1. Establish a Realistic Budget

Pay attention to your monthly budget.  How much do you spend on housing, living expenses like utilities, any debt obligations like credit cards or store accounts?

2. Know what you can spend comfortably

If you are not making a current car payment, consider “test driving the payment first”.  Determine what you feel is a comfortable payment for you and then simply pay yourself that amount into a savings account on a scheduled date.  This technique would mirror the car payment, give you a down payment or emergency fund, and more importantly, prove to yourself that the payment is manageable.  After making that payment for a few months, did you like the lifestyle adjustments that you had to make to afford the payment?  If not, adjust the payment to a more reasonable amount.

3. Establish your transportation needs and Identify/prioritize your wants

Is this vehicle to get to and from work?  Is your family size increasing and you need additional space?  Are gas prices too high and need to make a change?  Make a list of features you need in the next vehicle and then rank them based on importance. 

4. Secure Financing – Get Pre-Approved

Contact Weyco Community Credit Union before shopping.  WCCU will run your credit report and look at affordability numbers.  We can also help run book values on potential vehicles so you are prepared (see next step).  Securing financing ahead of time allows you to plan for your car payment. 

Don’t forget about car insurance.  A requirement of an auto loan is that you maintain full coverage insurance on the vehicle during the life of the loan.  So the true cost is not just the payment on the loan but it also includes the insurance costs.

5. Do Your Research

The best practice in buying a vehicle is to be prepared before talking to a dealer or seller.  You will need to know the value of the vehicle you are interested in.  You are already pre-approved for the loan so you know what your budget is.  Some dealerships will try to ask “where do you want your payment” and usually they will come back with a payment just a little higher than what you want.  Try to avoid negotiating this way.

Instead, try to negotiate the price of the vehicle, not the payment.  WHY – a $300 payment for 72 months instead of 60 months means you paid more for the vehicle over the life of the loan…Or in other words, the purchase price was higher because the term of the loan was longer.

In addition to researching the new vehicle, look up the value of your trade in (if applicable).  Knowing what your trade in is worth helps you negotiate the final deal on the purchase agreement.

6. Locate a Dealer

Most dealerships have their inventory online.  You can look for vehicles while sitting at home.  This is the best tool to avoid high pressure sales when you are just looking.

7. Take a Test Drive

You need to make sure the vehicle drives like you want, sits the way you like, and fits all the needs/wants from your earlier list.  Don’t be afraid to come back the next day. 

8. Determine the Proper Purchase Price

Once you have determined this is the vehicle you want, you need to determine what you are willing to pay for it.  Based on the book value and shape of the vehicle, what are you willing to pay?  Remember one fact – even with all the different options and colors – they normally make thousands of that particular vehicle with all those same options.  Be patient and be willing to walk away from the deal – if it doesn’t make sense.

In the purchase price will be the price of the vehicle plus fees.  These fees may include taxes, tags and documentation fees.  This will affect the “out the door” price of the vehicle.  You will have to figure in these additional costs in the price as you negotiate with the dealership.

Extended Warranties and GAP insurance plans are usually offered by dealerships.  WCCU offers GAP insurance as an alternative.  The best advice is to look at the fine print in the warranties and service plans.  What is covered?  Am I going to realistically travel back to this dealership for the service plan?  Is this going to add value or protection for me?

These are just some tips to help you navigate the stress of buying a vehicle.  Weyco Community stands ready to help you through this process.  Our job is to help you save money and make strong financial decisions.  We would love the opportunity to help with this process.