June 2nd, 2013

5 Important Steps to Buying and Financing Your Next New Car

If you’re thinking about buying a new car and you’re not sure where to start, you’ve come to the right place. Your first instinct might be to head straight to the dealership, but a little bit of financial planning and preparation can go a long way. Here are 5 steps to guide you on your way to getting a great deal on your new car.

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Step 1. Get pre-approved by your financial institution.

Just like you compare prices of clothes at the mall or food at the grocery store, you should compare loan rates and terms from your financial institution and from the dealership.

Applying for an auto loan at your credit union before you head to the dealership isn’t a commitment. It does, however, allow you to pick the better deal once you get an estimate from the dealer. Credit unions typically have lower rates and fees than other lenders.

Click here to learn more about auto loans with SMCU.

Step 2. Figure out how much you want to spend.

The amount you get approved for isn’t necessarily how much you can afford. You can use this calculator tool to estimate the maximum amount you should spend on a car, determined by your down payment, trade-in value, and how much you can afford to spend on monthly payments.

To determine how much monthly payment you can afford, you’ll need to play around with your budget a bit. If you don’t have a budget, now would be a great time to start one. Follow these easy steps to create your budget.

If you’d like to cut back in certain areas of your budget to accommodate a larger car payment, there are several ways you could make it work. You could always cut back on variable expenses such as dining out and entertainment, but long-term lifestyle changes can be a hard way to save money. Saving on your larger, fixed expenses can be easier and can also lead to bigger savings than cutting out your morning latte. For example, refinancing your mortgage with SMCU could save you thousands of dollars a year.

Step 3. The fun part: Find your car!

Once you’ve determined how much you want to spend, it’s time for the fun part: picking out your new car! The quickest way to see what’s available within your price range is to do your research online. Edmunds.com is widely regarded as one of the best sites for this. Not only do they list actual dealer invoices with costs for vehicles with different upgrades, but they also calculate the price you should pay based on the demand for the vehicle you want and the region you’re in. This price is referred to as the true market value.

If you decide to go to the dealership during the research phase to look at your top choices in person and possibly test drive them, don’t feel pressured to buy while you’re there.

Step 4. Hit the dealerships.

You know what kind of car you want and how much you’re expecting to pay for it, so now it’s time to head to the dealership.

…Or let SMCU and Autoland do all the work.
If you’d rather not spend your weekends price haggling at the dealership, SMCU’s Autoland car-buying consultant can do it for you. We’ll find the exact car you want, negotiate a great price on your behalf, and deliver it to the SMCU branch nearest you.

Learn more about Autoland here.

Tips for at the Dealership
If you decide to brave the dealership, here are a few tips that you should keep in mind:

  • Negotiate an overall price, not a monthly payment. A low monthly payment sounds nice. Think of all the extra money you’d have each month! But sometimes those low payments come at the expense of an extended term, which can mean you pay a lot more interest than you need to. If you stay focused on the overall price, interest rate, and loan term, the monthly payment will work itself out.
  • According to J.D. Power & Associates, you might be able to get a better deal if you go towards the end of the month.
  • Review the paperwork thoroughly before and after you sign to make sure all numbers are accurate.
  • Remember that it’s okay to walk out if you’re not getting the offer you want. You don’t have to feel pressured to buy a car right then and there.
  • Don’t stray from the numbers you decided on, no matter how tempted you are to get the really cool car just outside of your budget. If you’re seriously considering straying from the plan, take a few days to think about it. A purchase this large shouldn’t be impulsive.
  • Don’t forget to compare the dealership’s financing to the pre-approved amount you received from your credit union. In the moment it can seem easier to sign off on the dealership’s financing so you can leave right away with your new car, but you might wish you did things differently a few weeks down the road when you have a large loan with a high interest rate. If you do find yourself saddled with a loan you don’t think is in your best interest, you can talk to SMCU about refinancing it with more favorable terms.

Step 5. Protect Yourself and Your Loan

SMCU has several auto loan add-ons to help you in the event of an accident or emergency:

  • Protect your new car beyond the manufacturer’s factory warranty with Mechanical Breakdown Protection (MBP).
  • Let SMCU cover the difference between the value of your car and the balance of your auto loan with Guaranteed Asset Protection (GAP).
  • SMCU will cancel your loan obligation upon the occurrence of a specified life event with MemberSafe Debt Protection.

Learn more about these Debt Protection products here.

If you have questions regarding car-buying or auto loans, feel free to stop by any SMCU branch location or call us at (206) 398-5500. We’re happy to help.

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