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Auto Buying Resources
Auto Buying Resources
Consumer Education Program
Intro
We understand how hard you work to earn the money you have. We want to help you keep as much of it as you can. Read the articles provided below to learn more!
Be Prepared Before Buying a Car
In the market for a new or used car? To get a great deal and a car you’re happy with, brush up on the process of buying a car and the merits of new versus used vehicles:
The Car-Buying Process
1. Set a budget. Before setting off for the dealership, determine what you can afford. Add up your monthly expenses and subtract the total from your monthly income. Look at what’s left, leaving room for savings goals. That’s roughly what you’re working with for your car payments, auto insurance, fuel, and related costs.
2. Do your research. Make a list of qualities that are must-haves, such as large cargo space, a high safety rating, or long-term reliability. Then, seek out cars that match those needs and fit within your budget. From there, you’ll be set to start looking at cars in person.
3. Test-drive cars. Try to drive all the cars you’re considering on the same day to better compare them. Test a number of qualities over the course of at least 30 minutes: Make sure the car is comfortable, drives well on different road surfaces, brakes and accelerates to your liking, and has good visibility.
4. Secure financing. Car dealerships may offer their own financing, but you could be missing out on a better rate if you don’t do comparison shopping. Many dealers mark up their auto financing to boost profit margins, so chances are good that you could get a better deal from your local credit union. Get preapproved before shopping so you have some leverage when you start negotiating.
5. Negotiate terms. Your priority when negotiating should be lowering the total price of the car, not the monthly payment. Negotiating the monthly payment makes it easy for the dealer to sneak in extra costs for the lifetime of the loan. Clarify whether the price being discussed includes taxes and fees or not. Get a breakdown of any fees and be ready to walk if you feel like you’re being given a bad deal.
Purchasing New vs. Used
Buying new: There’s a lot to love about buying new, aside from that new car smell. You can get the latest safety and technology features. Newer cars generally have better gas mileage. And you can rest assured that you’re the first owner of the vehicle and you’re covered by a manufacturer warranty.
Buying used: Selecting a pre-owned vehicle doesn’t just mean a lower total cost. That lower cost can mean you’re able to afford a more premium make or model. You’ll also experience less depreciation on your car purchase and could pay less on auto insurance. Plus, you’ll have a better idea of reliability, since you’ll be able to analyze the real-life results of other car owners.
How Much Car Can I Afford?
How much can you really afford to spend on a car?
Most people find a car and then re-arrange their budget to fit the car. That's a very expensive and budget-busting way to find a car. If you're StreetWise, you let your budget determine what car you can buy.
Your budget is the boss
Based on your budget, you have an exact amount of money available to you right now to buy a car. That money is called Available Cash. It's made up of three things...
- The cash your payment will buy you – Payments don't buy you a car; they buy you a lump sum of cash.
- Any cash your trade-in may give you – After your old loan is paid off, of course.
- Any other cash – You may have rebate money or savings, for instance.
Understanding Available Cash means you understand your budget.
Here's an example of Available Cash
Both of these sentences say the same thing. Which is the easiest to understand?
- “I drive a 2009 Ford Mustang Cobra convertible, I owe $24,050.57 on it, I've got a thousand in savings I want to pay down, and I want to pay $400 per month for 48 months on a new car.”
- “I have $32,644.98 in Available Cash.”
Knowing your Available Cash makes you a Cash Buyer
That's the easiest way to shop. Why? As long as you don't spend more than your Available Cash figure, you will always be on budget!
Should You Buy or Lease a Vehicle?
If you’re considering getting a new car or truck, the choice to lease or buy may be difficult. With leasing, you might have smaller monthly payments, but you lose out on ownership of the vehicle and may have mileage limitations. With purchasing you get ownership equity, but also the stress of selling the vehicle once you’re ready to move on. So what’s the best choice for you?
Pros of Leasing
- When you lease, your payments are based only on the value of the vehicle’s depreciation during the term plus taxes and fees, so it can be more affordable than purchasing.
- Many leased vehicles come equipped with the latest and greatest in safety and entertainment technology. It may be easier to afford these features with a lease than purchasing the vehicle.
- You won’t have to pay for major repairs covered under the manufacturer’s warranty.
Cons of Leasing
- You can only drive within a set mileage per year as specified in the contract, or you will be stuck paying overage fees at the end of the lease term.
- You may need to get more insurance than you want. Most leasing companies require comprehensive and collision coverage, and may require guaranteed asset protection (GAP) coverage as well.
- On top of over-mileage fees, people returning a leased vehicle could have other fees, such as for excessive wear and tear. What may seem fine to you may end up costing you extra at the dealership.
Pros of Buying
- You may be able to refinance your loan and reduce your monthly cost.
- You can drive as many miles as you want and customize your car any way you see fit.
- Since you own the vehicle, you build resale or trade-in value.
Cons of Buying
- You pay more sales tax, since it is based off the total price of the vehicle.
- Unless you have really good credit, you often need a bigger down payment when you buy a vehicle.
- A manufacturer’s warranty is limited, and once you exceed the terms any costs on repairs will come out of your pocket.
Top 10 Car Buying Tips
Buying a new or used car is a big financial decision, so it pays to take your time and do some research before you commit.
Use the following 10 tips to make sure you’re getting a car you can afford, as well as one that will meet your needs now and into the future:
- Establish a car budget. Expect to spend 15% or less of your monthly income on a car payment, car insurance, gas, and maintenance every month.
- Weigh the pros and cons of buying a new or used car. New cars will cost more upfront, but you might get a lower interest rate on a car loan. You’ll also get a full warranty, have fewer maintenance costs, and many dealerships offer free roadside assistance.
Used cars usually give you more options for your money. But you may not know their history and the cars may not come with a warranty. And if you finance the purchase, you might pay a higher interest rate.
Experts say certified preowned cars are a good compromise for several reasons. They cost less than new cars and have lower mileage. Vehicles come with a manufacturer’s warranty, which means the dealership carefully inspects and verifies that they’re in good working order.
- Research models and pricing. Consider the type of car that fits your lifestyle. Visit auto manufacturer websites to find out which models and features appeal to you and how much they cost.
- Calculate the cost of ownership. Include gasoline, insurance, repairs, and maintenance. Independent auto websites can provide the general costs of ownership. Ask your insurance agent for an estimate based on the make and model of the car(s) you have in mind.
- Get preapproved for a loan. Compare rates and terms, then submit a loan application with a credit union, bank, or an online lender. Having financing in hand tells dealers you’re ready to buy.
- Shop around. If you have a dealership you trust, you’re another step closer to finding a vehicle. If you don’t know which dealerships to visit, try online dealer locators.
- Go for a test drive. When you’re ready, test drive a few cars. Let the salesperson know that you are gathering information before making a final decision.
- Check under the hood. Carefully look at the car inside and out. If you’re buying a used car, request a Carfax report and take it to a trusted auto mechanic for a thorough inspection.
- Be a smart negotiator. Bring all of your research when it’s time to talk about price. Make sure the dealer isn’t inflating the price with extras you didn’t ask for.
- Confirm your paperwork. Check your documents carefully to be sure the final price includes everything you negotiated with the salesperson and there are no additional fees.
Enjoy your car knowing you did a great job finding the best possible deal.