If you’ve been dreaming about heading out in a new ride, but don’t look forward to going through a stressful car-buying process, we hope this car buying 101 blog will help. It’s easy to get overwhelmed with selecting a new car and then dealing with financing. Our handy tips are useful whether you’re buying your first car or your tenth.
Determine a price you can afford
First and foremost in car buying 101, you need to figure out what you can afford. This determination may start with a monthly payment. What monthly payment or range best fits your budget. This will help you to calculate and determine a realistic price target for your new vehicle. Budgeting experts recommend only 15-20% of your net income be spent on transportation. This includes your car payment, insurance, maintenance, and fuel. You can use a car affordability calculator such as the one provided by U.S. News & World Report. Remember to include your trade-in and sales tax, fees, and any down payment into your calculation.
Car Buying 101: New or Used Vehicle
Your budget may determine whether a new or used vehicle is better for your needs. Used cars are obviously a bit less expensive, and you may be able to find a great deal on certified pre-owned. It all depends on your needs and budget. Used car loan rates might be just as good as new car loan rates, depending on the lender. Check out the competitive rates on both new and used vehicles at Choice One Community Credit Union.
Begin your car shopping journey with online research
Online car research will not only help you find vehicles that are in your price range but will also enable you to see reviews based on safety, quality, reliability, performance, and more. Sites such as the Insurance Institute for Highway Safety provide vehicle ratings based on the evaluation of how well a vehicle protects its occupants in a crash. They also rate based on technology that can prevent a crash or lessen its severity. You can even browse through a listing of top safety winners on the IIHS site. The National Highway Traffic Safety Administration (NHTSA) also provides information on safety ratings to help you make a more informed decision. The U.S. Department of Energy website will help you find and compare cars based on fuel economy. This can be extremely helpful when looking for a vehicle to fit your budget and should help you narrow down your choices.
Other helpful sites for online research include Edmunds and Kelley Blue Book. Edmunds even enables you to search for specific automaker deals and incentives. Both Edmunds and Kelley Blue Book will also help determine the value of your trade-in if needed. Check this while you’re on the site and put that figure with your other research to have handy when negotiations begin. Search each automaker for deals if there is a specific make and model of vehicle you are interested in. Automaker sites will contain information on discounts, cash-back rebates, and more. As you’re researching, take note of pricing, discounts, and deals. Being flexible with your vehicle choices will enable you to shop for the best deals. We can’t stress research enough when it comes to car buying 101.
Lock in your financing with auto loan pre-approval
Pre-approval can put you in the driver’s seat faster and help you through the negotiation process. Many financial institutions will offer auto loan pre-approval. Choice One Community Credit Union provides pre-approval online, by phone, or in person at any branch location. Tap to learn more about auto loans and pre-approval at Choice One. Car shopping with a pre-approval is an important piece of advice we don’t want you to overlook.
Just like you’ve been comparing vehicles, compare lenders for the best auto loan deal. When comparing auto loans, consider the APR (annual percentage rate) and the length or term of the loan. In addition to the rate, compare the percentage you are able to finance, as well as any fees or early payoff penalties. Some lenders may offer a lower rate but make up for it with higher fees or other hidden costs.
Visit several dealerships and take various cars for a test drive
By now you’ve done so much online research that you’re dying to get behind the wheel. Begin looking at vehicles you know fit your price range and needs. You’re going to have this vehicle for a long time, so be sure to spend enough time on a test drive. Test different makes and models for better comparison. You may be surprised at what a test drive can reveal when it comes to comfort, handle, and more. Drive on roads you would typically be taking and pay attention to how the vehicle handles and feels. You want to be comfortable and there has to be ample room for your family. Take them along for the test drive to see. Does the vehicle have the features you need? Test them out as well.
Even if you like a car you’ve driven, move on to the next dealership and test drive there as well. In addition to having the bargaining power of being pre-approved for a loan and knowing the deals and incentives, you also want dealers to know you are comparison shopping. Allow them to make suggestions as to the best deal. Perhaps next year’s models are already on the lot and there’s a discount on the current models. As you’re going from dealer to dealer and comparing vehicles, check with your insurance agent on insurance costs as well. You may have a couple of local dealerships you like. If not, ask friends and family for recommendations.
Begin negotiating
You should already have an idea of the cost of the vehicle from your research. In the dealership, the MSRP sticker on the window represents the Manufacturer’s Suggested Retail Price. It will also have option packages and destination charges. Keep in mind, this is not what the dealer paid for the vehicle. They pay what is called the Factory Invoice Price, which is lower than the MSRP. When you begin negotiating, tell the dealer you are not interested in a monthly payment cost, but rather a true selling price. You already have financing in place, so it’s strictly the vehicle price you’re focused on. Don’t buy any unnecessary extras, such as paint sealant or fabric protection. That will only increase the price. In addition, don’t bring up a trade-in until you’ve agreed on a price. Finally, if you don’t feel you’re getting the deal you’d like, walk away. You may be able to get a much better deal somewhere else.
Finalize your auto loan
Once you’ve struck a deal with the dealership, it’s time to finalize your auto loan. It’s the final step in car buying 101. If you’ve gotten your pre-approval at Choice One Community Credit Union, give us a call to let us know you’re ready to go on your loan. View rates or learn more about Choice One Community Credit Union car loans online. Read more about the car buying process in our blog article Common Car Buying Mistakes.