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Dollars and Sense: The Nine-Step Car-Buying GPS


Unless you plan to start collecting mega yachts, buying a vehicle is likely to be one of the larger kinds of purchases you’ll make. By taking the time to properly plan and prepare for buying a car, you can save yourself hundreds or thousands of dollars to put to good use elsewhere.  Sounds good?  Here’s how:

1. Figure out what you can afford.
Complete a budget. See how different monthly transportation expense figures make sense for your spending plan. Then plug that number into an auto payment calculator, like this one, to see how much of a total vehicle price you can afford.

Tip: Your Credit Union makes budgeting easy with our expert interactive tool.  It takes you through the budgeting exercise, “holding your hand” at each step to make light work of the task.   Check it out!

2. Monitor your credit.
Review your credit reports. To ensure the accuracy of the reports and pinpoint areas that need work, use the Credit Bureaus’ annual credit report service to get free copies of your reports at  For more frequent, free reports, sign up for your Credit Union’s Credit Sense platform.  You can see your credit report daily and discover/correct costly reporting errors.  This can enhance your score and save you money in the form of better interest rates.  Learn more here.

3. Find the right car for you.
Think about how you’ll use the vehicle. Will it traverse cross snow-covered mountain passes with hairpin turns, or chauffeur your kids to school–or both?

Pay special attention to safety and reliability ratings. No car meets your needs when it’s always in the service shop or puts you and your family at risk of harm.

Check with your insurance provider. That cherry red sports car might sound tempting, but you might not be as thrilled when you get the insurance bill.

4. Consider new vs. used, buying vs. leasing and down payment amount.
Decide on a new or used vehicle. Do you prefer the negligible wear-and-tear and increased reliability of a new vehicle, even if it means the value may drop sharply in the first few years? Or would you rather let someone else take the depreciation hit by going with a used vehicle, but take the risk of not fully knowing the condition and history of the vehicle?

(Side note: you can also buy “certified pre-owned” from an authorized dealer, which means your car will be subjected to the dealer’s inspection and you’ll receive an accident report.)

Figure out if you’d rather buy or lease the vehicle. If the idea of always driving a new car matters more to you, leasing might be the best option even though it usually costs more in the long run.

Think about how large of a down payment you can afford.  A larger down payment can help you get qualified for a loan more easily, get a better interest rate, a lower monthly payment, and a more expensive car for the same monthly payment―and lets you build equity (owing less on the vehicle than it is worth) more quickly.

5. Get financing.
Arrange your vehicle loan before you go shopping for a car.  Then you know exactly how much you can afford and won’t be rushed into a potentially poor choice in the heat of the moment.  Just like you shop around for a good deal on a car, shop around for the best deal on financing.  And when you do, be sure to check out your Credit Union’s rates.  They are exceptionally competitive, offer the same rates on new and used vehicles, and we will even work with the dealer on your behalf.

Avoid subprime lenders. If you can’t qualify for an auto loan with your credit union or bank, consider working on your credit standing first or maybe getting a co-signer and then reapplying for the loan instead of accepting the unfavorable terms provided by a subprime lender. 

6. Determine favorites, contact dealers, and check quality.
Find the vehicles that best fit your needs by searching online. Create a comparison chart to keep track of all the attributes that matter most and how each vehicle stacks up.

Use the internet or trips to dealerships to comparison shop. Once you know which vehicle will suit you best, start looking at particular models and add the prices of each to your comparison chart.

Do test drives and check vehicle histories. During the test drive, pay special attention to the transmission, shocks, brakes, and alignment. If you aren’t sure what to look or listen for, invite a more experienced driver along on the test drive. Write down the Vehicle Identification Number (VIN) and use it to get a vehicle history report from a company like AutoCheck or CARFAX if you are shopping for a used vehicle.

7. Get the best price on the car.
Know what your preferred models are selling for. Companies like Kelley Blue Book, TrueCar, and Edmunds specialize in tracking the average price of vehicles and rebates or incentives available.

Negotiate each piece of the deal separately. Beware of salespeople who roll the different components of the transaction – purchase price, financing, trade-in, extras – into one deal or who make an offer in one area of the deal that sounds too good to be true.

Walk away if you are not happy with the deal. You know what you can afford and ultimately you control this transaction. Let the salesperson know you “know where the door is” upfront, and that you won’t hesitate to use it if they can’t meet your number.

8. Know your legal responsibilities.
Find out the insurance necessary for your state. The Insurance Information Institute’s website at has a list of the minimum insurance requirements for each state.

Learn what the DMV requirements are for your area. Contact your state’s Department of Motor Vehicles (DMV) to make sure you have the proper license plate stickers or any other items that might be necessary to register your vehicle.  The dealership might offer to help, but ultimately it is your responsibility.

Know what to do if you can’t make your car payment. If you find yourself in a situation where you are struggling to make a car payment, the worst possible thing you can do is to avoid your lender. Instead, work to avoid repossession by staying in contact and asking about hardship programs.

9. Put yourself in a position to succeed long-term.
Establish an emergency savings account. Unexpected expenses have a way of popping up in life and vehicles can be a major source of these.  Your Credit Union has some rewarding ways of saving ―including our extra high-interest Rainy Day Savings account.  Learn more here.   

Look for ways of saving on gas (or electricity), to get more mileage for the buck. Like using the air conditioning sparingly, not accelerating rapidly from a standstill, and removing heavy items from the trunk.

Save on your insurance. Shopping for the best insurance deal is always a good idea, but think about all the ways you could get a better deal, like improving your credit score, buying a used car instead of a new one, and avoiding 4-wheel drive and high-performance cars.

Smart Tips

Five Potholes to Avoid in the Car-Buying Process 

  • When you think about what you can afford, remember it’s not just the car payment. Insurance, gas/electricity, tolls, parking, repairs, and maintenance can all drain a budget fast if you haven’t planned for them.
  • The percentage of your available credit limit you use, also known as credit utilization, makes up 30% of your credit score. Pay down your credit card balances at least a month before you apply for the car loan to be in a better position to potentially get a low interest rate.
  • A relative or friend can co-sign on a vehicle loan to help you qualify, but be aware that if you miss payments it will hurt that person’s credit too.
  • While a lower monthly payment on a lease may sound attractive, make sure you know the mileage restrictions and additional cost for excess miles.  They may conflict with how you plan to use the vehicle, and cost you more in the long run.

Zero percent financing and deals like zero down sound fantastic, but be aware―the dealer will look to make that money up elsewhere, like the purchase price or higher monthly payment.   

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