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Car-Buying Tips

There's so much to remember when you're buying a new car. Looking up invoice prices. Gathering consumer and insurance ratings. Finding a dealer who will treat you right. But in the end, it'll all be worth it when you're driving the car you really want and don't dread the day you'll have to bring it back in for service. Sure, buying a vehicle takes a little effort, but it's not hard getting a good deal when you follow a few simple guidelines.


Think about the next buyer. If you're like most Americans, you won't be holding on to that car longer than three years. Naturally, you need to consider vehicles that will best suit your needs. To maintain resale value, however, consider cars that are not too "exotic", have a limited production, or those that change body style often.

Do the research. Look up consumer and automotive web sites or magazines for consumer information on the specific makes and models you're considering. Such information will often allow you to directly compare one vehicle to another. 

Reputation is everything. Look for a reliable, trustworthy dealer or seller, and avoid those you feel are not. If you have any reservations about the integrity of a dealer, shop their competition. 

Take these items along when you inspect a used car:

  • A flashlight to check dark places for leaks, rust or damage
  • A magnet to detect body filler after an accident
  • Rags to wipe your hands
  • A note pad and pen to make notes

Try to contact the previous owner of a used car to learn about its maintenance history and verify it's current mileage. Take a used car to an independent mechanic and body shop to inspect the car for mechanical, body or structural problems so you'll know of any necessary or expected repairs that will need to be made. Look for any recalls on the vehicle you're interested in. 

Put it to the test. During the test drive, drive the car as you'll expect to once you own it -- load it with people or stuff, do some freeway driving, try a tight U-turn in a parking lot -- to see how it works under real world conditions.


Gather the numbers. Find out the invoice price or market value of the new car and the value of your trade-in before you visit the dealer or seller. Watch for any special incentives or dealer holdbacks that aren't necessarily advertised but provide extra profit to the dealer.

Know your trade. If you're trading your car, spiff it up and know what repairs may be necessary before showing it to the dealer. Negotiate the price of the new car first, then tell the dealer you'll be trading and negotiate the trade-in value separately from the new car. 

Watch out for last-minute additions. Be wary of expensive dealer installed options like rustproofing, fabric and paint sealants, extended warranties or extra insurances which tend to have a high mark up. 


The relationship shouldn't end with the sale. Before you buy, visit the dealer's service department and ask about the service they will give you once you own the car. Read the contract very carefully, and don't sign it until all your questions are sufficiently answered. Get it in writing that all recall work or agreed on repairs have been or will be made by the seller. 

Take your time. Make sure you really want the car and can afford to pay for it, since it can be very difficult to return it after you sign the contract. Finally, don't succumb to pressure by a salesperson, or even friends or family, into buying a car you don't really want. 

Borrow or Lease?

Apples and Oranges. Very different from one another, yet each makes a great snack. Car loans and leases. Both will allow you to get a new car with monthly payments. But each have their own distinct advantages and differences that may or may not be right for you. In your search for a new car, it makes sense to consider both before making a final decision.

Buying Your Car with a Loan

The only way you'll ever own your car is if you buy it. And with car prices creeping higher and higher, most people can't plunk down the full purchase price of a car, so they take out a loan instead. When you borrow money, the institution you get the loan from owns the car until you pay it off. As you make payments on the car, you're building equity in it until it's totally yours at the end of the loan. Throughout the term of the loan, you are free to put on as many miles and make any modifications you want to the car. Excess wear and tear is not a concern when you take out a loan (except at trade-in time!) since you'll own it when the loan is done. What's more, when the loan is paid off, the car is yours to keep with only insurance and maintenance expenses to think about. Sound like a good deal? It is -- to the right person. You'd probably be better off taking a loan on your new car if you... 

  • Would rather own your car at the end of the term
  • Average more than 12,000-15,000 miles per year
  • Use your car under extreme conditions
  • Tend to keep your car for several years
  • Are not overly concerned with driving a new car on a regular basis
  • Prefer to pay less on your car in the long run.

Leasing Your Car

Car payments for many are a way of life. As soon as you get one car paid off, or even before, another one catches your eye and the payments return. If this is you, a lease might make sense. With a lease, you are basically renting a car long term and making payments based on the depreciation cost of the car. That usually means lower monthly payments. You can drive a car in your price range for less, or move up to a more expensive vehicle for the same amount as a loan payment on a less expensive car. Some very attractive lease rates are out there, often subsidized by the auto manufacturers themselves. Popular models — or models that hold their value - tend to be a better deal since they depreciate less during the lease period. 

Along with your lease will come some restrictions. Mileage usually ranges between 10,000 and 15,000 miles per year, with charges per extra mile. "Excess wear and tear" can take a bite, and dealers can be picky — especially when you're just turning the car in and going elsewhere for your next car. Finally, leases can be very complicated and wind up costing you more than you thought — so lease with care.

Your Present Car — Sell it Outright, or Trade It In?

Just because you're tired of your present car, or it's just plain tired, doesn't mean it doesn't still have value. Most people either sell their current car and use the proceeds as a down payment, or turn their car in to the dealer to reduce their cost for a new vehicle. Trading-in tends to be a lot easier than selling it yourself, but you'll most always get a lower return on your vehicle for this convenience. Selling your car outright will usually give you a better overall deal.

Selling Outright

If you choose to sell your car to another private party, it's in your best interest to do make a few presale preparations. Whoever buys your car will appreciate it too. Before you set a price, find out the book value of the car, taking into account the mileage, options, and its overall condition. You can find out how much it's worth by asking your Credit Union Loan Officer, or looking it up yourself in the N.A.D.A. Blue Book or on one of several web sites specializing in the car information. Setting a reasonable price will draw more perspective buyers to your car, and you'll sell it faster.

Before you show your car, spiff it up. Wash and wax it and give the interior a good cleaning. Change the oil to show you maintain it well. Have a mechanic look it over and let you know what it may need to be in tip top shape. Gather up any repair and maintenance records so buyers can see what's been done to the car over the years. A buyer will place greater trust in you if you present a good clean car, repair receipts and recommendations for possible future repairs. That trust can turn into a faster sale for you. 

Trading It In

If you decide to trade, you'll want to make many of the same preparations to get the highest trade in value for your car. Look up its value, clean it up, change the oil, find out any necessary repairs, and bring your receipts. The dealer, like any buyer, will appreciate your honesty and make it easier for you to deal. The dealer will likely offer you a standard trade-in value, or even wholesale value, for your car. They'll in turn make their profit by reselling your car for closer to retail value to it's next owner. The sad truth is that most vehicles, even those that are super-clean with low mileage, depreciate over time. So don't be surprised if the dealer's offer isn't as high as you'd hoped.

On the other hand, feel free to negotiate the price on your old vehicle. Make offers and counter offers as you would with your new car. Above all, try not to let the dealer know you'll be trading before you have negotiated a price, in writing, for your new car. First, negotiate the lowest price for your new car. Then, negotiate the highest price on your trade in. A little wheeling and dealing during this critical time of the buying process can save you big bucks in the end.

It's 'Me' ...But is it Right for Me?

It's easy to fall in love during the car buying process, even over something as simple as a color. But many people find out, much to their dismay, that the honeymoon is over when their purchase doesn't really meet their needs after all. It's okay to love your car, but true bliss is found only when you've chosen the vehicle that best meets your needs. 

Consider these when you're shopping for a new car: 

Your Lifestyle – Do you take a lot of long trips with your car, or is it mostly short distances to work and back or around town? If you're constantly hauling things and helping others move, for example, cargo space is probably a priority. The same is true if you're a sports-enthusiast and haul bikes, canoes, camping equipment and the like. If your travel is off road, a sure-footed four-wheel drive will better get you through the rough spots. 

Where You Live – People who live in the desert rarely see need for a four-wheel drive vehicle, unless of course they travel through snowy areas or primitive roads fairly regularly. Similarly, a powerful rear wheel drive sports car won't do you much good when the snow comes to your town next winter. And if you live in an outstate area, will you have dealer support available for a model that's sold only in the big city? 

Your Family – More specifically, your passengers. Will you be carrying children? Older parents? Business associates? Pets? Then a cramped sports or economy car is probably a bad idea. A snazzy two-seater may be just the thing for weekend getaways or the daily commute, but not the overall best choice. Performance enthusiasts take heart -- there are plenty of sedans and wagons out there that provide driving excitement and performance along with the practical aspects you need in a car.

Your Likes and Dislikes – Do you have a favorite models, brands, or some "must have" options? Now's the time to think about what they are and look at those cars that have what you want. Some people require cruise control for frequent long trips. Others favor only domestic sedans. Remember, you may own this car for six or seven years before trading it in. Any minor dislikes you have can become major annoyances over time. 

Your Budget – In the end, money is a factor. Most of us have to work within a limited car budget and can easily get in over our heads with car expenses. Just because you can afford the monthly payments doesn't make a car affordable for you. There are insurance rates. Gas mileage. License fees. Maintenance expenses. All of these should be considered when you're looking for a new car.

Narrow Your Search – Once you've determined the type of car you want, you should be down to maybe four or five models that fit the bill. Of this small group, do a little comparison shopping. Check insurance ratings. Read consumer reports. Look at resale values. And of course, test-drive each one and note your likes and dislikes. During this part of your search, an overall "winner" should emerge, and you can start to think about negotiating a deal. 

Do Your Homework

You can always trust a car salesman to quote you fair prices for your trade-in and the car you want to purchase... Or can you? There's no need to take chances when you can readily find out these values on your own. Once you do, you'll get a good idea what your present car is worth if you trade it or sell it outright. You'll also get a good idea what a fair price is for your new car. It's easy to do, either by asking your credit union loan officer or looking them up on the internet. 

Ask Your Loan Officer

Under normal circumstances, your credit union will be more than happy to help you look up values on the new or used car you want to buy. In fact, they'll probably do it on their own anyway. After all, the lending institution typically doesn't want to lend more money than the vehicle is worth. 

Guides vary slightly between credit unions, but the most common are the NADA Used Car Guide, Kelly Blue Book, and the computer program PC Carbook. NADA and Kelly will give you information on the trade-in value, loan value, and retail value of your present vehicle, or on a used car you are looking to buy. (PC Carbook tends to focus more on new vehicles) Most guides include values of specific options on the car. NADA and Kelly feature a mileage table that can either add value to your car (for lower than average miles) or deduct for higher miles. 

The numbers you get out of these guides become a starting point to negotiation. Remember, every car has its own unique features, and probably some flaws, that may affect its ultimate value.

Internet Pricing Guides

As one would certainly expect, there is plenty of vehicle pricing information on-line. (Obviously, if you're reading this, you are well aware that such consumer education abounds on the internet.) Fortunately, you've discovered a fantastic starting point — CU Auto Online, provided by your credit union, is a first step in your quest, and one that is provided by your friends at the credit union. In all fairness, we also won't deny that there are many, many alternatives. If specific information is what you're after, and it can't be found on CU Auto Online, your favorite search engine will likely yield dozens of web sites that may offer solutions. 

A word to the wise, however, that is true of any on-line investigation — know your source. If it is unclear who sponsors, hosts, or offers the information you are gathering, the numbers you collect may not be accurate. If you have any doubts of the integrity of your source, gather comparative data. Or, visit with your credit union loan officer. Odds are, they have favorite web-based tools that will aid in your quest. 

New Car Pricing

New car manufacturers often love to brag about their vehicles. Use this to your advantage. Visit manufacturers websites and "build your own" new car. Here you can price different makes and models, add or subtract options, and even look at different colors on the car you'd like to buy. Remember, prices quoted on these sites are most likely retail values. So if you suffer "sticker shock" when you price out the car don't worry, there is probably some room to negotiate when you get to the showroom.




How Much Car Can You Afford?

So you've made the Big Decision. No more dreaming or just thinking about it — you're ready to go shopping. The process of buying a car can make your head swim with all the brands, models and options that are out there. And let's not forget the salespeople who can sometimes neglect your best interests when they're pushing a contract under your nose. Take heart though, your Perfect Car does exist. It just takes a little effort to find it. And the search begins before you even set foot on the lot. 

When pondering this all-important question, you'll want to consider how much of a down payment you've got for your new car, and your monthly income. A standard guideline is that your monthly car payment should not exceed 20% of your monthly net income. Once you've determined this number, the other costs associated with your car fit neatly into two categories: fixed and variable.

Fixed Expenses

Even just sitting there looking great in your driveway, your new car comes with fixed expenses. These are expenses you have no matter how much or little you drive your new car. They would include the down payment (for the first month), loan payment, insurance, tax and license fees.

The down payment, in the form of cash or trade-in, lowers the purchase price of the vehicle and the amount you'll need to finance. If you're financing a lower amount you'll gain some flexibility to choose lower payments over a longer loan period, or a shorter loan period that'll save you months of interest payments and very likely get you a lower loan rate.

Your loan payment will be the same each month unless you choose to prepay on your loan. Prepayment is not an option for many people, but there are benefits to adding a few extra dollars to your payment each month. You'll reduce the amount of interest you'll ultimately pay on the loan. Your credit report will reflect your good payment history. And, of course, you'll own your car sooner! 

Insurance costs will vary greatly depending on where you live, the car you're insuring, your driving record and the other drivers in your household. Remember, all insurance companies are not created equal. You may be surprised to find massive price variation between three different quotes for the exact same coverage, so it's wise to shop around. Insurance rating services such as A.M. Best can give you an idea if an insurance company is a good choice to consider. 

Tax and license round out the fixed costs associated with your new car. The sales tax is a one-time charge that varies from state to state based on the stated value of your car when you purchase it. License charges also fluctuate between states. Some charge a flat rate for all car licenses while others charge on a scale depending on the value of your car and it's age. A quick call to your local license bureau can tell you what you'll pay to license and register your new car. 

Variable Expenses

Variable expenses are just that — variable and dependent on how much you drive, maintenance you perform, and any improvements you make on your new car. First there's the day to day expenses associated with owning a car like gas, oil, oil filters, and those occasional trips through the car wash. 

Maintaining your car can cost almost nothing if you have a brand-new car, or somewhat more if you choose a preowned model. No car is immune from these expenses — you can expect to replace your tires, belts, shock absorbers, and refurbish various mechanical parts as your car ages and the miles add up.

Finally, there's the improvements you choose to make to your car. The possibilities are endless: custom wheels, high end stereos, security and navigation systems, performance enhancements. All these make your car unique and more fun to look at and drive. They also add to the cost of your car and should be considered when you're coming up with a new car budget. 

Loan Preapproval Prevents Shopping Stress

You walk into a car dealership, knowing you want a new car. You've got a good job and are quite sure you can make the payments, whatever they turn out to be. By the time you've negotiated a price and trade-in value for your current car, the loan process can be an afterthought. ...Bad idea! Sure, the dealer may come up with a payment that fits your budget, but will those payments continue long after the car is worn out and tired? Shop with confidence, and avoid any dealership slight of hand, by getting your car loan preapproved. 

Preplan Your Car Budget

As with any big expense, a new car will make a sizeable impact on your household budget. By applying for a loan before you shop, you will find out exactly what your monthly payment will be. Once you fill in the other fixed costs of insurance and license, you'll have a good idea of the overall monthly costs of a new vehicle. What's more, your Credit Union can also look up the value of the car you're considering. You'll know right away what your payment will be, and even the book value (or the true value) of your vehicle.

Take the Pressure Off

A car shopper who doesn't have financing in place is fair game for whatever loan programs the dealer has available, and those may cost you much more than a low interest loan. Your Credit Union's goal is to get you the most affordable financing possible. The dealer's goal is to sell you a car, which may mean finding you any financing necessary to make the sale. Such loans may provide a monthly payment that fits your budget but can wind up costing you hundreds or even thousands of dollars more over the term of the loan. 

Free Up More Time to Drive

When you're looking for a new car, one of your main objectives is negotiating the lowest purchase price, and, if trading in a vehicle, getting the highest possible trade-in value. These two important tasks are time consuming and, quite honestly, take a lot of concentration and energy. By getting your loan preapproved, you've saved the time and effort otherwise spent figuring out the dealer's financing options. You'll spend less time dealing, and more time with your new car!

Broaden Your Shopping Horizons

Say you're at a dealer far from home. The selection is great and the prices are even better. Loan preapproval lets you make your purchase without having to come back to the Credit Union to discuss a car loan, after which you'll make another trip back to the dealer to get the car — if it hasn't already been sold. The same holds true of purchasing a car over the internet if you're so inclined. It's simply a matter of convenience. Once you're preapproved, you've got buying power to make your move on a good deal and reduce your time spent at the dealership...and the Credit Union! 

The Facts of Leasing

More people these days are choosing a lease over purchasing their new car. There are benefits — the big ones being lower monthly payments, having a new car every few years, and low maintenance expenses. There are also downfalls, including mileage restrictions, confusing agreements, and the fact that you never really own your car. If the idea of renting a car long-term is appealing, leasing can be a good thing, provided you do your homework and shop around for the best deal.

The Profile

People who lease usually like to drive a new car every two to four years. They don't mind always having a car payment, especially if it's lower than a loan payment on a comparable vehicle. They don't drive long distances that rack up miles quickly, and are careful not to damage their car or otherwise jeopardize their security deposit. They also don't get too attached to their car, since it will likely go away at the end of the lease. If this sounds like you, read on. If not, purchasing a car may be the way to go. Once you lease a car there's no "cooling off" period to reconsider, and getting out of a lease early can be very expensive.

The Process

Leasing involves some unfamiliar terms and calculations the dealer uses to draw up your contract: 

  • Acquisition fee: An extra fee charged by the leasing company that may be added to your monthly payment, or paid up front.
  • Adjusted capitalized cost: The car's cost, less deductions (such as your trade)
  • Capitalized cost: The total cost of the car, including extra insurance, warranties, and the options you've agreed to pay for.
  • Disposition fee: A fee sometimes charged by the leasing company to clean and repair your car after you turn it in.
  • GAP insurance: Insurance coverage in the event your car is stolen or totaled, and its value is less than what you owe on your lease.
  • Money Factor: The number dealers use to determine the interest payment on your lease. Typically, that number multiplied by 2400 will equal your interest payment. This number varies between dealers.
  • Net trade in allowance: The difference between what you're getting for your trade less what you owe on it.
  • Purchase option price: The set price you'll pay for your car if you buy it after the lease is up.
  • Residual value: The estimated value of the car when the lease is up. This value is determined when the car is new.
  • Security deposit: Typically one month's payment, refundable if you return the car in good condition.
  • Monthly payment: Monthly depreciation + interest charge + tax
  • Monthly depreciation: (Adjusted capitalized cost - Residual value)/Months in lease
  • Monthly interest charge: (Adjusted capitalized cost + Residual value) x Money factor
  • Monthly tax: (Monthly depreciation + Monthly interest) x Tax rate
  • Total monthly payment: Monthly depreciation + Monthly interest charge + Monthly tax

The Deal

Not all leases are created equal! Stop by several dealers and compare their lease offers on similar cars. Negotiate the price of the car as if you were buying it, and discuss leasing once that price has been set. Avoid high cost extras like rustproofing and extended warranties — you probably won't use the car long enough to take advantage of them. Make sure your trade-in and other negotiated credits are listed on the lease form before you sign it. And compare your total monthly payment to a loan if you were purchasing the car. Remember, you won't own anything at the end of your lease, whereas you'll own a car at the end of your loan. 

Budgeting for Your New Car

Buying and owning a new car for most people is an exciting experience. It can also be more than you might expect financially. After all, there's more to your vehicle's expenses than your monthly loan payment. You'll have to maintain the car from the moment you drive it off the dealer lot. By coming up with a car budget before you buy, you'll have no surprises at what your new car will really cost to own. Money management services and automotive publications have come up with general budgets based on compilations of several types of cars. But the truth is, your budget will be as unique as your car and driving habits.

Break It Down

Most of your car expenses can be considered either fixed or variable costs. Fixed are those expenses you must pay no matter how much or how little you drive the car. Variable costs increase with each mile you drive.

Fixed expenses include: 

  • Down payment (one-time expense)
  • Loan payment
  • Insurance
  • License fees
  • Taxes
  • Miscellaneous (auto club, accessories, etc.) 

Variable expenses include: 

  • Gas
  • Oil
  • Tires
  • Maintenance
  • Repairs
  • Miscellaneous 

Once you've determined the monthly outlay for these expenses, add them together to determine your overall monthly cost (based on your average monthly mileage for variable expenses. Here's a few guidelines you can use to calculate the variable costs for your car. For example:

  • Your gas expense can be figured by taking the average number of miles you drive each month and divide by the car's average fuel mileage. Multiply the result by the average fuel price for your gas expense.
  • Your engine oil (and filter!) should be changed about every 3000 miles. Based on the miles you put on your vehicle, you should be able to guess how often you'll be changing your oil. From there, a monthly expense should be easy to calculate.
  • Tires can last anywhere from 40,000 miles to 70,000+ miles if used under normal conditions. Research rotation and replacement costs, then determine your monthly expense based on your travel habits.
  • Maintenance intervals for your car can usually be found in your owners’ manual. The dealer's service department or your mechanic can give you an idea what various maintenance procedures will cost. Remember too that some maintenance and repair items may be covered under your new car warranty.
  • One variable that's hard to pin down is repair costs. Overall, cars are getting to be more reliable and trouble free but major repairs will be needed sooner or later, particularly on older used cars. To cover these potential costs, you may want to consider a 'slush fund' of cash for just such an emergency.

The numbers, combined with your fixed expenses, should give you a pretty good idea of what it will cost to operate your new car. After coming up with a budget for the car you want, you may decide it doesn't fit your overall budget and consider other cars that cost less to own. You may not be able to comfortably afford the exact car you want right now, but hey — it's better to find that out now ...instead of later!

0% APR Auto Loan or Rebate

Are you confused by all of the auto offers out there? You're not alone. Deciding between a low-rate dealer loan or a rebate can be difficult. So take a look at these facts before you finance your next new vehicle. 

A dealer loan rate of 0% (or whatever today's "special" rate is) sounds attractive, but beware of hidden costs. Most of these loans require larger down payments and offer shorter terms, and some dealers may even require that high cost credit insurance be added to the amount of your loan. That can lead to huge monthly payments. You also may find that these loans are available only on in-stock vehicles and on slow-selling models. If the payment is too high for you, the dealer may try to talk you into a higher rate with longer terms. That's where it gets tricky, because they know you are eager to get into your car, and their goal is to close the sale.

That's where the credit union can help. For example, choosing the rebate may be a better option. A rebate can be applied to your down payment, lowering the amount of your loan. Then, with a low-rate loan from your credit union, you can choose longer terms to fit your budget. 

Consider a typical vehicle loan of $20,000. With 0% APR and a 36-month term, your payment will be a whopping $555 per month! Plus the dealer may require credit insurance protection, which will increase your payment even more (most credit insurance plans offered by car dealers add the premium to your loan balance, while Credit Life/Disability insurance offered by the credit union is charged monthly based on your current balance). Or you can take the rebate of say $1,500 and reduce the amount of your loan to $18,500. You then finance your new vehicle at the credit union for 48 months at 5.99%* APR. Your monthly payment will be about $434, a savings of $121 per month! Think of what you could do with an extra $121 every month. You could even invest it and perhaps earn a higher return than the 5.99% APR you are paying the credit union. So even if you can afford the high payment, 0% APR is not necessarily the best option for you. 

Before you shop, give us a call! 

*Rate listed is for example purposes only. Actual Rates are subject to change. 

The Truth About Super-Low Interest Rates

Each year, car makers set their goals ever higher to sell the millions of cars they produce. This can be good news for us, the consumers. It means there will be keen price competition and attractive deals to get us to buy, buy, buy. One tactic manufacturers use to move the metal is an incredibly low interest rate. It can certainly spark our interest, and it could even be a good deal... Maybe. 

Check the Fine Print

We've all seen the 'Super-Low' interest rate when shopping for that new car. Typically, these ridiculously low rates mean you'll be borrowing the money right from the manufacturer. And like any sound business, they are out to make money. If they're lending money at 3.9%, 2.9%, .9%, or even 0%, they're losing out on other higher interest investment opportunities. Since they're running a special promotion to sell cars they may give you the low rate, but for the shortest time period possible. Your low interest rate could be for a term as little as 12 months. If you're buying a car worth, say, $20,000, your monthly car payment would be over $1600 a month even with 0% interest for 12 months. Of course, your car would be paid off in a year. Wouldn't that be great! Unfortunately, for most car buyers, a year - or two - or three - is too little time to pay off a car when there are other household bills to consider as well. 

Keep in mind that not all super-low rate programs mean a short-term loan. In fact, some programs of late have been known to extend fantastic rates with terms of up to five years. Before you sign the dotted line, however, make sure you've checked the fine print on any loan you're considering. 

The Dealers Secret Weapon

The dealer may use the super low interest rate as an excuse not to bargain on the purchase price of the vehicle. Besides, they may reason, with an interest rate that low you're already going to save a bunch of money (no matter what the purchase price.) Think again. In the negotiating process, the finance rate should not be a factor. Your goal is to get the lowest reasonable price for the new car, and the highest reasonable trade-in value for your current car if you're trading. The money saved with a super low finance rate could go down the drain if the car was overpriced in the first place. 

The Real-World Alternative

If you can afford a higher than average car payment, or have a large down payment or trade in value on your car, this deal may well be for you. But before you possibly wind up with a higher car payment than you can comfortably afford, it would be smart to consult your credit union. They specialize in helping you get the best deal in financing — taking into effect your other household expenses and financial commitments. Your loan officer can help you run some numbers for a credit union loan vs. a manufacturer loan so you can compare monthly payments. They can also help you determine a fair value for the car you're purchasing and trading. And they can get you a loan with a longer repayment period and lower payments that may fit better with your overall budget.




Buy Low/Sell High

For most people, the negotiation process is the least favorite part of getting a new car. No surprise there. To walk into this process unprepared is to set yourself up to possibly lose hundreds, even thousands of dollars on the deal. That's the bad news. Now the good news - armed with some basic information about your present car, the new car, and dealer costs - you can pocket that extra cash and drive away a truly good deal.

The New Car

Do you know what that new car is really worth (the dealer's cost)? Here's a hint - probably a lot less than the MSRP printed on the window sticker. On a typical car, the dealer markup could be anywhere from 10% on a low-end car to 25% or more on a luxury model. Those percentages are your bargaining chip. Before you can bargain, however, you'll need a resource for tracking down dealer cost information. Fortunately, there are a number of resources at your disposal. Unfortunately, not all of these tools are alike. Odds are, your credit union has or can recommend their preferred resource, whether it is on the web, in book or magazine form, or even as software in use at the credit union itself. These resources usually carry dealer costs, and may even offer information about manufacturer incentives and bonuses.

Don't be shy about letting the dealer know you know this information. It lets them know you're an educated buyer, and have already been shopping around. 

When beginning the negotiation, don't worry about starting too low. Around 2% over invoice is a reasonable first offer. Then it's the dealer's turn to make a counteroffer. So long as they continue to negotiate, they're still making a profit. With each offer and counteroffer made, you're coming closer to the target price of the vehicle. It's possible you could reach a stalemate, where neither you or the dealer will budge from an offer. At that point, your search may need to continue at another dealer. Don't hesitate to walk away if the deal doesn't seem reasonable. After all, you're the one with the most power during the negotiation process. 

Once you reach a deal on the new car, you can now begin discussing your trade.

Your Trade

If you trade your car in for a new one, you're actually going through two negotiations. And like the new car, you'll want to do some research on your trade. What's the fair market value and trade-in value of your car? What are cars like yours going for in the local market? Are there any mechanical problems or cosmetic defects that will lessen the value of your car? Gather this information, and share it (including repairs needed) with the dealer. This will give both parties a better idea of an ultimate target price for your trade. Keep in mind though, you'll usually get more for your vehicle if you sell it outright rather than trading it in. That only makes sense - After all, the dealer is taking your trade-in assuming he or she will be able to sell it to someone else at a profit. 

Dealer Costs

The hardest part of the negotiation may be over, but you're not quite done yet! Dealers can (and most likely, will) try to tack on a few extra charges before you drive that new beauty off the lot. Keep your eyes out for... The Extended Warranty - Be clear on exactly what this covers, and feel free to shop around for a better price elsewhere - you don't need to buy one from your dealer, or at all if you don't want to. Sealants/Rustproofing - Proceed with caution. These are often high-profit dealer frills of dubious value that can do more harm than good if installed improperly. Special Order - Only under the most unusual circumstances should you ever consider paying extra simply to order a car. Manufacturers impose no such charges. Dealer Preparation and Handling - Virtually all manufacturers pay an allowance to dealers to clean a new car and prepare it for sale to you. To pay these charges is like paying the dealer twice for the preparation. 

...And just what is "handling" anyway? 

Those Little Extras with the Big Markups

For the dealer, profits can vary greatly on the particular models they sell. The question is, how can they turn a good profit on each and every vehicle they sell? By promoting the extras — like extended warranties, rustproofing, and sealants for paint and fabric. Granted, none of these are a bad thing. But should you pay extra for them? Many people do, but their usefulness can be considerably less than the purchase price. 

Extended Warranties

The reliability of new cars these days is far ahead of vehicles even a decade ago. Still, the dealer may strongly recommend an extended warranty that covers various components. Be aware, however, that not all such warranties are created equal. Before signing up, determine the following:

  • Is the insuring company insured? That is, will someone still honor your policy if they went bankrupt?
  • Is the policy transferrable if you sell your car?
  • What is the deductible on the plan?
  • Exactly which parts are covered by the plan and what are the stipulations? 

Many standard car warranties these days provide coverage to 70,000, even 100,000 miles. Do you plan to keep the car long enough to get some use out of the warranty, or are you even paying twice for the coverage provided by your standard warranty? If you decide you want this coverage, feel free to shop around for it — you may find a better policy from another provider. 


Modern technology has also provided us with cars that hold up better to rust. In the end, rust will probably win, but quite possibly long after you've traded the car. Today's cars of galvanized steel (even plastic!) come with generous "rust though" warranties, in the event that inner rust comes through to the outside of your car. Some would argue that a rustproofing job can make a car rust even faster with all the drilled holes necessary to spray the coating through the body. Rustproofing isn't as common (or necessary) as it used to be, and typically a high markup service performed by the dealer.


Most all of us want to keep that new car look and feel long after our cars are really new, but are paint and upholstery sealants the answer? It's hard to tell. Again, advances in painting processes and materials have made new car finishes and interiors tougher. But if your car sits out in harsh sun or punishing winters, a sealant may help some. So would a good old-fashioned coat of wax once or twice a year, at a fraction of the cost. And certainly no seat is immune from a nasty tangle with a chocolate bar or ice cream cone. A sealant would help in the cleanup, but you'd probably get the same protection if you went out and bought a can of fabric protectant for under $10 and sprayed it on yourself.

The bottom line is this: Many products serve to protect the sizeable investment you have in your car, but there's usually no need to pay high prices for them — especially if they already come with the car, or can be done inexpensively on your own. 




Take Cover! The Basics on Car Insurance – Part One

Throughout this great land of ours, car insurance is a legal requirement for every vehicle on the road. But there are no laws that say you have to pay too much for insurance or have more coverage than you really need. There's a lot to consider when you're shopping around for insurance, but even a little background information can help you get the best possible coverage and reasonable rates.

The three major types of car insurance are Liability, Collision, and Comprehensive. Liability Insurance pays for vehicle repairs and injury damages stemming from accidents in which you are at fault. This insurance is for the other party in an accident, and does not cover costs to repair your own vehicle or for injuries to you or anyone in your car. Collision Insurance is used to cover repairs to your vehicle whether or not the accident is your fault. Comprehensive Insurance covers theft of your vehicle, or damage caused by fire, flood, wind and the like. Other coverages are always available, and may or may not be necessary depending on the policies you already have.

Other Insurances to Consider

Medical Payment Insurance, or Personal Injury Protection (PIP) insurance, is required in all but 13 states where "no-fault insurance" is not in force. No-fault insurance states that if you are in an accident, whether or not it's your fault, your PIP insurance is expected to cover your medical expenses. You may be able to sign up for the state mandated minimum coverage of PIP insurance, depending on the life and health insurance you already carry. 

Even though it's the law, many motorists drive while uninsured, or have too little coverage to pay for an accident. Uninsured/Underinsured Motorist insurance covers your car repair and personal injury expenses if the other motorist cannot. Such protection is usually well worth its cost - For as little as $50 per year, many motorists can receive this additional coverage.

Rental Car Insurance – Typically, your primary car insurance will cover you when you rent a car while traveling. Before you travel, check to make sure you’re covered, and decline the insurance offered through the rental car agency. No use paying twice for the same coverage! Another type of rental car insurance will cover you if you’re involved in an accident and need something to drive while your primary car gets fixed. If you have more than one car and can get by if necessary, this is another insurance you can likely do without. 

If you’re leasing a vehicle, GAP Insurance is necessary if the car is totaled and the leasing company needs a higher dollar amount to pay off the vehicle than your regular policy will provide. Your insurance agent will have this insurance available, but many leasing companies simply build the price into the monthly payment. Before you lease, you can still shop around for the best price available — the best deal on Gap Insurance isn't always from your leasing company.

Roadside Assistance will cover the cost of towing and other aid in case you break down. If you already belong to an Auto Club like AAA, you can decline this coverage and rely on your Auto Club to provide assistance.

These are the primary coverages you can expect to pay when you insure your new car. In Part Two, we'll look into rating an insurance company, finding an agent, and more ways to reduce your insurance rate. 

Take Cover! The Basics on Car Insurance – Part Two

In Part One of this report, we discussed a few of the basic insurance coverages for your vehicle. Once you've determined the types of insurance you'll need, it's wise to get quotes from a few insurance companies. In the eyes of the law, coverage is coverage, but you'll want the piece of mind to know that your company has the resources to handle your claim, the customer service to help you quickly and courteously, and reasonable prices for the coverage you need. 

Insurance is available through three different outlets. Independent agents are affiliated with many different companies that provide insurance. They'll meet with you and gather your information, then submit it to several different companies to come up with the best package of service, reliability and price. Insurance agents represent only one insurance company, but can still provide all the coverages you're likely to need for your new car. Other insurance companies offer their product direct to the consumer with no agents at all. These companies, working through web sites such as GEICO.COM and QUOTESMITH.COM often advertise the lowest rates, but keep in mind that they tend to accept only applicants with the cleanest of driving records. If you have two or more accidents or violations in the last three years, plan to spend about twice as much for coverage as a "preferred" customer would. If you have a DWI on your record, you'll be in a much higher insurance bracket, or 'risk pool', until your record is clear. 

The Rating Game

Each insurance company is rated differently when it comes to customer service and reliability. Luckily, once-obscure rating and consumer information is now relatively easy to find over the internet. Friends, family and co-workers can help you fill in the remaining blanks when it comes to personal experience with a company. 

Of the insurance rating companies, the most common are A.M. Best, Standard and Poor, and Moody's. Standard and Poor's rating system is as follows: AAA - Exceptionally strong, BBB - Good, BB - Marginal and CC - Weak. Not all companies use these exact ratings, but a rule of thumb is to avoid companies with a "C" rating, as they may not have adequate funding or soundness to meet your needs. State Insurance Regulators also record consumer complaints and post 'complaint ratios' for different insurers on the web. 

As you'd rate your insurer, you can also rate your car on some key insurability factors. Cars that cost less to insure typically have a low theft rating, high safety rating, and are rated high in National Highway Traffic Safety Administration (NHTSA) crash tests. In the NHTSA tests, cars are crashed at 35 miles per hour into a barrier simulating a real crash. From there they are rated for driver and passenger safety on a scale of 1 to 5 stars, with 5 being the highest. If your car rates high on these tests, consider yourself lucky. You'll be safer in the event of a crash and will probably pay lower premium on your insurance. Check out NHTSAs website at for the test results of several new-model cars. 

How Low Can Your Premium Go?

That depends on several factors including age, lifestyle, even your credit. If you can answer yes to any of the following questions, you could be in for lower insurance rates.

  • Does your car have anti-theft devices, such as an engine cutoff system?
  • Will you be insuring more than one vehicle, or your home, with the same insurer?
  • If you're over 70 years old, have you taken a defensive driver course?
  • If you're under 25, can you prove that you're an "A" or "B" student?
  • If you're under 25, have you had drivers training education?
  • Is your driving record clean for at least three years? 

There may be other factors that can help lower your rate. Be sure to talk to your agent about any other discounts you may be eligible for to get that insurance payment as low as possible.


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