Advice on Buying a New Car                Click here for Advice on Buying a Used Car

Buying a new vehicle is probably the second biggest purchase you’ll ever make, and more than likely one of the ones you’ll need to research the most. We have developed this guide to help you with the buying process. Learn the financial options available to you, how to negotiate price and how to make the most of your dealership visit. Drive away feeling good about your decision.

The First Step


The best place to start your vehicle shopping is at the credit union. Before you even look at models, colors and features, you should determine how much you can afford and how much your loan will cost you. There are various terms available with different interest rates. By visiting your credit union first, you can learn which terms work with and for you and your financial situation. Getting pre-approved for a set amount will help narrow your field of vision.


During the pre-approval process, ask about GAP (Guaranteed Automobile Protection) and Extended Warranty, both of which cover you in case of a total loss to your vehicle or unexpected repairs. By asking about coverage now, you can calculate the cost into your monthly payment, helping you budget appropriately.


TIP: According to industry standards, all your monthly payments (rent or mortgage, auto, credit cards, other loans, etc.) should equal less than 40% of your gross (before taxes) income.


Buying vs. Leasing


To buy or to lease? That is the question. It’s really a personal decision and depends on your lifestyle and financial needs. Before you decide, it’s important to know the differences of both financing methods.


Buying - When you choose to buy a vehicle, you pay for the entire cost of the vehicle, regardless of how many miles you put on it. You may make a down payment and pay sales tax either upfront in cash or as part of your loan. You also pay an interest rate based on your credit history. Your first monthly payment may start as early as a month after you sign your contract. If you choose to buy a vehicle, in essence, you become the owner of the vehicle. This allows you to sell or trade the vehicle at any time, usually for its depreciated value.


Advantages of Buying:


    You enjoy ownership of the vehicle and can build up trade-in or resale value (equity).

    You won’t have to worry about a monthly payment once your loan is paid off.

    You have the ability to customize your vehicle.

    You avoid the risk of possible lease-end charges.

    You can trade it or sell it if your lifestyle changes, requiring a new mode of transportation.


Disadvantages of Buying:


    You may have a higher monthly payment.

    You may have to endure the unexpected cost of repairs after your warranty has expired.


TIP: New cars depreciate by 20-30% the second you drive them off the lot.


Leasing - When you lease a vehicle, you pay for the “use” of the vehicle. In other words, you pay for only a portion of the vehicle’s cost, which is the part you “use up” during the time you drive it. You don’t have to make a down payment (though there usually are costs due at signing, including the a security deposit and first payment), and you pay only the sales tax on your monthly payments. Instead of paying an interest rate, you pay a financial rate, called money factor, which is similar to the interest on a loan. At the end of your lease, you may either return the vehicle or purchase it for its depreciated value.


Advantages of Leasing:


    You enjoy driving a new vehicle every two or three years.

    You enjoy lower monthly payments.

    Your vehicle will always have the latest safety features and is always under warranty.

    You don’t have to worry about ever trading-in or selling your vehicle.


Disadvantages of Leasing:


    You won’t have ownership of your vehicle or the equity in it.

    You have to worry about lifestyle changes and how it may affect your current vehicle.

    You have to stick to an average number of miles and properly maintain your vehicle.

    You will always have a vehicle payment.


TIP: In general, leasing a new car will end up costing you more over time than buying one.


The Research


Once you know how much you can afford and have been pre-approved, you can begin shopping. Remember, knowledge is power, so obtain as much information on the vehicle(s) of your choice as possible. Research can be overwhelming but it is essential. For your convenience, we’ve listed a few key steps to get you started:


1. Before you even step foot in a dealership, research your vehicle options and pricing online. In today’s technologically-advanced world, your resources are limitless. Be sure to visit and for the latest product reviews and safety ratings.


2. When researching your options, keep in mind how long you intend to drive this vehicle. For example, if you plan on starting a family soon, you may want to research models with special features like child-safety locks, more storage space, etc.


3. In your online research, seek out the invoice price, which is what the dealer pays to the manufacturer. Print a copy of the invoice price for future reference and negotiation at the dealership.


4. When you have a better idea of what you are looking for in terms of models, stop at a dealership on a Sunday or after hours to window shop without pressure. Compare the invoice price you printed from your research to the dealer’s sticker price pasted on the window. How do they measure up?


5. If you intend on selling or trading your current vehicle, research its current value. A helpful resource for vehicle information is the N.A.D.A. website at Even better, get a price from a used-car dealer.


TIP: While researching your vehicle, stop to call your insurance agent. This is the perfect time to re-evaluate your current coverage. Get a couple of quotes from different insurance agencies to determine if you need to switch plans. Your credit union even offers member-discounted insurance coverage through an outside agency. (Click here to learn more.)


Once you’ve gathered your information, you’re ready to shop!


Shopping Tips


Thanks to the internet, shopping is easier than ever, even for a car. Before you go down that path, keep in mind you may get a better deal negotiating a price in person. And since some people stress over this part of the process, here are a few shopping tips to make your visit worthwhile:


TIP #1: Commit to visiting at least three dealerships. Call ahead to check inventory. Visit the location farthest from you in an effort to help you keep your promise of shopping for the best deal. Do not make any decisions until you visit all three.


TIP #2: Shop for your vehicle at the end of the month. Dealers are usually looking to meet end-of-the-month quotas and may offer you a better deal.


TIP #3: Eat well before you go. You may be there for a long time and if hunger takes over, you may make too hasty of a decision.


TIP #4: At each dealership, state your intention to buy a particular vehicle in the next week, as well as your plans to visit other dealerships. This lets the dealer know you are a serious shopper and want the best price.


The Negotiator


Negotiating the price is a vital part of the vehicle-buying process and requires a little know-how. It pays to be smart and to know when to act or in some cases react. If you’ve done your research and followed our shopping tips, you are in good shape to talk money. Again, for your convenience, we have put together a few important tips to help you get the price you want:


TIP #1: When determining your asking price, take the invoice price you found in your research and then subtract any dealer or manufacturer rebates. This still leaves the dealer two to three percent profit. Subtract even more if inventory is high for that particular model or if it’s the end of the model year, calendar year or month.


TIP #2: Keep your trade-in separate. Price the new car first, and negotiate the trade-in separately. This will help you keep track of each transaction. If you don’t like the offer of your trade-in, sell it yourself or to a used-car dealer.


TIP #3: Give the dealer a time limit if he/she leaves to speak with his/her sales manager. This puts you in control and gets you to a final price sooner.


TIP #4: Don’t make a decision that day if possible. Leave with a firm offer and a deadline to accept this offer. This gives you time to weigh your options and feel even better about your decision.


TIP #5: Before you sign, test drive the vehicle and check that it has all the agreed upon features. Your dealership will probably attempt to sell you protection packages and extended warranties. Listen to their offers and then evaluate if they are of value to you, and especially if they are at a good value compared to what the credit union offers.


Click here for Advice on Buying a Used Car

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