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News & Tips

Tips for Buying Your New Car

May 10, 2018 by Jodie Kinley-Smith

According to TrueCar, May is one of the best months to get a great deal on a car, even apart from Memorial Day sales events. May is popular not only for the good weather, but it may be related to dealers’ desire to clear out inventory to make room for new model releases in June. So, if you are planning to buy a new car this summer, read these tips to find the car of your dreams.

Determine Your Budget

As with any major purchase, it is always a good idea to do your homework in advance to know what you can afford. A good rule of thumb is to spend no more than 25 percent of your monthly household income, including your monthly car loan payments and all other vehicle costs, like fuel and car insurance. We offer calculators on our website that are helpful for estimating your monthly payment; For the most accurate payment estimate getting preapproved for an auto loan is best because it’s based on your specific needs and credit.
Another important consideration that many people overlook is depreciation, which has to do with the value that your car loses over time.  Your new car may lose as much as 11 percent of its value the moment you drive it off the dealer lot. According to Kelly Blue Book deprecation is among the largest cost in owning a car, even more so than fuel and repairs. Kelly Blue Book and Edmunds both offer online calculators that will estimate the additional cost of car ownership including: depreciation, interest on your loan, taxes and fees, insurance premiums, fuel costs, maintenance and repairs. 
Understanding how well a vehicle holds its value can also help you avoid getting “upside-down” or “underwater” on your auto loan, where you owe more than the market value of your vehicle. When financing, choose a loan term that equals the length of time that you are likely to keep the car. 

Decide: New, Certified Pre-Owned, or Used?

There are a wide variety of car makes and models to choose from when considering a purchase.  The benefits of buying a new car include perks like reliability, a better resale value, and the new-car smell.

However, buying a new car may not be cost-effective for some, which is why certified pre-owned (CPO) is an ideal compromise.  CPO vehicles are cheaper than new cars, they usually have some warranty left, and they must meet certain criteria to help ensure their reliability and condition. 

Alternatively, buying a used car may be a more affordable option, but consider getting a CARFAX report to make sure that there is not any frame or flood damage when looking at used vehicles. You can also negotiate to take it to your mechanic for review before you sign on the dotted line.

Reduce Your Choices

Research the cars that have caught your interest to determine whether they fit your budget, visit the automaker’s official website, and seek independent automotive information from other sites to assess the features that are important to you; important things to note include MSRPs (manufacturer’s suggested retail prices) and invoice prices. Also, check local inventory listings to see what is available in your area to help narrow the search to what you are looking for specifically.

Research all Possible Discounts in Advance

Many automakers offer discounts to students, military members, and even members of certain credit unions. These discounts can be stacked and combined with the cash-back rebates on the car model of interest. 
Check the automakers’ websites and look for incentives in their “Current Offers” section to see what you may qualify for. You’ve probably seen ads promoting cash-back deals during your search; these incentives can be deducted after you negotiate the final price of the car that suits you. 

Take Your Time With the Test Drive

Call the dealerships you want to visit and book appointments to test drive the cars you are interested in after completing your research. On average, car shoppers typically keep their cars for five years or more once a decision has been made, so take your time with the test drive to make sure you really love the car. 
Do not hesitate to ask for more time behind the wheel to ensure you like the driving experience:
  • Spend time in the car while it’s parked to adjust the seats.
  • Experiment with the controls to determine whether passengers would be comfortable.
  • Check to see if your regular cargo would fit well.

Purchasing Service Contract, Maintenance and Gap Insurance

Most new cars come with a warranty to begin with, but extended service contracts can be beneficial and help you avoid out of pocket expenses should the vehicle have mechanical issues; the same concept applies to the maintenance program.  
Many car manufacturers offer programs that can prepay for maintenance and save you money in the long term.  Gap insurance is beneficial if you happen to total your vehicle in an accident, and can help save thousands of dollars and pay for your insurance deductible.

Use Smart Negotiating Strategies

When you are ready to make a purchase and start discussing a price, keep in mind all the discounts you’ve researched, and — for the moment — forget about trading in your car as part of the deal. You’ll do better if you negotiate the sale price of your new car and the trade-in value of your old car separately. Make sure you have already researched your current car’s value online so you’ll know whether you are being offered a fair price when a trade-in is being discussed.
Go over all of the details carefully once you’ve reached an agreement to buy, make sure that you aren’t paying any unnecessary fees when you are presented with a sales contract, and verify that everything you negotiated verbally is spelled out in writing.

Secure Financing Prior to Your Dealer Visit

You’ve heard the phrase, “you should never go grocery shopping when you’re hungry”?  Well, the same can be said about car shopping.  Buying a new car is exciting, and for many of us it’s an emotional experience.  Too often shoppers start with the goal of a monthly payment and while at the dealership they lose sight of the car’s price.    
Getting preapproved for a loan puts you in a better negotiating position like that of a cash buyer. You will know that you are getting the best interest rate, and it simplifies the dealership experience.

SCCU works with many local auto dealers, and we’re glad to offer the convenience of SCCU financing at the dealership.  However, if you’re cost-conscious, then doing your homework upfront will likely save you money in the long run; researching your loan is as important as researching the car. Comparing rates and terms from lenders will help you get the best deal, and it puts you in the driver’s seat at the dealership! 
Visit our website to check out our low interest rates and see how much you can save when you finance your auto loan with Space Coast Credit Union. 
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