There's so much to
remember when you're buying a new car. Looking up invoice
prices. Gathering consumer and insurance ratings. Finding a
dealer who will treat you right. But in the end, it'll all be
worth it when you're driving the car you really want and don't
dread the day you'll have to bring it back in for service. Sure,
buying a vehicle takes a little effort, but it's not hard
getting a good deal when you follow a few simple guidelines.
Think about the next buyer. If you're like most Americans, you
won't be holding on to that car longer than three years.
Naturally, you need to consider vehicles that will best suit
your needs. To maintain resale value, however, consider cars
that are not too "exotic", have a limited production, or those
that change body style often.
Do the research. Look up consumer and automotive web sites or
magazines for consumer information on the specific makes and
models you're considering. Such information will often allow you
to directly compare one vehicle to another.
Reputation is everything. Look for a reliable, trustworthy
dealer or seller, and avoid those you feel are not. If you have
any reservations about the integrity of a dealer, shop their
Bring along "friends" Take these items along when you inspect a
● A flashlight to check dark places for leaks, rust or damage
● A magnet to detect body filler after an accident
● Rags to wipe your hands
● A note pad and pen to make notes
Try to contact the previous owner of a used car to learn about
its maintenance history and verify it's current mileage. Take a
used car to an independent mechanic and body shop to inspect the
car for mechanical, body or structural problems so you'll know
of any necessary or expected repairs that will need to be made.
Look for any recalls on the vehicle you're interested in.
Put it to the test. During the test drive, drive the car as
you'll expect to once you own it -- load it with people or
stuff, do some freeway driving, try a tight U-turn in a parking
lot -- to see how it works under real world conditions.
Gather the numbers.
Find out the invoice price or market value of the new car and
the value of your trade-in before you visit the dealer or
seller. Watch for any special incentives or dealer holdbacks
that aren't necessarily advertised but provide extra profit to
Know your trade. If you're trading your car, spiff it up and
know what repairs may be necessary before showing it to the
dealer. Negotiate the price of the new car first, then tell the
dealer you'll be trading and negotiate the trade-in value
separately from the new car.
Watch out for last-minute additions. Be wary of expensive dealer
installed options like rustproofing, fabric and paint sealants,
extended warrantees or extra insurances which tend to have a
high mark up.
shouldn't end with the sale. Before you buy, visit the dealer's
service department and ask about the service they will give you
once you own the car. Read the contract very carefully, and
don't sign it until all your questions are sufficiently
answered. Get it in writing that all recall work or agreed on
repairs have been or will be made by the seller.
Take your time. Make sure you really want the car and can afford
to pay for it, since it can be very difficult to return it after
you sign the contract. Finally, don't succumb to pressure by a
salesperson, or even friends or family, into buying a car you
don't really want.
Borrow or Lease?
Car loans and
leases. Both will allow you to get a new car with monthly payments. But
each have their own distinct advantages and differences that may
or may not be right for you. In your search for a new car, it
makes sense to consider both before making a final decision.
Buying your Car with a Loan
The only way you'll
ever own your car is if you buy it. And with car prices creeping
higher and higher, most people can't plunk down the full
purchase price of a car, so they take out a loan instead. When
you borrow money, the institution you get the loan from owns the
car until you pay it off. As you make payments on the car,
you're building equity in it until it's totally yours at the end
of the loan. Throughout the term of the loan, you are free to
put on as many miles and make any modifications you want to the
car. Excess wear and tear is not a concern when you take out a
loan (except at trade-in time!) since you'll own it when the
loan is done. What's more, when the loan is paid off, the car is
yours to keep with only insurance and maintenance expenses to
think about. Sound like a good deal? It is - to the right
person. You'd probably be better off taking a loan on your new
car if you...
● Would rather own your car at the end of the term
● Average more than 12,000-15,000 miles per year
● Use your car under extreme conditions
● Tend to keep your car for several years
● Are not overly concerned with driving a new car on a regular
● Prefer to pay less on your car in the long run.
Leasing Your Car
Car payments for
many are a way of life. As soon as you get one car paid off, or
even before, another one catches your eye and the payments
return. If this is you, a lease might make sense. With a lease,
you are basically renting a car long term and making payments
based on the depreciation cost of the car. That usually means
lower monthly payments. You can drive a car in your price range
for less, or move up to a more expensive vehicle for the same
amount as a loan payment on a less expensive car. Some very
attractive lease rates are out there, often subsidized by the
auto manufacturers themselves. Popular models - or models that
hold their value - tend to be a better deal since they
depreciate less during the lease period.
Your Present Car - Sell it Outright, or Trade it In?
Just because you're tired of your present car, or it's just
plain tired, doesn't mean it doesn't still have value. Most
people either sell their current car and use the proceeds as a
down payment, or turn their car in to the dealer to reduce their
cost for a new vehicle. Trading-in tends to be a lot easier than
selling it yourself, but you'll most always get a lower return
on your vehicle for this convenience. Selling your car outright
will usually give you a better overall deal.
If you choose to sell your car to another private party, it's in
your best interest to do make a few presale preparations.
Whoever buys your car will appreciate it too. Before you set a
price, find out the book value of the car, taking into account
the mileage, options, and its overall condition. You can find
out how much it's worth by asking your Credit Union Loan
Officer, or looking it up yourself in the
N.A.D.A. Blue Book or on one of several web sites
specializing in the car information. Setting a reasonable price
will draw more perspective buyers to your car, and you'll sell
Before you show your car, spiff it up. Wash and wax it and give
the interior a good cleaning. Change the oil to show you
maintain it well. Have a mechanic look it over and let you know
what it may need to be in tip top shape. Gather up any repair
and maintenance records so buyers can see what's been done to
the car over the years. A buyer will place greater trust in you
if you present a good clean car, repair receipts and
recommendations for possible future repairs. That trust can turn
into a faster sale for you.
Trading It In
If you decide to
trade, you'll want to make many of the same preparations to get
the highest trade in value for your car. Look up its value,
clean it up, change the oil, find out any necessary repairs, and
bring your receipts. The dealer, like any buyer, will appreciate
your honesty and make it easier for you to deal. The dealer will
likely offer you a standard trade-in value, or even wholesale
value, for your car. They'll in turn make their profit by
reselling your car for closer to retail value to it's next
owner. The sad truth is that most vehicles, even those that are
super-clean with low mileage, depreciate over time. So don't be
surprised if the dealer's offer isn't as high as you'd hoped.
On the other hand, feel free to negotiate the price on your old
vehicle. Make offers and counter offers as you would with your
new car. Above all, try not to let the dealer know you'll be
trading before you have negotiated a price, in writing, for your
new car. First, negotiate the lowest price for your new car.
Then, negotiate the highest price on your trade in. A little
wheeling and dealing during this critical time of the buying
process can save you big bucks in the end.
It's 'Me' ...But is it Right for Me?
It's easy to fall in love during the car buying process, even
over something as simple as a color. But many people find out,
much to their dismay, that the honeymoon is over when their
purchase doesn't really meet their needs after all. Consider
these when you're shopping for a new car
Your Lifestyle - Do you take a lot of long trips with your car,
or is it mostly short distances to work and back or around town?
If you're constantly hauling things and helping others move, for
example, cargo space is probably a priority. The same is true if
you're a sports-enthusiast and haul bikes, canoes, camping
equipment and the like. If your travel is off road, a
sure-footed four-wheel drive will better get you through the
Where You Live - People who live in the desert rarely see need
for a four-wheel drive vehicle, unless of course they travel
through snowy areas or primitive roads fairly regularly.
Similarly, a powerful rear wheel drive sports car won't do you
much good when the snow comes to your town next winter. And if
you live in an outstate area, will you have dealer support
available for a model that's sold only in the big city?
Your Family - More specifically, your passengers. Will you be
carrying children? Older parents? Business associates? Pets?
Then a cramped sports or economy car is probably a bad idea. A
snazzy two-seater may be just the thing for weekend getaways or
the daily commute, but not the overall best choice. Performance
enthusiasts take heart -- there are plenty of sedans and wagons
out there that provide driving excitement and performance along
with the practical aspects you need in a car.
Your Likes and Dislikes - Do you have a favorite models, brands,
or some "must have" options? Now's the time to think about what
they are and look at those cars that have what you want. Some
people require cruise control for frequent long trips. Others
favor only domestic sedans. Remember, you may own this car for
six or seven years before trading it in. Any minor dislikes you
have can become major annoyances over time.
Your Budget - In the end, money is a factor. Most of us have to
work within a limited car budget and can easily get in over our
heads with car expenses. Just because you can afford the monthly
payments doesn't make a car affordable for you. There are
insurance rates. Gas mileage. License fees. Maintenance
expenses. All of these should be considered when you're looking
for a new car.
Narrow your search - Once you've determined the type of car you
want, you should be down to maybe four or five models that fit
the bill. Of this small group, do a little comparison shopping.
Check insurance ratings. Read consumer reports. Look at resale
values. And of course, test-drive each one and note your likes
and dislikes. During this part of your search, an overall
"winner" should emerge, and you can start to think about
negotiating a deal.
Do your Homework when Pricing that Vehicle
You can always trust a car salesman to quote you fair prices for
your trade-in and the car you want to purchase... Or can you?
There's no need to take chances when you can readily find out
these values on your own. Once you do, you'll get a good idea
what your present car is worth if you trade it or sell it
outright. You'll also get a good idea what a fair price is for
your new car. It's easy to do, either by asking your credit
union loan officer or looking them up on the internet.
Ask Your Loan Officer
Under normal circumstances, your credit union will be more than
happy to help you look up values on the new or used car you want
to buy. In fact, they'll probably do it on their own anyway.
After all, the lending institution typically doesn't want to
lend more money than the vehicle is worth.
Guides vary slightly between credit unions, but the most common
are the NADA Used Car Guide, Kelly Blue Book, and the computer
program PC Carbook. NADA and Kelly will give you information on
the trade-in value, loan value, and retail value of your present
vehicle, or on a used car you are looking to buy. (PC Carbook
tends to focus more on new vehicles) Most guides include values
of specific options on the car. NADA and Kelly feature a mileage
table that can either add value to your car (for lower than
average miles) or deduct for higher miles.
The numbers you get out of these guides become a starting point
to negotiation. Remember, every car has it's own unique
features, and probably some flaws, that may affect it's ultimate
Internet Pricing Guides
As one would certainly expect, there is plenty of vehicle
pricing information on-line. (Obviously, if you're reading this,
you are well aware that such consumer education abounds on the
internet.) Fortunately, you've discovered a fantastic starting
point - CU Auto Online, provided by your credit union, is a
first step in your quest, and one that is provided by your
friends at the credit union. In all fairness, we also won't deny
that there are many, many alternatives. If specific information
is what you're after, and it can't be found on CU Auto Online,
your favorite search engine will likely yield dozens of web
sites that may offer solutions.
A word to the wise, however, that is true of any on-line
investigation - Know your source. If it is unclear who sponsors,
hosts, or offers the information you are gathering, the numbers
you collect may not be accurate. If you have any doubts of the
integrity of your source, gather comparative data. Or, visit
with your credit union loan officer. Odds are, they have
favorite web-based tools that will aid in your quest.
New Car Pricing
New car manufacturers often love to brag about their vehicles.
Use this to your advantage. Visit manufacturers websites and
"build your own" new car. Here you can price different makes and
models, add or subtract options, and even look at different
colors on the car you'd like to buy. Remember, prices quoted on
these sites are most likely retail values. So if you suffer
"sticker shock" when you price out the car don't worry, there is
probably some room to negotiate when you get to the showroom.
How Much Car Can You Afford?
So you've made the Big Decision. No more dreaming or just
thinking about it -- you're ready to go shopping. The process of
buying a car can make your head swim with all the brands, models
and options that are out there. And let's not forget the
salespeople who can sometimes neglect your best interests when
they're pushing a contract under your nose. Take heart though,
your Perfect Car does exist. It just takes a little effort to
find it. And the search begins before you even set foot on the
When pondering this all-important question, you'll want to
consider how much of a down payment you've got for your new car,
and your monthly income. A standard guideline is that your
monthly car payment should not exceed 20% of your monthly net
income. Once you've determined this number, the other costs
associated with your car fit neatly into two categories: fixed
Even just sitting
there looking great in your driveway, your new car comes with
fixed expenses. These are expenses you have no matter how much
or little you drive your new car. They would include the down
payment (for the first month), loan payment, insurance, tax and
The down payment, in the form of cash or trade-in, lowers the
purchase price of the vehicle and the amount you'll need to
finance. If you're financing a lower amount you'll gain some
flexibility to choose lower payments over a longer loan period,
or a shorter loan period that'll save you months of interest
payments and very likely get you a lower loan rate.
Your loan payment will be the same each month unless you choose
to prepay on your loan. Prepayment is not an option for many
people, but there are benefits to adding a few extra dollars to
your payment each month. You'll reduce the amount of interest
you'll ultimately pay on the loan. Your credit report will
reflect your good payment history. And, of course, you'll own
your car sooner!
Insurance costs will vary greatly depending on where you live,
the car you're insuring, your driving record and the other
drivers in your household. Remember, all insurance companies are
not created equal. You may be surprised to find massive price
variation between three different quotes for the exact same
coverage, so it's wise to shop around. Insurance rating services
such as A.M. Best can give you an idea if an insurance company
is a good choice to consider.
Tax and license round out the fixed costs associated with your
new car. The sales tax is a one-time charge that varies from
state to state based on the stated value of your car when you
purchase it. License charges also fluctuate between states. Some
charge a flat rate for all car licenses while others charge on a
scale depending on the value of your car and it's age. A quick
call to your local license bureau can tell you what you'll pay
to license and register your new car.
are just that -- variable and dependant on how much you drive,
maintenance you perform, and any improvements you make on your
new car. First there's the day to day expenses associated with
owning a car like gas, oil, oil filters, and those occasional
trips through the car wash.
Maintaining your car can cost almost nothing if you have a brand
new car, or somewhat more if you choose a preowned model. No car
is immune from these expenses -- you can expect to replace your
tires, belts, shock absorbers, and refurbish various mechanical
parts as your car ages and the miles add up.
Finally, there's the improvements you choose to make to your
car. The possibilities are endless: custom wheels, high end
stereos, security and navigation systems, performance
enhancements. All these make your car unique and more fun to
look at and drive. They also add to the cost of your car and
should be considered when you're coming up with a new car
Loan Preapproval Preempts Shopping Stress
You walk into a car
dealership, knowing you want a new car. You've got a good job
and are quite sure you can make the payments, whatever they turn
out to be. By the time you've negotiated a price and trade-in
value for your current car, the loan process can be an
afterthought. ...Bad idea! Sure, the dealer may come up with a
payment that fits your budget, but will those payments continue
long after the car is worn out and tired? Shop with confidence,
and avoid any dealership slight of hand, by getting your car
Preplan Your Car Budget
As with any big
expense, a new car will make a sizeable impact on your household
budget. By applying for a loan before you shop, you will find
out exactly what your monthly payment will be. Once you fill in
the other fixed costs of insurance and license, you'll have a
good idea of the overall monthly costs of a new vehicle. What's
more, your Credit Union can also look up the value of the car
you're considering. You'll know right away what your payment
will be, and even the book value (or the true value) of your
Take the Pressure Off
A car shopper who
doesn't have financing in place is fair game for whatever loan
programs the dealer has available, and those may cost you much
more than a low interest loan. Your Credit Union's goal is to
get you the most affordable financing possible. The dealer's
goal is to sell you a car, which may mean finding you any
financing necessary to make the sale. Such loans may provide a
monthly payment that fits your budget, but can wind up costing
you hundreds or even thousands of dollars more over the term of
Free up more time to drive
When you're looking
for a new car, one of your main objectives is negotiating the
lowest purchase price, and, if trading in a vehicle, getting the
highest possible trade-in value. These two important tasks are
time consuming and, quite honestly, take a lot of concentration
and energy. By getting your loan preapproved, you've saved the
time and effort otherwise spent figuring out the dealer's
financing options. You'll spend less time dealing, and more time
with your new car!
Broaden Your Shopping Horizons
Say you're at a
dealer far from home. The selection is great and the prices are
even better. Loan preapproval lets you make your purchase
without having to come back to the Credit Union to discuss a car
loan, after which you'll make another trip back to the dealer to
get the car - if it hasn't already been sold. The same holds
true of purchasing a car over the internet if you're so
inclined. It's simply a matter of convenience. Once you're
preapproved, you've got buying power to make your move on a good
deal and reduce your time spent at the dealership...and the
The Facts of Leasing
More people these
days are choosing a lease over purchasing their new car. There
are benefits - the big ones being lower monthly payments, having
a new car every few years, and low maintenance expenses. There
are also downfalls, including mileage restrictions, confusing
agreements, and the fact that you never really own your car.
People who lease
usually like to drive a new car every two to four years. They
don't mind always having a car payment, especially if it's lower
than a loan payment on a comparable vehicle. They don't drive
long distances that rack up miles quickly, and are careful not
to damage their car or otherwise jeopardize their security
deposit. They also don't get too attached to their car, since it
will likely go away at the end of the lease. If this sounds like
you, read on. If not, purchasing a car may be the way to go.
Once you lease a car there's no "cooling off" period to
reconsider, and getting out of a lease early can be very
some unfamiliar terms and calculations the dealer uses to draw
up your contract:
fee: An extra fee charged by the leasing company that
may be added to your monthly payment, or paid up front.
capitalized cost: The car's cost, less deductions (such
as your trade)
cost: The total cost of the car, including extra
insurance, warranties, and the options you've agreed to
fee: A fee sometimes charged by the leasing company to
clean and repair your car after you turn it in.
insurance: Insurance coverage in the event your car is
stolen or totaled, and its value is less than what you
owe on your lease.
Factor: The number dealers use to determine the interest
payment on your lease. Typically, that number multiplied
by 2400 will equal your interest payment. This number
varies between dealers.
Net trade in
allowance: The difference between what you're getting
for your trade less what you owe on it.
option price: The set price you'll pay for your car if
you buy it after the lease is up.
value: The estimated value of the car when the lease is
up. This value is determined when the car is new.
deposit: Typically one month's payment, refundable if
you return the car in good condition.
payment: Monthly depreciation + interest charge + tax
depreciation: (Adjusted capitalized cost - Residual
value)/Months in lease
interest charge: (Adjusted capitalized cost + Residual
value) x Money factor
(Monthly depreciation + Monthly interest) x Tax rate
monthly payment: Monthly depreciation + Monthly interest
charge + Monthly tax
Not all leases are
created equal! Stop by several dealers and compare their lease
offers on similar cars. Negotiate the price of the car as if you
were buying it, and discuss leasing once that price has been
set. Avoid high cost extras like rustproofing and extended
warranties - you probably won't use the car long enough to take
advantage of them. Make sure your trade-in and other negotiated
credits are listed on the lease form before you sign it. And
compare your total monthly payment to a loan if you were
purchasing the car. Remember, you won't own anything at the end
of your lease, whereas you'll own a car at the end of your loan.
Budgeting For Your New Car
Buying and owning a
new car for most people is an exciting experience. It can also
be more than you might expect financially. After all, there's
more to your vehicle's expenses than your monthly loan payment.
You'll have to maintain the car from the moment you drive it off
the dealer lot. By coming up with a car budget before you buy,
you'll have no surprises at what your new car will really cost
to own. Money management services and automotive publications
have come up with general budgets based on compilations of
several types of cars. But the truth is, your budget will be as
unique as your car and driving habits.
Break It Down
Most of your car
expenses can be considered either fixed or variable costs. Fixed
are those expenses you must pay no matter how much or how little
you drive the car. Variable costs increase with each mile you
Fixed expenses include:
● Down payment (one time expense)
● Loan payment
● License fees
● Miscellaneous (auto club, accessories, etc.)
Variable expenses include:
Once you've determined the monthly outlay for these expenses,
add them together to determine your overall monthly cost (based
on your average monthly mileage for variable expenses. Here's a
few guidelines you can use to calculate the variable costs for
your car. For example:
expense can be figured by taking the average number of
miles you drive each month and divide by the car's
average fuel mileage. Multiply the result by the average
fuel price for your gas expense.
oil (and filter!) should be changed about every 3000
miles. Based on the miles you put on your vehicle, you
should be able to guess how often you'll be changing
your oil. From there, a monthly expense should be easy
last anywhere from 40,000 miles to 70,000+ miles if used
under normal conditions. Research rotation and
replacement costs, then determine your monthly expense
based on your travel habits.
intervals for your car can usually be found in your
owners manual. The dealer's service department or your
mechanic can give you an idea what various maintenance
procedures will cost. Remember too that some maintenance
and repair items may be covered under your new car
that's hard to pin down is repair costs. Overall, cars
are getting to be more reliable and trouble free but
major repairs will be needed sooner or later,
particularly on older used cars. To cover these
potential costs, you may want to consider a 'slush fund'
of cash for just such an emergency.
The numbers, combined with your fixed expenses, should give you
a pretty good idea of what it will cost to operate your new car.
After coming up with a budget for the car you want, you may
decide it doesn't fit your overall budget and consider other
cars that cost less to own. You may not be able to comfortably
afford the exact car you want right now, but hey -- it's better
to find that out now ...instead of later!
0% APR Auto Loan or Rebate - which one is better?
Are you confused by
all of the auto offers out there? You're not alone. Deciding
between a low-rate dealer loan or a rebate can be difficult. So
take a look at these facts before you finance your next new
vehicle.A dealer loan rate of 0% (or whatever today's "special"
rate is) sounds attractive, but beware of hidden costs. Most of
these loans require larger down payments and offer shorter
terms, and some dealers may even require that high cost credit
insurance be added to the amount of your loan. That can lead to
huge monthly payments. You also may find that these loans are
available only on in-stock vehicles and on slow-selling models.
If the payment is too high for you, the dealer may try to talk
you into a higher rate with longer terms. That's where it gets
tricky, because they know you are eager to get into your car,
and their goal is to close the sale.
That's where the credit union can help. For example, choosing
the rebate may be a better option. A rebate can be applied to
your down payment, lowering the amount of your loan. Then, with
a low-rate loan from your credit union, you can choose longer
terms to fit your budget.
Consider a typical vehicle loan of $20,000. With 0% APR and a 36
month term, your payment will be a whopping $555 per month! Plus
the dealer may require credit insurance protection, which will
increase your payment even more (most credit insurance plans
offered by car dealers add the premium to your loan balance,
while Credit Life/Disability insurance offered by the credit
union is charged monthly based on your current balance). Or you
can take the rebate of say $1,500 and reduce the amount of your
loan to $18,500. You then finance your new vehicle at the credit
union for 48 months at 5.99%* APR. Your monthly payment will be
about $434, a savings of $121 per month! Think of what you could
do with an extra $121 every month. You could even invest it and
perhaps earn a higher return than the 5.99% APR you are paying
the credit union. So even if you can afford the high payment, 0%
APR is not necessarily the best option for you.
Before you shop,
give us a call!
is for example purposes only. Actual Rates are subject to change
The Truth About Super-Low Interest Rates
Each year, car makers set their goals ever higher to sell the
millions of cars they produce. This can be good news for us, the
consumers. It means there will be keen price competition and
attractive deals to get us to buy, buy, buy. One tactic
manufacturers use to move the metal is an incredibly low
interest rate. It can certainly spark our interest, and it could
even be a good deal... Maybe.
Check the Fine Print
We've all seen the
'Super-Low' interest rate when shopping for that new car.
Typically, these ridiculously low rates mean you'll be borrowing
the money right from the manufacturer. And like any sound
business, they are out to make money. If they're lending money
at 3.9%, 2.9%, .9%, or even 0%, they're losing out on other
higher interest investment opportunities. Since they're running
a special promotion to sell cars they may give you the low rate,
but for the shortest time period possible. Your low interest
rate could be for a term as little as 12 months. If you're
buying a car worth, say, $20,000, your monthly car payment would
be over $1600 a month even with 0% interest for 12 months. Of
course, your car would be paid off in a year. Wouldn't that be
great! Unfortunately, for most car buyers, a year - or two - or
three - is too little time to pay off a car when there are other
household bills to consider as well.
Keep in mind that not all super-low rate programs mean a
short-term loan. In fact, some programs of late have been known
to extend fantastic rates with terms of up to five years. Before
you sign the dotted line, however, make sure you've checked the
fine print on any loan you're considering.
The Dealers Secret Weapon
The dealer may use
the super low interest rate as an excuse not to bargain on the
purchase price of the vehicle. Besides, they may reason, with an
interest rate that low you're already going to save a bunch of
money (no matter what the purchase price.) Think again. In the
negotiating process, the finance rate should not be a factor.
Your goal is to get the lowest reasonable price for the new car,
and the highest reasonable trade-in value for your current car
if you're trading. The money saved with a super low finance rate
could go down the drain if the car was overpriced in the first
The Real World Alternative
If you can afford a
higher than average car payment, or have a large down payment or
trade in value on your car, this deal may well be for you. But
before you possibly wind up with a higher car payment than you
can comfortably afford, it would be smart to consult your credit
union. They specialize in helping you get the best deal in
financing - taking into effect your other household expenses
and financial commitments. Your loan officer can help you run
some numbers for a credit union loan vs. a manufacturer loan so
you can compare monthly payments. They can also help you
determine a fair value for the car you're purchasing and
trading. And they can get you a loan with a longer repayment
period and lower payments that may fit better with your overall
Buy Low/Sell High - The Negotiation Process
For most people, the
negotiation process is the least favorite part of getting a new
car.No surprise there. To walk into this process unprepared is
to set yourself up to possibly lose hundreds, even thousands of
dollars on the deal. That's the bad news. Now the good news -
armed with some basic information about your present car, the
new car, and dealer costs - you can pocket that extra cash and
drive away a truly good deal.
The New Car
Do you know what
that new car is really worth (the dealer's cost)? Here's a hint
- probably a lot less than the MSRP printed on the window
sticker. On a typical car, the dealer markup could be anywhere
from 10% on a low-end car to 25% or more on a luxury model.
Those percentages are your bargaining chip. Before you can
bargain, however, you'll need a resource for tracking down
dealer cost information. Fortunately, there are a number of
resources at your disposal. Unfortunately, not all of these
tools are alike. Odds are, your credit union has or can
recommend their preferred resource, whether it is on the web, in
book or magazine form, or even as software in use at the credit
union itself. These resources usually carry dealer costs, and
may even offer information about manufacturer incentives and
Don't be shy about letting the dealer know you know this
information. It lets them know you're an educated buyer, and
have already been shopping around.
When beginning the negotiation, don't worry about starting too
low. Around 2% over invoice is a reasonable first offer. Then
it's the dealer's turn to make a counteroffer. So long as they
continue to negotiate, they're still making a profit. With each
offer and counteroffer made, you're coming closer to the target
price of the vehicle. It's possible you could reach a stalemate,
where neither you or the dealer will budge from an offer. At
that point, your search may need to continue at another dealer.
Don't hesitate to walk away if the deal doesn't seem reasonable.
After all, you're the one with the most power during the
Once you reach a deal on the new car, you can now begin
discussing your trade.
If you trade your
car in for a new one, you're actually going through two
negotiations. And like the new car, you'll want to do some
research on your trade. What's the fair market value and
trade-in value of your car? What are cars like yours going for
in the local market? Are there any mechanical problems or
cosmetic defects that will lessen the value of your car? Gather
this information, and share it (including repairs needed) with
the dealer. This will give both parties a better idea of an
ultimate target price for your trade. Keep in mind though,
you'll usually get more for your vehicle if you sell it outright
rather than trading it in. That only makes sense - After all,
the dealer is taking your trade-in assuming he or she will be
able to sell it to someone else at a profit.
The hardest part of
the negotiation may be over, but you're not quite done yet!
Dealers can (and most likely, will) try to tack on a few extra
charges before you drive that new beauty off the lot. Keep your
eyes out for... The Extended Warranty - Be clear on exactly what
this covers, and feel free to shop around for a better price
elsewhere - you don't need to buy one from your dealer, or at
all if you don't want to. Sealants/Rustproofing - Proceed with
caution. These are often high-profit dealer frills of dubious
value that can do more harm than good if installed improperly.
Special Order - Only under the most unusual circumstances should
you ever consider paying extra simply to order a car.
Manufacturers impose no such charges. Dealer Preparation and
Handling - Virtually all manufacturers pay an allowance to
dealers to clean a new car and prepare it for sale to you. To
pay these charges is like paying the dealer twice for the
...And just what is "handling" anyway?
Those Little Extras with the Big Markups
For the dealer,
profits can vary greatly on the particular models they sell. The
question is, how can they turn a good profit on each and every
vehicle they sell? By promoting the extras -- like extended
warranties, rustproofing, and sealants for paint and fabric.
Granted, none of these are a bad thing. But should you pay extra
for them? Many people do, but their usefulness can be
considerably less than the purchase price.
The reliability of
new cars these days is far ahead of vehicles even a decade ago.
Still, the dealer may strongly recommend an extended warranty
that covers various components. Be aware, however, that not all
such warranties are created equal. Before signing up, determine
● Is the insuring company insured? That is, will someone still
honor your policy if they went bankrupt?
● Is the policy transferable if you sell your car?
● What is the deductible on the plan?
● Exactly which parts are covered by the plan and what are the
Many standard car warranties these days provide coverage to
70,000, even 100,000 miles. Do you plan to keep the car long
enough to get some use out of the warranty, or are you even
paying twice for the coverage provided by your standard
warranty? If you decide you want this coverage, feel free to
shop around for it - you may find a better policy from another
has also provided us with cars that hold up better to rust. In
the end, rust will probably win, but quite possibly long after
you've traded the car. Today's cars of galvanized steel (even
plastic!) come with generous "rust though" warranties, in the
event that inner rust comes through to the outside of your car.
Some would argue that a rustproofing job can make a car rust
even faster with all the drilled holes necessary to spray the
coating through the body. Rustproofing isn't as common (or
necessary) as it used to be, and typically a high markup service
performed by the dealer.
Most all of us want
to keep that new car look and feel long after our cars are
really new, but are paint and upholstery sealants the answer?
It's hard to tell. Again, advances in painting processes and
materials have made new car finishes and interiors tougher. But
if your car sits out in harsh sun or punishing winters, a
sealant may help some. So would a good old-fashioned coat of wax
once or twice a year, at a fraction of the cost. And certainly
no seat is immune from a nasty tangle with a chocolate bar or
ice cream cone. A sealant would help in the cleanup, but you'd
probably get the same protection if you went out and bought a
can of fabric protectant for under $10 and sprayed it on
The bottom line is this - Many products serve to protect the
sizeable investment you have in your car, but there's usually no
need to pay high prices for them - especially if they already
come with the car, or can be done inexpensively on your own.
Take Cover! The Basics on Car Insurance - Part One
Car insurance is a
legal requirement for every vehicle on the road. But there are
no laws that say you have to pay too much for insurance or have
more coverage than you really need. Throughout this great land
of ours, car insurance is a legal requirement for every vehicle
on the road. But there are no laws that say you have to pay too
much for insurance or have more coverage than you really need.
There's a lot to consider when you're shopping around for
insurance, but even a little background information can help you
get the best possible coverage and reasonable rates.
The three major types of car insurance are Liability, Collision,
and Comprehensive. Liability Insurance pays for vehicle repairs
and injury damages stemming from accidents in which you are at
fault. This insurance is for the other party in an accident, and
does not cover costs to repair your own vehicle or for injuries
to you or anyone in your car. Collision Insurance is used to
cover repairs to your vehicle whether or not the accident is
your fault. Comprehensive Insurance covers theft of your
vehicle, or damage caused by fire, flood, wind and the like.
Other coverage's are always available, and may or may not be
necessary depending on the policies you already have.
Other Insurances to Consider
Insurance, or Personal Injury Protection (PIP) insurance, is
required in all but 13 states where "no-fault insurance" is not
in force. No-fault insurance states that if you are in an
accident, whether or not it's your fault, your PIP insurance is
expected to cover your medical expenses. You may be able to sign
up for the state mandated minimum coverage of PIP insurance,
depending on the life and health insurance you already carry.
Even though it's the law, many motorists drive while uninsured,
or have too little coverage to pay for an accident.
Uninsured/Underinsured Motorist insurance covers your car repair
and personal injury expenses if the other motorist cannot. Such
protection is usually well worth its cost - For as little as $50
per year, many motorists can receive this additional coverage.
Rental Car Insurance - Typically, your primary car insurance
will cover you when you rent a car while traveling. Before you
travel, check to make sure you're covered, and decline the
insurance offered through the rental car agency. No use paying
twice for the same coverage! Another type of rental car
insurance will cover you if you're involved in an accident and
need something to drive while your primary car gets fixed. If
you have more than one car and can get by if necessary, this is
another insurance you can likely do without.
If you're leasing a vehicle, Gap Insurance is necessary if the
car is totaled and the leasing company needs a higher dollar
amount to pay off the vehicle than your regular policy will
provide. Your insurance agent will have this insurance
available, but many leasing companies simply build the price
into the monthly payment. Before you lease, you can still shop
around for the best price available - the best deal on Gap
Insurance isn't always from your leasing company.
Roadside Assistance will cover the cost of towing and other aid
in case you break down. If you already belong to an Auto Club
like AAA, you can decline this coverage and rely on your Auto
Club to provide assistance.
These are the primary coverage you can expect to pay when you
insure your new car. In Part Two, we'll look into rating an
insurance company, finding an agent, and more ways to reduce
your insurance rate.
Take Cover! The Basics on Car Insurance - Part Two
Once you've done
with Part One of this report, we discussed a few of the basic
insurance coverage for your vehicle. Once you've determined the
types of insurance you'll need, it's wise to get quotes from a
few insurance companies. In the eyes of the law, coverage is
coverage, but you'll want the piece of mind to know that your
company has the resources to handle your claim, the customer
service to help you quickly and courteously, and reasonable
prices for the coverage you need.
Insurance is available through three different outlets.
Independent agents are affiliated with many different companies
that provide insurance. They'll meet with you and gather your
information, then submit it to several different companies to
come up with the best package of service, reliability and price.
Insurance agents represent only one insurance company, but can
still provide all the coverage you're likely to need for your
new car. Other insurance companies offer their product direct to
the consumer with no agents at all. These companies, working
through web sites such as GEICO.COM and QUOTESMITH.COM often
advertise the lowest rates, but keep in mind that they tend to
accept only applicants with the cleanest of driving records. If
you have two or more accidents or violations in the last three
years, plan to spend about twice as much for coverage as a
"preferred" customer would. If you have a DWI on your record,
you'll be in a much higher insurance bracket, or 'risk pool',
until your record is clear.
The Rating Game
company is rated differently when it comes to customer service
and reliability. Luckily, once-obscure rating and consumer
information is now relatively easy to find over the internet.
Friends, family and co-workers can help you fill in the
remaining blanks when it comes to personal experience with a
Of the insurance rating companies, the most common are A.M.
Best, Standard and Poor, and Moody's. Standard and Poor's rating
system is as follows: AAA - Exceptionally strong, BBB - Good, BB
- Marginal and CC - Weak. Not all companies use these exact
ratings, but a rule of thumb is to avoid companies with a "C"
rating, as they may not have adequate funding or soundness to
meet your needs. State Insurance Regulators also record consumer
complaints and post 'complaint ratios' for different insurers on
As you'd rate your insurer, you can also rate your car on some
key insurability factors. Cars that cost less to insure
typically have a low theft rating, high safety rating, and are
rated high in National Highway Traffic Safety Administration (NHTSA)
crash tests. In the NHTSA tests, cars are crashed at 35 miles
per hour into a barrier simulating a real crash. From there they
are rated for driver and passenger safety on a scale of 1 to 5
stars, with 5 being the highest. If your car rates high on these
tests, consider yourself lucky. You'll be safer in the event of
a crash and will probably pay lower premium on your insurance.
Check out NHTSAs website at www.nhtsa.gov for the test results
of several new-model cars.
How Low Can Your Premium Go?
That depends on
several factors including age, lifestyle, even your credit. If
you can answer yes to any of the following questions, you could
be in for lower insurance rates.
● Does your car have anti theft devices, such as an engine
● Will you be insuring more than one vehicle, or your home, with
the same insurer?
● If you're over 70 years old, have you taken a defensive driver
● If you're under 25, can you prove that you're an "A" or "B"
● If you're under 25, have you had drivers training education?
● Is your driving record clean for at least three years?
There may be other factors that can help lower your rate. Be
sure to talk to your agent about any other discounts you may be
eligible for to get that insurance payment as low as possible.
Determined the types of insurance you'll need, it's wise to get
quotes from a few insurance companies.