My third post ever was about my own car buying experience. However most of you weren’t around then so I wanted to rehash that post into a simple guide on how to buy a car. Buying a car can be a very simple exercise, or it can be a stress filled nightmare that ends with you not getting the car you want and making way too much in car payments.

My parents used to be classic examples of exactly how not to buy a car. They’d wait until there was something wrong with their current ride and go down to the dealership. Trusting as they are, my parents assumed car salesmen had their best interests at heart. I don’t know what my dad paid for a minivan when I was a young teen, but the circumstances were not good. Thankfully they have enough fiscal constraint to buy cheaper cars and can easily afford every car they’ve owned. Even paid cash for the last two. But most people are the combination of the classic customer and poor with money, so I want to give a simple, no nonsense guide on how to buy a car.

Step 1: Unless you get a subsidy from your employer, there will be no leasing. No way, no how.

Step 2: Figure out how much car you can afford. This is easier than it sounds. If you’re planning on keeping this vehicle for a while simply take your salary and divide by 2. That’s how much car you can afford. If you make $50k then you can afford a car that costs $25,000. If you’re married, take your total family income and divide by 4. If your family makes $80k, then you can afford a car that costs $20,000 (because you have to buy twice as many cars, so if you were buying 2 that day you could spend a total of $40k). When it comes to trade-ins, don’t factor this into what you can afford. The car you can afford isn’t just about making payments, it’s about buying a car that fits your lifestyle and income range.

Step 3: Go to websites like Kelley Blue Book and Edmunds and learn how much your trade-in is worth. Take that number and divide by 2 because that is what the dealer will offer. Consider private sale or to another dealership like Carmax.

Step 4: Go shopping! Go find out what kinds of cars are in your price range that you’d be interested in. Test drive as many as you want. Don’t worry about taking business cards or giving out phone numbers, you won’t be buying a car the same day you test drive. Once you have a few you like go research things like reliability, gas mileage, blah blah blah. By the end of this step you should know the exact car you want. Do not go to any more steps until you know the exact car you want.

Step 5: Go to the manufacturer’s website and get the websites of the nearest 10 or so dealerships. Depending on where you live you could increase or decrease this number as needed. I pulled up anything withing about 90 minutes of my place.

Step 6: Find the contact information for the internet sales department. Many websites use contact forms but others will use email addresses. Give your contact info (WITHHOLD YOUR PHONE NUMBER!!!!) and send a message to the effect of “I want X car in Y color, please send me an out the door quote for this vehicle itemizing all taxes and fees.” It’s important that you request an out the door (OTD) price because otherwise they’ll just take you to town on fees. You’ll get quotes back from a number of dealers. Some will be good, some bad. Pick the best 3 or 4 and start playing them off each other. Ask them to price match or beat. Many will want to discuss it over the phone or have you come into the dealership. Avoid this because that puts the ball in their court. Hide behind the anonymity of email. Also do not tell them what dealership offered what quote. It creates an environment for collusion. Eventually you’ll get to a price level so low you can’t play them anymore. A good way to see if you’re getting a good deal is to check Edmunds’ TMV (true market value) report which actually aggregates data of other sales in your area. Then move on to step 7.

Step 7: Take the best offer you got back to the dealer and tell them it looks good, you just want it in writing. Fax, email, snail mail. So long as it’s on company letterhead, signed by the agent, and includes a listing of all prices, fees and taxes with a summary OTD price at the bottom. Only after you receive this can you finally talk to them on the phone. This will be to arrange a time and date to pick up and pay for the car. Many dealers will require a deposit of good faith to hold the car.

It’s important to ignore all advances by the dealer to speak with you in person or on the phone. Also ignore discussions of financing and a trade-in. When it comes to financing, the dealer can probably offer you a good rate. But it doesn’t hurt to be pre-approved by a bank or credit union before you go in so you know which one to take. The dealer offered me a good rate which was better than I got from my bank (and my employer at the time) so I financed through the dealer. If you want to trade-in, discuss that in-person and bring quotes from the websites about how much its worth. Be ready to walk away from the trade-in if you don’t like the deal.

Now when you go in to make your purchase, make sure you test drive YOUR car before you sit down to do any paperwork. If there are any problems with it, make sure its taken care of. When you sit down to sign the paperwork they will try and upsell you on various services and products. THEY ARE NOT WORTH IT. Just say no, no, no, no, no matter how cool the demonstration is (that stain remover stuff looked cool).

Now drive off in your new car and enjoy life. Make sure you keep it for at least 5 years, but 10 is better. Oh, and if you want me to negotiate for you I’d be happy to. My fee is 10% of whatever I save you using MSRP as the starting price.

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*Special note regarding cash: Offering to pay cash matters not to dealers these days. They’d actually rather you finance through them, because they make more that way. If you are in a position to pay cash, by all means do so.

*Special note regarding downpayments: They don’t care how much you put down. Do what you’re comfortable with, of course the more you do now they less you have to do later. I put 50% down.

*Special note regarding payments: You shouldn’t figure out how much car you can afford based on payments. Because they will just move you from 36 months out to 72 months until they find something you can afford. If you follow my rules above for a car you can afford, plus negotiation, plus being smart with money already, you should be able to afford the payments over 36 months and still pay it off early (I paid mine off in 11 months).

By The Weakonomist

The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice.

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