With auto sales estimated to exceed 17 million in 2015, per the National Automobile Dealers Association and other analysts, you could say it was another good year for car dealers. Now we're entering a phase where a lot of pent-up demand has been met, so 2016 could turn the tides in buyers' favor, said Matt DeLorenzo, managing editor for Kelley Blue Book's KBB.com, an auto research site.
"A well-informed consumer will be in a good position," he said, "but you have to do your research upfront."
We've compiled a handy set of questions all rookie car buyers should ask -- both of themselves and the car dealer. Don't visit the showroom without them.
Doing your homework
Having a baseline of information about what type of car you want -- and how much it will cost -- can be priceless.
"You have to ask yourself, 'What can I realistically afford?'" DeLorenzo said. "The showroom environment might put you in a more expensive model" than your budget can handle.
Once you've got your number, the next thing to ask is, "Should I lease or buy?" The answer will depend on how you plan to use the car, although you can read more on making the lease vs. buy decision here. If you don't plan to put a lot of miles on the car in a year and want a new one every so often, a 2- to 3-year lease may be right for you. Just know a lot of leases have mileage caps and excessive wear and tear provisions, DeLorenzo said, so you could end up owing money you hadn't otherwise planned on spending.
If you plan on keeping your wheels for a while, you'll need to ask, "Should I buy used or new?" With a new car you can finance for a longer period (and keep the car longer) so you won't have to worry about mileage and condition. If you're going the other route, consider a certified pre-owned car (CPO), which is different than buying a car from a private party. With these cars, the dealership has inspected the used vehicle, DeLorenzo said, and will offer a warranty.
Your credit score will play a major factor in how much car you can afford, so be sure to check your credit before you start applying for loans. You may spot errors that you can quickly correct to boost your score and save you major money over the life of your loan. You can check your credit scores for free every month on Credit.com to see where you stand.
At the dealer
No matter what car you're buying, always ask, "Are there any particular incentives on this vehicle?" That applies to cash rebates, subsidized, or 0 percent financing, and whether you need to put any money down, especially if you're not trading in. In short, you're asking, "How much will you need from me upfront to make this deal?" If there are cash rebates and other incentives, be sure to ask how the lease deal works. "You can get two or three different scenarios on acquiring this car and what your monthly payment should be," DeLorenzo said.
Once you know what you'd be signing up for, it's time to whip out the second-biggest question: "Are there any add-ons or documentation fees?"
"A lot of times they'll have a fairly attractive ad price, but then once you get in and start negotiating for the car, you may find there are a lot of documentation fees where the dealer is trying to build margin back into the deal," DeLorenzo warned. Again, the most important thing is to know what you want.
Avoiding a lemon
The last thing you want is to drive home a lemon, so be sure to check sources like Consumer Reports and the J.D. Power Auto Ratings, especially if the car is used. Also, research what kind of service the car was in. For example, was it leased, a daily rental, an Uber, etc.? How the previous owner used the vehicle may determine how good it is for you to own and operate, DeLorenzo said. Carfax, which offers registered used car listings and histories, is a good place to start your research.