How to Buy a New Car in Just 10 Steps?

Quick Summary:

• Set Your Budget: Know the On-Road Price (the final cost, not just the ex-showroom price). Your total car expenses (EMI, fuel, insurance) should be under 20-25% of your monthly income.
• Research & Shortlist Cars: List your needs (e.g., city vs. highway driving). Compare models on safety ratings (Global NCAP), mileage, and features.
• Get Financing Pre-Approved: Secure a car loan pre-approval before visiting the dealership. This strengthens your negotiating power by making you a “cash buyer.”
• Test Drive Your Top Choices: Drive the cars you’ve shortlisted. Check comfort, AC performance, engine noise, and how it handles on Indian roads.
• Get Quotes & Negotiate the Deal: Get detailed on-road price quotes from at least 2-3 dealers. You can’t negotiate the ex-showroom price, but you can negotiate on: Dealer-provided insurance, Accessories, and Extended warranties
• Book the Car: Pay the booking amount and get a detailed receipt. Submit your documents (PAN, Aadhaar, income proof) and carefully read the sales agreement.
• Arrange Your Own Insurance: You are not required to buy insurance from the dealer. Compare quotes online from different providers to find the best deal.
• Conduct a Pre-Delivery Inspection (PDI): This is a crucial step. Inspect the car at the stockyard before it is registered in your name. Check for scratches, dents, and ensure the VIN (Vehicle Identification Number) indicates a recent manufacturing date.
• Finalise Paperwork: Once you approve the car after the PDI, give the dealer the green light to proceed with registration.
• Take Delivery: Do a final check of the car and its accessories. Ensure you receive all necessary documents: the final invoice, registration certificate, insurance copy, and warranty papers before driving home.

How to Buy a New Car in Just 10 Steps?

For any individual or family, buying a new car is one of the most exciting life milestones, but it’s also a significant financial decision. Every step is crucial to ensure you get the most for your money, from selecting the best model to comprehending how car loans work.

Here’s a step-by-step guide that takes you through everything from setting your budget to driving your new car home, including insights on the car loan process in India to help you make informed decisions.

Step 1: Determine Your Budget & On-Road Price

Assessing Your Financial Situation

Assess your earnings, expenditures, and current debts first. Add in the price of maintenance, insurance, fuel, and EMIs. A rule-of-thumb to follow is that total car-related expenses shouldn’t exceed 20–25% of your monthly income. To estimate EMIs and repayment schedules, use online car loan calculators.

Understanding On-Road Price vs. Ex-Showroom Price

Many first-time car buyers often make the mistake of planning their budget based only on the ex-showroom price. This price is listed by the dealer for the car itself.

The actual on-road price is always higher than the ex-showroom price because it includes several mandatory and optional charges. These typically include:

• Ex-showroom price
• RTO registration fees
• Road tax
• Mandatory insurance
• TCS (Tax Collected at Source)
• Handling and logistic charges

This final figure, after adding all these, gives you the actual cost of the car that you’ll pay.

Factoring in Running Costs

Beyond the purchase, remember the ongoing costs. This can include fuel, routine servicing, insurance renewals, and occasional repairs. 

Step 2: Research Cars and Shortlist Your Favourites

Identifying Your Needs

Start by listing what matters most to you. This includes family size, daily commute distance, driving conditions (city vs. highway), and desired mileage. For example:

• Small families or city commuters prefer hatchbacks or compact SUVs.
• Frequent highway drivers may look for vehicles with larger engines, better mileage, and stability.
• Those with long daily commutes can consider fuel-efficient or hybrid models.

Exploring Popular Models and Brands in the Indian Market

Explore trusted brands and models known for reliability, service network, and resale value. For example, Mahindra models like the XUV700, Scorpio-N, and Bolero Neo. Research popular models online, consider resale value, and read user reviews to gauge long-term satisfaction.

Comparing Features, Safety Ratings, and Specifications

Compare safety ratings (like Global NCAP), engine performance, fuel efficiency, and features such as ABS + EBD, hill-hold assist, airbags, infotainment, and connectivity. 

Step 3: Get Your Financing Pre-Approved

Exploring Car Loan Options from NBFCs and Banks

Once you have a shortlist, the next step is understanding how car loans work, unless you want to pay upfront. A car loan allows you to pay for your vehicle in easy EMIs, spreading the cost over a few years. 

Most car buyers in India finance a certain percentage of the vehicle cost through loans from NBFCs or banks. Both NBFCs and banks offer flexible loans with quick processing and minimal documentation, particularly suitable for rural and self-employed buyers.

Get a Pre-Approved Loan Letter Before Visiting the Dealership

Pre-approval clarifies your budget and strengthens your negotiating power, as you effectively become a “cash buyer.” It also speeds up the buying process.

Understanding Lease vs. Buy

Leasing is still relatively uncommon in India, and mostly corporate companies use it. However, buying remains popular since ownership gives long-term asset value and freedom from mileage or wear restrictions. 

Step 4: Locate Dealers and Schedule Test Drives

How to Choose a Reputable Authorised Dealer

Select authorised dealers with good customer reviews and transparent pricing. Authorised dealers ensure genuine vehicles, proper documentation, and reliable after-sales support.

What to Look for During a Test Drive

When you test drive your shortlisted cars, pay attention to:

Engine responsiveness and NVH levels (noise, vibration, harshness)

• Air-conditioning effectiveness is especially important in stop-and-go city traffic.
• Seat comfort and visibility.
• Ride quality on uneven roads.

Important Questions to Ask the Sales Advisor

Before finalising, ask about:

• Waiting periods
• Available variants and colour options
• Warranty and service packages
• After-sales service reputation

Step 5: Get Final Quotations from Multiple Dealers

Compare to Save Smart

Comparing offers helps spot inflated fees or insurance markups. To increase your bargaining power, get detailed quotes from at least two or three dealers that include ex-showroom pricing, RTO, insurance, accessories, and handling costs.

Step 6: Negotiate the Final Deal

Focus on Negotiating What’s Possible

Once you’ve completed test drives, request a detailed, itemised quotation from at least two or three dealers. Ensure the quote lists:

• Ex-showroom price
• Registration charges
• Insurance premium
• Extended warranty and accessories

Politely Decline Unnecessary Add-ons

Dealers rarely have room to reduce the ex-showroom price since the manufacturer sets it. However, you can negotiate discounts on:

• Dealer-provided insurance (compare quotes from multiple online insurance aggregators for better value and coverage).
• Extended warranty.
• Accessories like floor mats or seat covers.

Step 7: Finalise Your Booking and Paperwork

Pay the Booking Amount

Once satisfied, pay the booking amount and get a receipt. Booking amounts generally range from ₹5,000 to ₹50,000, depending on the model. Always get a signed receipt that mentions the variant, colour, and the promised delivery timeline.

Submit Essential Documents

You’ll need to provide:

• PAN Card
• Aadhaar Card
• Address Proof (electricity bill, passport, rental agreement)
• Income Proof (salary slips, bank statements, or ITR for self-employed individuals)

Most lenders today accept soft copies or digital uploads, making the document submission process quick and hassle-free.

Understand the Sales Agreement

Read all terms carefully, especially cancellation clauses, refund terms, and delivery timelines. Keep a copy of the booking form and dealer quotation for future reference.

Step 8: Arrange for Insurance

Compare Insurance Quotes

Compare insurance premium quotes online across insurers for better value and coverage. Your dealer may also offer car insurance in partnership with an insurer

Choose Between Third-Party and Comprehensive Coverage

Third-party insurance is legally mandatory. However, comprehensive insurance provides broader coverage against damage, theft, and natural disasters. You can further enhance it with add-ons like zero-depreciation or roadside assistance.

Activate Policy Before Registration

The car’s insurance policy number is needed for registration, so ensure the coverage starts before your vehicle’s registration date.

Step 9: Conduct a Pre-Delivery Inspection (PDI)

Why PDI Matters

Before the car is officially registered in your name, inspect it at the dealer’s stockyard. This is crucial to confirm that you’re getting the exact vehicle allotted to you.

What to Check

Use a PDI checklist to examine:

• Exterior (scratches, dents, paint finish)
• Interior (seat fabric, dashboard)
• Odometer reading (should be under 100 km)
• Lights, wipers, infotainment system, and AC

Check the VIN

The Vehicle Identification Number (VIN) reveals the manufacturing month and year. Verify it to ensure you’re getting a recent batch of cars.

Green Signal for Registration

If everything looks fine, approve for registration. Otherwise, raise the concern immediately before the car is registered in your name.

Step 10: Take Delivery of Your New Car

Final Inspection

On delivery day, take one last look to ensure accessories are installed correctly, all fluids are topped up, and the car exterior is spotless.

Verify All Documents

Ensure you receive:

• Final invoice and payment receipt.
• Insurance copy and policy details.
• Temporary or permanent registration certificate.
• Extended warranty documents (if opted).
• RTO registration papers or temporary registration.

Finalise the Payment

After the final settlement, you’re ready to drive your brand-new car home. 

Conclusion

Buying a new car in India can seem like a long journey, but it becomes a smooth, exciting experience with the proper preparation. From setting your budget to understanding how car loan works, each step plays a crucial role in ensuring you get the best deal, the right car, and the perfect financing option.

Visit Mahindra Finance to explore how car loans work, check your eligibility, and get started on your car ownership journey, confidently, and in just 10 steps. With quick approvals, flexible EMI plans, and tailored loan options designed for every need, you can bring home your dream car without hassle or hidden charges.

FAQs

Q1. What is the first thing to do when buying a new car?

The first thing is to understand your budget using the 20/4/10 rule—plan for at least 20% down payment, limit your loan to 4 years, and ensure monthly car expenses don’t exceed 10% of your income.

Q2. How can I get the best deal on a new car?

Compare loan offers from multiple lenders, leverage your good credit score for better rates, make a larger down payment to reduce the loan amount.

Q3. Is it better to lease or buy a new car?

In India, buying is typically better for long-term value and asset creation, which we can help you finance with a tailored car loan. Leasing can be a good option if you prefer lower monthly outgoings and like to change your car every few years.

Q4. What should I look for during a test drive?

During the test drive, pay close attention to the vehicle’s comfort, handling in city traffic, and performance on open roads. Make sure to test all the essential features like the air conditioning, infotainment system, and safety functions to ensure they meet your expectations.

Q5. How much should I budget for car insurance when buying a new car?

You should budget around 3-5% of the car’s ex-showroom price for your first year of comprehensive insurance. Most lenders require comprehensive insurance for financed vehicles, with some offering the option to pay premiums alongside monthly instalments for added convenience.