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10-step checklist for Labor Day car shopping

By Jennifer Calonia

Thursday - 8/28/2014, 9:45am  ET

Labor Day is a federally-recognized holiday which celebrates hardworking Americans with a day off from work. Unofficially, this day also marks the end of summer and is considered one of the best times to buy a new car.

TrueCar.com estimated that Labor Day weekend last year would boast 1.13 million unit sales among the country's leading automotive manufacturers. With the car- buying trend likely to pick up at a similar speed from the last Labor Day weekend, it's clear that now is the best time to buy a car for those in the market. But like any other major purchase -- particularly purchases that require haggling -- it's important to know the obstacles you'll face at the dealership.

Whether you're goal is to drive off your local dealership lot in a new car or you're waiting for incentives at the end of the year, it's important do a bit of reconnaissance about your target vehicle, and be armed with the right approach to secure the best deal.

Here are 10 must-dos before signing on the dotted line:

1. Know your budget.

Calculate your monthly or recurring financial obligations before coming up with a price you're willing to spend on a car. Once you've determined how much your output is for bills and other regular expenses such as groceries and personal care items, consider your income after taxes. As a guide, a conservative range for a monthly car payment is within 10 to 15 percent of your available discretionary budget. A mistake that many rookie car buyers make is filling up the remainder of their available money stores with a massive car loan payment, without breathing room for essentials such as gas, annual registration, car insurance and maintenance.

2. Check your credit report.

Purchasing a car involves a two-way negotiation, particularly when you're financing a car instead of buying it outright. The reality is that loan lenders use your credit report and credit score as a basis for determining whether to even approve you for a new line of credit, what financing percentage of the vehicle purchase to offer, as well as what interest rate to charge on the loan. All of these factors affect the overall affordability of the car you're eyeing.

Before the test drive, know where your credit stands. Request a copy of your credit report to make sure there aren't any errors casting your financial reputation in a negative light. If your credit score seems unusually low, and you've identified a mistake on your report, contact the three credit bureaus immediately to correct the issue.

3. Test drive ahead of time.

Cast a wide net by feeling out a variety of car models within your price point -- before you decide you're ready to buy. The car you've dreamed about may not handle as well on the road as you'd have hoped, and there may be features you were expecting that the manufacturer doesn't offer for that model. Test driving a car on the day you're expecting to buy can add undue pressure on you at the dealership and cause anxiety because you're unprepared.

4. Identify the trim level you want.

Besides locking in your budget and deciding the make and model of the car you want, make sure you know the features and upgrades you need, are indifferent about and simply do not want. Make these granular details known to the sales associate you're working with, and be firm about what you want. This way there isn't a question about whether you'd be OK with paying more for a moonroof and 18-inch wheels when you walked in wanting a base model at $2,000 less.

5. Research average price points.

At this stage in the game you've identified how much you realistically can afford and what you want in a car, but what's equally important is knowing what price points are available for the car specifications you want. Using online tools like TrueCar.com can help demystify how much of a deal you're really getting.

Car-buying sites can reveal a wealth of information about pricing, which you can use when negotiating a car purchase. When walking into a dealership, it's important to know the manufacturer's suggested retail price (MSRP), the invoice price (how much the dealer pays for the car) and the average amount paid in your area.

6. Seek out manufacturer or dealer promotions.

High car- sale periods of the year, like Labor Day weekend, are a good time to buy a new car because dealerships are looking to push current year inventory out to make room on the lot for 2015 vehicle models. Some manufacturers also recognize these holidays are a good opportunity to encourage more purchases, so keep a lookout for discounts or rebates for 2014 stock.

7. Get a preapproved auto loan.

Probably the most vital -- and effective -- item on this checklist is securing preapproved financing from your bank or credit union. Preapproval shows dealerships you're serious about purchasing a car now, so you can cut some of the back-and-forth haggling from the get-go. Also, it keeps your budget defined, helping you avoid up-sells, and likely keeps your auto loan rate as low as can be, as dealership-based loans are often not highly competitive compared to local bank and credit union interest rates.

8. Watch out for add-on features.

Despite all the measures you've taken thus far to avoid getting charged more money out the door, it's always important to ask for an itemized cost list when discussing pricing. Sometimes tricky financing managers try to sneak in extras like an extended warranty that increases your price overall.

9. Beware of negotiating with four-squares.

If for whatever reason you found your way to a dealership without getting preapproved and you're, in fact, interested in financing through the dealership, make sure you stay mindful of the overall picture. Often car buyers will be shown a four-square worksheet that is used to distract them from how the numbers are being shifted around. The squares are used to identify any trade-in credit, vehicle price, down payment and monthly payment.

Throughout the negotiations, you'll notice the notes in the squares become a lot more cluttered, disorganized and confusing. The goal of this tactic is to make you think the dealership is actually working with any pricing hesitations you may have and to get you to focus solely on the monthly payment instead of out-the-door pricing.

10. Take the pressure off.

At the end of the day, you have more leverage over the car- buying experience than you realize. Even if you spend three hours trying to get to your ideal price point, you can still walk away and give yourself the week to think about the purchase if you're feeling pressured.

More from U.S. News

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The Hidden Costs of Buying a Car

The Best Labor Day Weekend Shopping Deals

10 Step Checklist for Labor Day Car Shopping originally appeared on usnews.com

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