How to Plan for Buying a Car
Buying a car is a big decision and may also be a very frustrating one. While it may admittedly not be the most expensive decision you will make, it can be a rather costly one. That coupled with actually choosing the car and negotiating with the dealer, might prove to be stressful and an emotional decision for most people. Before you actually reach the point of buying the car, you plan for it properly. You will need to ensure that you have the means of acquiring the car and the means to maintain it post acquisition. Below are some tips to consider when you are ready to buy a car. These items will help you see the whole picture and perhaps point out some things you may have forgotten:
First and foremost DO NOT go to the dealer with the intent of buying a car before you perform the research. You will end up buying a vehicle and when you get home “buyer remorse” will have set it within the first hour. Depression will follow and you WILL wonder why didn’t I stop by the credit union first! You will need to research what type of car you are looking for whether it is a sedan, a coup, SUV, commuter or hybrid, or that luxury dream car.
If you are looking at purchasing a used vehicle check publications (such as Edmunds and Car and Driver) on-line, your local magazine rack or local bookstore will have information that will be useful in helping you determine how you would like the vehicle equipped. Technology add-ons will add up quickly, options such as navigation may be better served by an application on your smart phone and will save you thousands. You can consult with your credit union professional to get the value of a used car and get your loan pre-approved for that vehicle before you go to the dealership. Used cars have an established value for condition, options and mileage and armed with this knowledge will help you negotiate. If you are purchasing a used car through a private party the same process will be extremely beneficial and don’t forget to have the vehicle checked out by a good mechanic. Private party sales should require a trip to your mechanic before the purchase as you have no warranty and the price of repairs or lack of a warranty can cost you thousands. This type of purchase is “as is” so buyer beware!
Let’s say you decide on a vehicle and have followed the suggested steps above and armed with that pre-approval you get to the dealership, find the car of your choice and find yourself negotiating the price of the car. Much to your surprise they hit you with selling you additional warranties and paint protection and other alternatives that you did not know about. Whatever you do, don’t add extras in the loan that you have no knowledge of as you will end up with thousands of dollars in costs that you will never be able to re-coup in the loan. There are two primary warranties that the dealer will try to sell you during your negotiations. Guaranteed Auto Protection, which will only cost you $400 at the credit union but the dealer will charge you as much as $2,000 or more for the same warranty and then when you hesitate, they will drop the cost by $500 for the same exact product as the $400 version. The other warranty they will offer you is Mechanical Breakdown Protection (though the name may vary). This coverage will be over and above your warranty and can cost thousands more, but certainly it will be less at allU.S. Credit Union. Additionally, they will give you a rate that may seem better than the credit union, but add in the cost of these new features and you are toast and again paying more than you should.
A new car can be a much more daunting experience. Use the resources above to discover the Factory Invoice Price of the vehicle. Again you can be pre-approved for a value that you feel comfortable with and the credit union can share with you how much you are eligible to borrow. An auto dealership will approve you for more car than your finances will allow as they are in the business of selling cars. How do they do this? Well the first question any salesman will ask is what kind of payment are you looking for? They can extend the loan out for years, more than you would like, depreciate the value of the car to where you will be underwater yet make the payment affordable. The rate on the car will be increased in those same situations or they may charge you a rate that is far above what you can afford or higher than your credit score qualifies you for. Check with allU.S. Credit Union before you buy the car. We won’t charge you a thing for the information. Come in and talk to us before you buy. We will help you determine what payment you can afford. Remember, similar to that used car scenario above, they will sell you extended warranties that the credit union can offer to you at half the cost.
We have talked about a purchase of a new or used car, but what if you have a trade-in or a car you intend to sell before the purchase of another. Use your credit union to assess the worth of your current car. Whether you plan to trade or sell your current vehicle, your current car can be an important factor in your budget. You can also discuss the possibility of trading in your old car as well. Discuss with your dealer if it is possible for you to make a trade-in. This should be done after you have negotiated the best price for the new car and have evaluated the value of your old car. Selling your car yourself may get you a little more money than if you decide to trade it in but it also takes a lot longer to sell it yourself.
Decide whether new or used is best for you. Cars are built better now than in the past, so used cars make a lot of sense. But if you get a rebate or other cost breaks from the dealer, the math may be on the side of buying new. Dealers may offer promotional incentives during various parts of the model year and can be great times to buy, but be careful as they may increase the cost of warranties or not negotiate the value of the cars below factory invoice and in effect are not offering you their best deals.
Leasing is a final option that allU.S. is not involved with. Leasing generally provides lower monthly payments than buying with a conventional auto loan. If you don’t have the money for a down payment or if you trade in your car every two to three years, you may want to check in to a lease. You normally will pay $2,000 to $5,000 up front and have lower payments for a pre-determined amount of time say 20, 32, or even 40 months, which are different than normal loan terms. At the end of the lease you walk away and repeat the process or have the option to buy the car at a predetermined value established at the purchase. You still pay sales tax and normally the value of the lease is set in stone. But, you will be able to drive the newest car every couple of years and look stylish doing it. Make sure you ask yourself if this is what I really what to do? If the answer is yes, do it.
Finally, what you will also need to prepare yourself to do is walk away. Don’t allow yourself to get pressured into making a purchase that is far outside your budget and will prove difficult to repay. You can prevent “buyer remorse”. Always keep in mind that you will have to keep your credit in check as well as keeping your finances in good condition. As much as you may believe that the deal is quite reasonable, try to consider what it will do to your budget and the impact it will make on your income. If you aren’t able to get what you are looking for leave the building. There are many dealerships and that dream car can still be found at another dealership a few miles away.
So, if you are thinking about buying a car, you have come to the right place. allU.S. Credit Union, Positively Different.