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How to Buy a New Car

Other than buying a home or condo, a car is often one of the largest financial purchases you’ll make; so it’s important to be smart about car loan financing. You’ve heard the phrase, “you should never go grocery shopping when you’re hungry”? Well, the same goes for car shopping. Buying a new ride 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. So, if you’d like to know how to buy a new car, read these top tips to help you find and finance the one.

Step 1: Determine your Budget

Before you apply for your car loan, review your own finances and budget. A good rule of thumb is to spend no more than 25% of your monthly household income, including your monthly car loan payments and all other vehicle costs, like fuel and car insurance.

The best time of year to buy a new car that will offer the most savings is usually from October to December, but the end of any month, three-day weekends, Black Friday, and May are all good times too.

Ask yourself the following questions before settling on a car price range:

What down payment can you afford, and what car payment would that cause you to have?
Most people have a down payment range in mind. What would the payment be if you put down the smallest amount in your range? The largest amount?
If you put down the maximum amount you can for the car, will it be worth having fewer funds in your account? Or would you be better off keeping more money in savings and having a slightly higher car payment?

We offer car loan calculators on our website that are helpful for estimating your monthly payment. See the pros and cons of different auto loan terms here.

Keep in mind that your car will usually have additional costs, such as state and local sales tax, a documentation fee, and registration fees.

Step 2: Get Pre-Approved for Your Car Loan

You can save plenty of frustration and streamline the car loan process overall by getting pre-approved for your loan. That way, when you go shopping, you’ll know exactly how big of a loan you can afford, and the dealership can show you a range of cars that are in your budget.

When buying a car, you typically need to focus on three different elements:

how much you’re going to pay for the car you want and need
how much you will get for your trade-in vehicle
- Not sure what you can get for your current car? Find out what it’s worth here.
details of your financing

If you’re thinking of buying or selling a car privately, be sure to check out our infographics on our Car Buying Center.

If you get pre-approved for your financing, that frees you up to focus on strategic negotiations at the dealership so you can get the best price possible and the best trade-in value. Learn more about the auto loan pre-approval process and qualifications here.

Auto Loan Purchase Interest Rates

Effective Date: November 30, 2023
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Payment Period	Purchase APR^* "As Low As"	Minimum Loan Amount	Payment per $1,000
Up to 36 Months	6.24%	No minimum loan amount	$30.53
Up to 48 Months	6.49%	No minimum loan amount	$23.71
Up to 60 Months	6.74%	$10,000	$19.68
Up to 66 Months	6.99%	$10,000	$18.29
Up to 72 Months	7.24%	$12,000	$17.16
Up to 75 Months	7.49%	$15,000	$16.74
Up to 78 Months	7.99%	$20,000	$16.48
Up to 84 Months	8.24%	$25,000	$15.71

Rates shown are fixed Annual Percentage Rates for vehicle model years 2023 and newer. Rates are subject to change. Your actual rate and terms are affected by your creditworthiness, term selected, vehicle type, and model year. Certain restrictions apply. You may be asked to furnish a down payment. Florida loans are subject to Documentary Stamp Tax. The tax amount is not included in the quoted APR.

Step 3: Weigh the Advantages of a New Car vs. a Used Car

When you’re looking at buying a car, it’s important to consider the advantages and disadvantages of a new car vs. a used car:

New Cars

The benefits of buying a new car include perks like reliability, the latest technology features, a better resale value, warranty coverages and the new-car smell.

Another important consideration that many people overlook with new cars is depreciation, which has to do with the value that your car loses over time. According to Kelley Blue Book, depreciation is among the largest costs of owning a car, even more so than fuel and repairs. New cars can lose up to 20 percent of their value as soon as you drive off the lot and 60% within the first five years.

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 is no longer than the length of time that you are likely to keep the car.

Pssst, you may be able to get a tax break on the depreciation of your car, so be sure to consult with your tax advisor about deductibles.

Used Cars

Alternatively, buying a used car may be a more affordable option and depreciation that occurs early on has already taken place. You’ll want to determine if any major accidents have occurred, and if you want the type of warranty coverages that come automatically with new cars, you’ll have to purchase additional coverages.

Also, consider obtaining a CARFAX report when looking at used vehicles to get a complete history of the vehicle as well as make sure it was not involved in any major accidents nor has any frame or flood damage, etc. You can also negotiate to take the vehicle to your mechanic for review before you sign on the dotted line.

Certified Pre-Owned Vehicles

If buying a new car is not cost-effective for you, but you would like a relatively new car with low mileage, a certified pre-owned (CPO) vehicle is an ideal compromise. CPO vehicles are cheaper than new cars, usually have some warranty left, and must meet certain criteria to help ensure their reliability and condition. Learn more about if it’s better to buy a new or used car here.

Step 4: Shop for Your Car

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. Key things to note include MSRPs (manufacturer’s suggested retail prices) and invoice prices.

These are some of the best online car buying sites: Consumer Reports, Edmunds, Autotrader, CarMax, Carvana, Cars.com, CarsDirect, AutoTempest, and CarGurus. 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. With today’s competitive market, you may need to be more flexible on makes, models, colors, and features.

Step 5: Research All Possible Discounts in Advance

Many automakers offer discounts to students, teachers, 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.

At Space Coast Credit Union (SCCU), we offer exclusive auto rates for community heroes.

Step 6: 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, new car buyers hold onto their cars for more than 8 years; so take your time when you’re giving the car a spin to make sure you really love it.

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.
Open and close all the doors and check all the windows.
Check all the A/C and heat settings.
Try out the sound system to make sure speakers work well.
Test all the lights, technical features, seatbelts, mirrors, signals, and windshield wipers.
Drive at higher speeds, perhaps on the highway; check the gauges; and test the brakes.

Step 7: Review the 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.

Be sure to consider Guaranteed Asset Protection (GAP) insurance. If your car is totaled or stolen when you owe more on your loan than your car is worth, and your collision or comprehensive insurance only pays your lender the total depreciated value, then GAP insurance bridges the difference in costs by helping you settle the loan with your lender instead of the costs coming out of your pocket.

Step 8: 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.

Take your time! 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.

Get a Better Rate with SCCU

SCCU works with many local auto dealers and offers the convenience of financing at the dealership. Doing your homework up front 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! We offer loans for both new and used cars, with great low credit union rates

and flexible terms

. As long as you live or work in these 34 counties, you can get a loan from us with a $5 deposit into a Share Savings account, which establishes your membership with us. Our Team Members will be more than happy to guide you through the options.

Apply for a new car loan at SCCU today!

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