Whether your current car is on its last wheels, your family is growing or you’ve decided to add a recreational ride to your garage, it’s best to think about what you need and how you’re going to finance your new vehicle before you step into a dealership. These car-buying tips from Elevations’ auto loans team will help you make an informed decision.
Do your homework
First, figure out your exact wants and needs in a vehicle before going shopping. Do you need room for a new baby or family dog? Do you prefer a vehicle with ample cargo room to haul supplies from the home improvement store? Do you need towing power to pull an RV? Do you need better gas mileage for a job that requires daily highway driving? We all use our vehicles for different things, so it’s best to make a list of your requirements before you shop.
Next, do you want to go with a new, leased or pre-owned vehicle? New vehicles usually come with a warranty for greater coverage and peace of mind that the vehicle will run well while providing the latest technologies. A pre-owned or leased car can be easier on the wallet, offer a limited warranty and still meet your personal needs.
Research vehicles from home
Go online and explore the type of vehicle you want. Maybe you search for “best SUVs for families” or “best trucks to tow a horse trailer.” Get specific and read reviews from various sources: bloggers, car dealers, manufacturers and car owners. This will give you a well-rounded picture of what’s available, prices (new, leased and used), best features and consumer concerns.
Use the information you learned to ask informed questions when you do finally go to the dealership. Ask to see how the third-row seat folds down or what trim packages are available locally since you’re familiar with the features you’d like to have on your new car.
Investigate the dealerships you plan to visit
Spending time on your computer before you make an in-person visit can help you choose the best dealership for your needs. You can easily see if they stock the make and model of the car you want to see in person. Also, look at the reviews. What’s their customer service like? How did they handle a customer’s complaint? Do they offer an on-site body shop or partnership with a local repair shop chain for oil changes? What’s their timeline for filling new vehicle orders? Much of this information is outlined online or available from a quick web chat.
Turn to family, neighbors, colleagues and friends to gain insight into their car-buying experiences and follow-up service from the dealership. Also, spend time asking people in your trusted circle for their recommendations. Ask them these questions:
- Who did you like working with?
- Who made the process hard?
- Who would you buy from again?
Learn about pricing and rates
Compare the listed prices of your ideal ride online. How much is it going for at various dealerships? What’s the breakdown for new versus used or leased? Does the price vary based on the length of financing you use? Does the dealership take trade-ins?
Look closely at auto loan interest rates, not just the vehicle price. Many dealerships will have an on-site banking professional to run numbers for you, but remember that’s not your only option. You can also work with an external lender, like Elevations Credit Union. Our auto loan application is available online, and you can also view a range of term options and our competitive interest rates.
There are numerous factors to consider when it comes to rates. While rates are important, lower rates don’t always mean a lower payment, even at 0% financing.
As you can see in the chart above, electing to go through your financial institution can save you money even if the interest rate is higher. We can’t stress enough the importance of asking about available rebates when buying a new car.
Check your FICO Score®
Your credit score will, in part, determine the interest rate and loan amount you qualify for. You can check your score for free and without penalties by using the Federal Trade Commission’s partnership with Annual Credit Report.
Many financial institutions now provide your credit score for free. If you have an Elevations account, you can view your credit score by logging in to digital banking from a computer or by using our app. Download the app from the App Store for Apple devices and from Google Play for Android devices.
Determine your budget and get preapproved
Once you’re armed with your FICO Score®, it’s time to determine a budget for your vehicle purchase. Most financial planners agree that your monthly vehicle expense, including principal, interest and insurance, should not exceed 10% of your gross monthly income. While that serves as a good reference point, you can get much more specific by using an auto loan calculator to help determine how much car you can afford. You can also work in reverse order and use a calculator to determine your monthly payments if you already have your dream car in mind.
In addition to the monthly car payment, be sure to consider these other costs:
- Vehicle tax, title and licensing. These rates vary by county.
- Insurance premiums. These are determined by several factors including the car’s age, the vehicle type, your driving history and the insurance plan.
- Maintenance costs. Budget for regular maintenance like oil changes and new tires. It’s also good to have savings set aside for surprise repairs like a new fuel pump or cracked windshield.
Now that you’ve done your research, the next step is to get preapproved for a loan from your financial institution or visit a dealership directly. Getting preapproved before going into the dealership allows you to lock in a rate and can take some of the stress out of the purchasing process.
Find out more about the auto loan preapproval process by giving the Elevations Credit Union team a call at (800) 429-7626. In the meantime, browse our auto loans hub, where you can learn more about buying from a dealership, buying from a private seller, refinancing an existing auto loan, our current loan rates, AutoTrek and our dealer inventory search tool.