Buying a car isn't one negotiation, it's many: your trade, the new car you're buying, the financing – and the newest, most popular profit center – warranties, protection packages, alarm systems and other add-ons.

If you don't know what you're doing, you can save money in one area and pay too much in the other. That's why dealers can sell cars for “no profit” and still make thousands on you. And that's why you need to pay very close attention to the right steps.

If you really want to save money and still like your car after the fourth payment, you'll have to look at the car-buying transaction in a new way. Most people find a car and adjust their budget to fit that car's payment. That's the wrong way, and usually means you spend money on car payments you should have invested or spent on more important things.

The StreetWise approach doesn't start with the car at all; it starts with your budget. StreetWise also encourages you to slow down rather than speed up. Emotions in car buying should come after you've done it right.

And we define “right” as saving money and buying the right car, too. Doing it our way, versus simply following the dealership's lead, can literally put thousands of dollars in your pocket. So, throw out the conventional thinking and take and consider this:

Trade-ins and payments only provide you cash. And right now, based upon your budget and your old car, you have an exact amount of cash available to you to buy a new car. That amount of money is called Available Cash, and it's made up of all the cash you have available to buy a car. For instance, the payment you can afford to make buys you cash. That's called loan cash. Your trade-in may give you cash. That's called equity. Plus there is any cash you have saved that you plan to put toward a down payment.

That's easy to determine. In a minute, we're going to give you an on-line calculator to help you determine that.

Do you want to pay more than you're paying now? Would it make your life easier if you had a lower payment? You decide. If you want a good guideline, most people should keep their car payment below 15% of the monthly gross pay. That can vary greatly depending on your personal financial situation and the size of your other monthly expenses.

Jot that on a piece of paper.

DCU will finance your car, truck, or van for up to 72 months (longer for boats and recreational vehicles). But the truth is we hope you won't stretch out your payments to the longest possible time. Financing longer means you're paying vastly more money in interest, and may owe money on your vehicle for years after its useful life is over.

Finance for the fewest months that will fit your budget, and you actually can buy more vehicle. For instance, the difference on a $30,000 loan financed for 48 instead of 60 months is only $3.85 a day.* You spend more on lunch, don't you? Well then, pay the higher payment, finance for 48 months, and, in this example, you'll save $1,680 in interest. And wouldn't it be nice not to have car payments for that fifth year?

* Assumes a 8.0% APR on the 60-month loan and a 7.5% APR on the 48-month loan.

We're going to give you an easy way on-line to get a rough idea of your trade-ins wholesale value (what a dealer or buying service should give you for it.) Use that for now to get a rough idea of your Available Cash amount. Later, we'll give you a more specific way to know your trade-in value. But for now, head to the next screen and use our handy calculator to determine your Available Cash figure!

© 2009. Digital Federal Credit Union