Thinking about buying a car? Make sure you set aside some time to plan for this major purchase. After a home, a car is typically the second most expensive purchase anyone makes — and settling on a new vehicle is not a decision to make merely over a weekend.

Follow these 10 car-buying tips to make sure you get a car you can afford and will be happy driving for years to come.

1. Determine your budget

While you may have your heart set on a specific car, you won’t be able to take it home unless you can afford it. A good rule of thumb is to spend no more than 25 percent of your monthly household income for all the cars in your household. And this figure should include not only monthly car loan payments but all other vehicle costs, including fuel and car insurance. If you’re not sure how a new car would fit into your monthly expenses, use Bankrate’s home budget calculator to help you determine your monthly bills and necessary savings.

2. Decide: New, certified pre-owned or used? Buy or lease?

Thanks to a large number of lease returns, a wide array of used cars that are about three years old is currently on the market, making buying a used or certified pre-owned (CPO) car more attractive than in recent years. In addition, there are more inexpensive new cars available than ever before, making your choices positively dizzying, regardless of your budget.

You’ll be able to get the most car for your money if you buy used, though you’ll pay a higher interest rate, have a shorter warranty period and won’t know the car’s full history. If you lease, you might get a more upscale car for your dollars, but then you won’t own the car outright and will need to be careful about the lease terms to avoid hefty penalties. A new car for the same amount of money would have fewer features, but you’ll also have a full warranty and pay a lower interest rate, and often you’ll get free maintenance and roadside assistance.

3. Narrow your choices to a few cars

Start by researching the cars that have caught your eye to see if they fit your budget. Visit automaker websites and independent automotive information sites to assess the features that are important to you, and note MSRPs (manufacturer’s suggested retail prices) and invoice prices. Check local inventory listings to see what is available in your area. Choose cars that would cost at least 5 percent less than your monthly budget to give yourself some room to cover operating costs, including gasoline, insurance, repairs and maintenance. Print out or electronically save web pages that have pertinent details. Don’t, however, rush off to the dealership for a test drive just yet.

4. Assess your ownership costs

Using your short list of cars, determine if each would fit into your budget by estimating ownership costs. An auto research website such as Edmunds.com or Kelley Blue Book’s kbb.com would provide a general overview of ownership costs for your area, but these numbers will vary depending on your personal situation. For better accuracy, do your own calculation for fuel based on the number of miles you drive annually, and obtain an auto insurance quote on the cars you are considering that would apply to the drivers in your household. Make sure you give the insurance agent the exact model, including trim level, engine and sometimes certain options, to get an accurate quote.

5. Secure financing — before you visit the dealer

Dealers don’t just want to sell you a car, but they want to coordinate the car loan, too. That’s because they typically receive a flat fee or a commission on the auto loans they facilitate, regardless of whether the loan is from the manufacturer or a local lender. So, secure financing from a bank or credit union in advance and compare it with what the dealer offers. Find current interest rates on Bankrate, and check with local lenders, including credit unions, which tend to offer rates that are 1 to 2 percentage points lower, on average, than conventional banks. Many community credit unions are open to anyone living in their area, eliminating the need to work at a certain company or in a specific industry to join. 

6. Don’t assume financing at the dealership is the best deal

While you may be drawn to a certain car or brand because you saw an ad for a low-interest rate, it’s of no use unless you qualify. Only about 10 percent of car buyers qualify for the zero percent or low-interest-rate deals automakers offer. Even if you do qualify, you may be better off taking an automaker’s cash rebate and obtaining financing on your own at a bank or credit union. To find your best deal, first, find the best interest rate you can get and then use Bankrate’s Car rebate vs. low-interest calculator.

7. Learn the invoice price

The research you did on independent automotive information websites should have included the invoice price (for new cars) or wholesale price (for used cars), as well as the manufacturer’s suggested retail price (for new cars) or the dealer’s asking price (for used). While invoice pricing on third-party information sites isn’t 100 percent accurate, it is a good indicator of what the dealer paid for the car, and it’s the best place to start your negotiation. Aim to reach an agreement on the sale price that is close to that number before any discounts are applied, and keep in mind that the dealer needs to make at least a few hundred dollars’ profit to cover the operating costs of running the dealership.

8. Research all possible discounts in advance

You’ve probably seen the ads promoting cash-back deals, and these incentives should be deducted after you negotiate the price. In addition, many automakers offer discounts to students, military members and even members of certain credit unions. These discounts can be stacked and can be combined with the cash-back rebates on the model. Check automaker websites for these incentives in their “Current Offers” sections.

9. Take your time with the test drive

When you’ve completed all your research, call the dealerships you want to visit and make appointments for test drives with the internet or fleet manager. You can find the name of the right person at the dealership website. By reaching out, you’re establishing a relationship with someone who might be less likely to try to strong-arm you into a deal if you decide you are ready to buy after the test drive.

Since most car shoppers these days keep their cars for five years or more, take your time with the test drive to make sure you really love the car. Don’t hesitate to ask for more time behind the wheel to ensure you like the driving experience, and spend time in the car while it’s parked to adjust the seats, experiment with the controls and determine whether passengers would be comfortable and your regular cargo would fit well.

10. Use smart negotiating strategies

When you are ready to make a purchase and start discussing a price, keep in mind all the discounts you’ve researched, and — for the moment — forget about trading in your car as part of the deal. You’ll do better if you negotiate the sale price of your new car and the trade-in value of your old car separately. Make sure you have already researched your current car’s value online so you’ll know whether you are being offered a fair price when a trade-in is discussed.

Once you’ve reached an agreement to buy, be prepared to say “no” to all the extras you may be offered. Instead, say “no” and do the research at home for whatever add-ons interest you, and contact the dealership at a later date to negotiate fair prices for those items. When you are presented with a sales or lease contract, go over all of the details carefully, making sure that you aren’t paying any unnecessary dealer fees and that everything you negotiated verbally is spelled out in writing.