

Want more great tips about buying, selling, maintaining, or insuring your vehicle? Visit AmFam.com or contact your local agent today.

American Family Insurance jingle.

2. Research Car Pricing and Financing

Before heading to the dealership, get online and research consumer organizations for information.

  • What are people really paying for the cars on your list? Make realistic offers and avoid paying too much.
  • Check safety ratings to understand your car’s reliability. Plus, your auto insurance may offer discounts for reliable cars that have certain safety mechanisms, such as airbags.
  • Look up free car history reports for vehicles you find online — dealerships often provide links. If buying from an individual, use the vehicle ID number to find its history.
  • Read reviews to see what others say about the vehicle’s performance.
  • If you need to finance some of the car, how much will you need to finance? How much do you want to pay each month and for how long?

Get a Car History Report

They don't always include all accidents, but they can give you some indication of a car's background and help you decide if it's right for you.

3. Determine Your Car Budget

This step is crucial for budgeting for a car. Knowing your budget will allow you to plan for how long you’ll have to save up in addition to how much to save for a car.

First, get a copy of your credit report to confirm there aren’t any credit issues you should clear up. Typically, the better your credit, the better your interest rate. Then, get pre-approved financing from your bank, credit union or online lender. It could make it easier for you to negotiate with dealerships, since you’re a cash buyer. You can always check later to see if the dealership’s financing provides a better interest rate.

Narrow Your Search

Based on your preferred price tag and wish list, find three or four vehicles that fit the bill.

Take a Drive

A short test drive is a first step, but you’ll want to know more before you buy. Most dealerships let you take an extended test drive — some even allow overnight use.

  • Take the route you usually take to work.
  • Make sure it fits in your garage. You can’t return a vehicle if you find out later it’s too big.
  • If you tow a boat or trailer on a regular basis, hitch it up and take it for drive to test its towing power.
  • Music lover? Play some tunes to hear if you get the sound you want.
  • Try out the 4-wheel drive, if the vehicle has it.

a woman looking over her finances

4. Keep Your Budget in Mind for Car Expenses

Budgeting for your car is more than just saving up for the cost of initially buying it. You’ll need to take into account any monthly payments you’ll be responsible for if you’re financing or leasing.

There are a few other expenses to take into account when considering your budget, including:

  • The cost of gas
  • Regular maintenance, like oil changes and tire rotations
  • Future repairs — for this, you’ll want to set up a savings fund
  • Car insurance

Car insurance is almost always required on a financed or leased car before you drive it off the lot, so be sure you know your dealership’s, bank or leasing company’s and state’s requirements for insurance. This will inform your budget because you may be required to purchase certain coverages that can add up to a steeper monthly bill.

Check with your insurance agent to see what kind of discounts you might be eligible for when buying car insurance for your new or used car.

5. Start Saving for Your Car

Now that you know what kind of car you want and how much it’ll cost you to own and maintain it, it’s time to start saving. We’ll go through just a few of the many ways you can start saving for your car.

How to Save for a Car

Keeping your goal in mind is the first step to saving up for your car. By sticking to your budget, you’ll stay on track to buy your first car. Here are some tips to help you save money:

  • Set your bank account to automatically send money to a savings account every month.
  • Cut back on eating out and make more meals at home.
  • Start a side hustle, like driving for a rideshare company.

a salesman showing a woman a car

6. Save at Least 20% for a Down Payment

By saving at least 20% of the price of the car for your down payment, you’ll have a lower monthly payment and typically qualify for lower interest rates. Remember: price isn’t the only negotiable thing. You can ask for a better trade-in deal or interest rate, too.

7. Stick to Your Monthly Budget

Buying a car is just the first step in the long-term process of owning one. Remember those budget considerations you made earlier? Stick to them — they’ll help keep your overall budget on track and keep you from overspending.

Now that you have a plan to buy your dream car, there’s only one more thing you’ll need: car insurance. We can help with that. Connect with your American Family Insurance agent to get a quote and help protect what matters most.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

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