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.

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.