Senate Cents: A Financial Wellness Blog

Buying a new car is a little like a game show. Choose the right door and you win your prize — a sweet deal on a good car. Choose the wrong door and you will lose money and hate the shopping experience. Navigating the car-buying process has never been easier, thanks to the transparency created by the internet.

Before we go into detail, here is an overview of the steps you will need to take to buy a new car:

1. Set your budget. Decide how much you can spend, what your monthly payment should be, and how you will finance your new car.
2. Choose the right car. Narrow the field and choose the model that best serves your needs.
3. Check reliability and ownership costs. Choose a reliable car that is inexpensive to own, even if it costs a bit more to buy.
4. Test-drive the car. Test-drive your top choices to see which car is right for you.
5. Locate your car. Cast a wide net by searching dealership inventories online.
6. Find the right price. Use pricing guides to see what other people are paying for the car you like.
7. Get dealer quotes. Contact several dealerships and ask for the best price.
8. Maximize trade-in value. If you trade in your old car, figure out how to get the most for it.
9. Seal the deal. Review the contract and sign documents.

Set your budget

Start by deciding if you want to pay cash, take out a loan, or lease your new car. Paying cash makes your budgeting process pretty simple, but don’t spend all your savings. And remember that you will also have to pay sales tax, registration and insurance. 

Most people take out a car loan or, increasingly, opt for leasing a vehicle. It is smart to get preapproved for a car loan because it simplifies the buying process and puts you in a stronger position at the dealership. Later, you will see how having a preapproved loan fits into the process.

Choose the right car

Now the fun begins — picking the right car for you. Think about how you plan to use this car. For example, if you have a family, you will want enough room for everyone plus ample cargo space. If safety is a top priority, check out the Insurance Institute for Highway Safety for crash tests.

Narrow the field by making a list of must-have features. Then, search for models with the car finder tool found on some automotive sites. Filter your search according to your budget and desired features. As you move forward, list three target models to research in more detail.

Check reliability and ownership costs

You want to make sure to choose models not only for their dependability but also for their low cost of ownership. Consumer Reports and J.D. Power collect maintenance reports from owners and rate all cars for reliability.

A closely related issue is the total cost of ownership. Some cars are cheap to buy, but will cost a lot in the long run because of insurance, maintenance, repairs and depreciation. Several automotive websites — such as Kelley Blue Book’s Five-Year Cost to Own or Consumer Reports’ Cost of Vehicle Ownership — show estimates of these expenses. It may be wiser to shell out a bit more money upfront when buying a car. 

Test-drive the car

Ideally, you want to test-drive all the cars you are interested in buying in quick succession so that the impressions will be fresh in your mind for comparison. Consider setting aside a morning or afternoon for the process, and, if possible, do it mid-week when the dealership is not too busy.

Rather than just walking on to the car lot, call ahead and schedule an appointment with the internet sales manager. That way, the right model will be pulled out and ready to go.

Select a test-drive route that has a bit of everything: hills, rough pavements, curves and even a stretch of highway.

Locate your car

Maybe one of the cars you tested meets your needs and is the right color. If not, you will have to search local dealerships until you find the right car.

Nearly all dealerships list their entire inventory online. But if you’re searching for an unusual color or option combination, you can use sites that cover an entire region — or even the whole country. Many new cars are listed on sites such as Autotrader.com or CarGuru.com. Manufacturer websites might also allow you to search a broader area rather than individual dealerships. Keep widening your search area until you find exactly the car you want.

Find the right price

Pricing guides, such as Kelley Blue Book, allow you to cut to the chase and find out what other people in your area are paying for the car you want. On the website, accurately input all the options you want and, in some cases, even the color, since all those factors affect the car’s price.

Make sure to see what, if any, incentives and rebates are available for the car you want. Most manufacturer websites list current offers, which usually change each month.

Get dealer quotes

Requesting dealer quotes by email can take the stress out of negotiating. You can ask for a price quote by emailing the dealership through its website. Or, to save time, use a third-party site such as Truecar.com to request quotes from multiple dealerships simultaneously. Compare the seller’s asking price to the average market price you determined through the pricing guides. Chances are, the seller is asking more than the market average.

If you negotiate in person, here are a few tips to use on the car lot:

• Do not be a monthly payment buyer.If you have a preapproved loan, you are a cash buyer and you should negotiate the price of the car, not the size of the monthly payment.
• Be unpredictable.Do not let a salesman leave you trapped in a sales office while he “goes to talk with his boss.” Instead, roam around the showroom or go get a cup of coffee.
• Negotiate slowly and repeat the numbers you hear.It is easy to get confused, so go slow and even write down the numbers thrown at you. Make sure you know whether you are talking about the “out-the-door” price, which includes all taxes and fees, or just the sale price of the car.
• Ask about fees before saying yes to a deal.Some dealers may include bogus fees to recoup the profit they lose while negotiating. Ask for a breakdown of additional fees before you agree to any deal.
• Be ready to walk.If you are not making progress toward a deal, or you do not like the way you are being treated, just walk out. No goodbyes are necessary.

Maximize trade-in value

A lot of people like to trade in their old car so they can resolve all their car-buying hassles at the same time. But this could be a costly choice. While trading in a vehicle is convenient, dealers usually may try to low-ball customers and only pay the wholesale price. To see how much that is, go online to a pricing guide, look up your car and compare the trade-in price (what you would receive) to dealer-retail (what the dealer will try to sell it for).

Often, the difference can be $3,000. For example, Edmunds.com’s True Market Value used-car pricing shows that for a 2013 Honda Accord EX, the difference between trade-in and dealer-retail is $3,100.

New trade-in options are available, such as selling the vehicle to CarMax. Or, you can sell it to a private party.  At the very least, look up the trade-in price of your car and negotiate the highest possible price for it.

Seal the deal

If you are negotiating via email or phone, ask to have the car delivered to you rather than picking it up at the dealership. It is quick and stress-free.

But most people go to the dealership to sign papers in person. Even if you have a preapproved loan to pay for the car, the dealership’s finance manager may offer to beat the terms of the loan. It does not hurt to see if he or she can get a better interest rate. Just make sure all the other terms of the loan are the same.

Before the contract is drawn up, the finance manager may also try to sell you additional products and services. Buying an extended car warranty at the right price can provide peace of mind. But check first to see how much warranty is included with the price of your new car. Most new cars have a bumper-to-bumper warranty covering at least three years and 36,000 miles, along with a powertrain warranty that typically lasts up to 75,000 miles. The powertrain warranty covers all the parts that make the car drivable, such as the engine, transmission and suspension.

Take your time reviewing the contract and do not let yourself be pressured into signing just to get it over with. The contract will include the agreed-on sales price and these additional figures:

• State sales tax.This is a percentage of the cost of the car.
• Documentation fee. As crazy as it sounds, the dealership actually charges you for filling out the contract. This “doc fee” is capped in some states. In states such as Florida, some dealerships charge as much as $700 for doc fees.
• Registration fees. A dealer has the ability to register the car for you, which is convenient.

Some dealerships might include additional fees, of which some may be bogus. It is tricky to know what is legit and what is included just to boost their profit. If the dealer’s finance manager cannot explain a fee in the contract to your satisfaction, ask to have it removed.

Currently, USSFCU is giving members the opportunity to win Caps tickets and a fully catered suite for the Stanley Cup Rematch August 1, 2018 through September 30, 2018. Members are automatically entered for a chance to win, when they are approved for a new, used or refinanced Auto Loan from another lender. Two Grand Prize Winners will be selected on October 3, 2018.

For more information, terms and conditions please visit our ALL-CAPS Stanely Cup Rematch Giveaway-Auto Loan Page.

Visit USSFCU’s Auto Loans for more information on how to get a new, used, or refinancing on an Auto Loan.

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