Ten Tips to Buy a Car at the Right Price in 2013

If you're thinking about buying a car in 2013, it's time to start planning and budgeting. Car buying is expensive, and it's typically the second most expensive purchase an American makes, next to a home. To avoid spur-of-the-moment decisions, follow these 10 tips for car buying in 2013.

Tip 1: Determine your budget

To keep your auto costs in check, plan to spend no more than 20% of your monthly household income on car-related costs for all the vehicles in your household. Remember that the 20% number includes all costs associated with your car, such as repairs, maintenance, auto insurance and your car payment. Use Bankrate's home budget calculator to help you determine what you can afford.

Tip 2: Don't assume a small budget equals a used car

Thanks to demand after Superstorm Sandy, used cars are in shorter supply than new cars, which makes them more expensive than similar cars in the past and harder to get a good deal. Plus, interest rates are higher on used cars than new cars, so it may cost more in the long run in interest to own a used car than a similarly priced model that is new. If you plan to spend at least $14,000, then assess your options for both new and used cars, and then make your choice.

Tip 3: Know your ownership costs

You probably have a pretty long list of possibilities for your new car at this point. To narrow it down, look at each car's ownership costs on independent car-pricing websites. You'll probably find a wide range of actual ownership costs, even with cars that are priced similarly.

Keep in mind that these costs are averages and that your actual costs may vary dramatically, especially for car insurance and fuel. For a more accurate calculation, run your own calculations on car insurance by getting quotes based on your area and driving record. Use current gas prices in your city to determine fuel costs, and add those to other ownership costs listed on the website.

Tip 4: Find the best interest rate before visiting a dealer

Those ads for zero percent and low-interest financing are designed to woo you into a car dealership to commit to buying before you've thoroughly given thought to the decision. The reality is that most car buyers don't qualify for the cut-rate finance deals that automakers offer.

Even if you have good credit, don't assume you'll get the best finance deal. Instead, shop around at your local lenders, including credit unions and Bankrate's rate search tool, to determine the best interest rate you qualify for before visiting the dealer. Then, you can compare the deals and make the best financial choice.

Tip 5: Know all the rebates and discounts that apply to you

Automakers often tout cash-back rebates in advertising that apply to all buyers, but frequently there are "personal rebates" that only some buyers qualify for that are not as easy to spot.

Some examples include savings offered to students or recent grads, current or former military personnel, members of certain credit unions, or other member-based stores. There are also discounts for current owners of the brand they are buying, called a loyalty discount, or a competing brand, called a competitor discount. Traditional cash-back rebates that apply to all buyers are usually offered in lieu of manufacturer financing, so if you are considering both, use Bankrate's calculator that compares car rebates to low-interest loans. The tool can help you determine which is the better choice. Personal discounts can usually be combined with traditional rebates, and they can often also be applied to a low-interest car loan, which often means a guaranteed savings.

Tip 6: Determine the invoice price

Independent car-pricing websites note every car's invoice price for new cars or wholesale price for used cars. While this information isn't always 100% accurate, the figures listed on these sites are very close and are a great tool. As you negotiate the sale price on your new car, start at the invoice or wholesale price and negotiate upward to ensure the best deal, while still giving the dealer some profit to cover his overhead and expenses.

Tip 7: Forget about trading in your car

Even if you plan to trade in your car instead of selling it privately, forget about it as part of the deal for the moment. It's easier to get the best price for each if you negotiate the sale price of your new car and the trade-in value of your old car separately. Make sure you do your research online about your current car's value in advance so you know whether you are being offered a fair price.

Tip 8: Be thorough in your test drive

It's likely you will own your next car for many years, and that means logging a lot of time in the driver's seat. Make sure you'll be comfortable and happy with your car for the long term by ensuring your test drive takes you through all the typical driving situations, and don't hesitate to ask for more time if you need it.

Allocate extra time with the car parked to fully review the seating position, controls and all of the car's other features. If you carry specific cargo regularly or use car seats for your kids, do a test of those items to ensure a good fit.

Tip 9: Check the car's history even if it's new

Check the reliability ratings for the car you're buying so you're aware if the model has a history of problems. Then, once you've settled on the exact car, get its vehicle identification number, or VIN, and run a vehicle history report, even if it's new.

Thanks to Superstorm Sandy, there are likely to be tens of thousands of cars sold all over the country in 2013 that were damaged in the storm. Use the vehicle history report to look for clues of storm-related issues and other problems. For details, read Bankrate's "4 tips to avoid buying a water-damaged car."

Tip 10: Say 'no' to extras

If you are buying a car at a dealership, the salesman will bring you to the finance and insurance department to finalize the sale after you've agreed to a price. It's here where you are likely to be offered a whole host of extras, ranging from an extended warranty to car accessories and everything in between.

It's wise to say no to all the extras, even if you'd be adding a few extra dollars to your car payment for something you think you might like or need, and even if it sounds like a fair price. Instead, say no and do the research at home for whatever it is and contact the dealership at a later date to negotiate a fair price for that item.