7 Tips for Buying Your Next New Car

Kate Robinson
Greater Nevada Credit Union
It might start with something falling off your car… maybe something small like the handle to control the seat tilt. You may start noticing worn through spots in the carpet or upholstery, or it may just be that a newer, shinier model catches your eye. Whatever it is, once you get the “new car” itch, it’s only a matter of time before you’re kicking tires at the local dealership, looking for your upgrade.
Before you do, let’s talk about a few ways you can get the most out of the car-buying experience. You want to make sure you feel great about the deal you get when you walk off the lot. These seven tips should help you do just that.

1. Research the car. Don’t let the stars in your eyes blind you as to the real value of the car. It’s shiny and it’s got heated seats but what is it really worth? What will it cost you in gas? Does it fit your daily activities? Does it have a reputation online for needing constant repair? My truck, for instance, needs brake jobs unrealistically often and has experienced a variety of strange defects. I have a friend who has the same exact truck and we have both experienced all the same exact mechanical and cosmetic issues in our respective trucks. A little Googling reveals we aren’t the only ones. I like my truck, but if I’d known about all these things ahead of time, I might have looked around a bit longer before signing the papers. Start somewhere like http://www.carcomplaints.com/ to find common complaints, recalls, government safety warnings and more.Read More...

2. Research the dealer. Car dealers tend to have a bad rap, but there are quite a few honest salesmen out there. I personally know dealers and dealerships that I esteem highly, while there are others I’d be more hesitant to work with. Again, put Google to work. Find out who in town has a reputation for dealing fairly and working with customers to get them the best deal. Read review sites and use the massive power of social networking to ask friends and acquaintances about their experiences.

3. Get pre-approved. Taking the extra step of handling your financing yourself gives you more buying power at the dealership, and more control over the terms of your financing. Plus, it’s a great way to avoid multiple credit inquiries. When you finance at the dealer (and especially if you apply for credit at multiple dealers), they send your application to multiple financial institutions. If you work out the financing terms with your own financial institutions, you can walk into the dealership armed with a pre-approval letter and save yourself a lot of hassle working out interest rates and monthly payments. All you have to work out is the price of the car at that point. Also for you young folks, a lot of financial institutions have first-time buyer programs to help you get your first car with no credit history. Definitely do your research there too, though. Make sure you get the best financing you can get, even before you start car-shopping.

4. Think big picture. It’s easy to be more concerned about working out the right monthly payment than about the total price of the car. That’s because the monthly payment is the one you feel right now (and every other paycheck). But shortsighted car-buying choices can lead to finding yourself upside down in a car loan a few years down the road. For instance, if you’re buying a car that’s priced higher than it’s worth (or maybe just outside your price range), and you stretch the loan out over 72 months to keep your monthly payment reasonable, your car will very likely depreciate so much that within four years, you still owe far more on it than it’s worth. Instead, think long-term and make sure you’re getting a car you can afford, rather than a payment you can afford.

 5. Sleep on it. Don’t pick your car and buy it at the dealership that day. It’s easy to get caught up in the excitement of getting your new vehicle, and sometimes pressure from the sales staff, and make rushed decisions. Sometimes taking a night or two to wait for the adrenaline to subside and really weigh the pros and cons of the decision can save you from making a big mistake. It might help to make a list during your research phase: write down what you’re looking for, what’s negotiable and non-negotiable, and the maximum you’re willing to pay. Look at it while you negotiate. If you find yourself compromising on most of the list, you may be making decisions based on emotion. Come back when you’re thinking more clearly. Don’t take the car home with you when you do this. Some dealers offer that, but it’s just a way to send all those emotions home with you! MSN’s 10 Common Car Buying Mistakes talks about other ways to avoid regretting your purchase later.

 6. Don’t fall for incentives. Don’t get me wrong, incentives like gas cards, rebates on your trade-in are awesome! But they should be bonuses, not points on which you make your decisions. Make sure you’re getting the best value for your car. The perks should take a back seat. This CNN article expands on this point, especially in relation to trade-ins.

7. Protect your investment. I bought a new truck in 2009, which I loved. Five days later (it didn’t even have license plates yet!) someone backed into me with a bigger truck. I only sustained a size-able dent that helps people around town recognize me, many others have had worse stories than this. GAP insurance (available at most dealers and financial institutions) protects your investment if you total your car at any time during the length of your loan by paying the difference between what your car is worth and what you owe on it.

One of our loan consultants, Marla Wulf-Franke, said these days most people buy new cars with no downpayment and many don’t realize how much the car depreciates when you drive it off the lot. So if you buy a $40,000 car, and a week later total it, that car may only be worth $36,000, and your insurance is only going to cover the value of the car. That’s why GAP insurance is such a gem – it pays the difference between what your car is worth and what you owe on it. Marla said she’s had people call her in tears, thanking her for encouraging them to purchase GAP.

And now for a shameless plug. GAP insurance is not expensive, but I highly recommend buying it from the financial institution that finances your car, as it can often be much more expensive straight from the dealer. I don’t know about all banks and credit unions but at Greater Nevada (shameless plug alert!) GAP not only covers the difference between the value and the loan, it also pays your insurance deductible and gives you $1,000 toward the purchase of a new car (if you finance it with Greater Nevada).

There is a lot of other information on the Internet designed to help you get the most for your money when car-shopping. Hopefully this gives you a bit of a push in the right direction.

02/21/2014