How To Buy a New Car and Get a Good Deal On The Right Car - Part 1

Buying a new car is a big deal in more ways than one. Selling for over $40,000 on average, a new car could be among the most expensive purchases you’ll make. The new car buying process can seem complex and even frustrating without the right help, especially if you’re a first-time car buyer. Here’s a step-by-step guide on how to buy your next new car without any hassles. Depending on your situation, you may have to do some of these steps out of order or at the same time. What’s really important is that you consider each one and prepare as much as you can before signing on the dotted line.

Step 1: Figure out how much you can afford

Your first step is taking a hard look at your budget and figuring out the answers to some key questions. Ask yourself:

  • How much can I get for my trade-in?
  • Do I have enough for a down payment?
  • How big of a monthly payment can I afford?
  • How’s my credit?
  • How much do I need for taxes and registration?

Unless you’re paying cash, your budget for a new car probably revolves around your monthly payment. Each monthly payment is a combination of interest, fees and your principal debt. Just remember that, once it comes time to buy, you want to pay as little as possible over the long term. A convenient way to set a cap on your new car purchase is getting pre-qualified for a loan.

Step 2: Pre-qualify for a car loan

If you’re financing your next vehicle purchase, the smart play is often to get pre-qualified or pre-approved for auto financing before you start shopping. Doing this can help you know how much you can borrow for your new car, along with what interest rate and loan term you’re getting.

WKFCU is happy to pre-approve you for a loan.

Simply fill out a loan application and indicate that it is for pre-approval.

You will receive a letter with all the information you need.

Getting pre-qualified or pre-approved isn’t necessary for buying a new car, but arranging your own financing lets you shop around to make sure you’re getting a good auto loan. This has several advantages:

  • Lower interest rates
  • More leverage when negotiating vehicle pricing
  • More flexibility if you have a bad credit score

While the terms “pre-qualified” and “preapproved” are sometimes used interchangeably, they do have different meanings. Pre-qualification is usually less intensive, but it’s also less certain. Think of pre-qualification as an estimate of what type of loan you may qualify for. Getting preapproval is a more thorough process, but you should wind up with a more detailed loan offer to use when shopping.

The alternative is financing through the dealership.  Dealership financing options can be competitive with outside financing, although the rates may be slightly higher due to the “finder's fee” added on top of the base “buy rate” offered by the dealer’s preferred lender. Dealerships may also offer special financing incentives, ranging from 0% interest rates to discounts on certain options and equipment.

The problem is that you don’t know what your options are unless you check with other lenders.

Once you know how much you can afford, you can begin shopping for a new car in earnest.

Step 3: Research cars

Whether you’re visiting a local car dealership or buying a car online, it’s smart to figure out what vehicles you’re interested in before you start shopping. Think about your needs and consider how you prioritize things like:

  • Vehicle configuration
  • Passenger capacity
  • Performance specs
  • Safety ratings
  • Reliability scores
  • Available features

If safety is your top priority, consider a vehicle with excellent safety ratings and driver-assist features. If fuel efficiency is non-negotiable, consider a hybrid or a pure electric vehicle (EV). However, if you’re interested in an EV, make sure you consider your range needs and available charging solutions.   Other features may be nice to have, but they aren’t a deal-breaker if they’re not available. Power sunroofs, heated and ventilated seats and a premium sound system often fall into this category, depending on your preferences. Once you have an idea of what you’re looking for, start by checking dealers’ inventories and online car buying sites to find the right one for you.

WKFCU Offers AUTOLINK To Help You Find Your Next Vehicle and Avoid The Dealership Hassle.

Your can research cars you are interested in, get a value for your existing vehicle, take a virtual test drive, get a CARFAX report on some vehicles and apply to be pre-approved or for a loan.

Visit our website, www.wkfcu.org to get started.

Step 4: Compare prices

Comparing actual vehicle prices is a safe way to make sure you’re getting a good deal, and it can also help you set expectations for car values in your area. While online estimates are a good starting point, your local market may differ.

These comparisons can even help you when it comes time to negotiate the price of a car later on. Citing your other options to a salesperson shows them that you know what you’re doing and that you’re not willing to pay more than necessary.

Matt Farah, an automotive expert that reviewed this article, recommends getting offers in writing from three or four dealerships in your area. Even if you don’t accept the offers, you can use them as leverage to negotiate.

Negotiations are also when your choice of financing comes back into play. If you’re relying on dealer financing, salespeople like to negotiate your monthly payment rather than the overall price. However, haggling over this usually leaves you spending as much (if not more) money as before. Pre-qualification and preapproval take that trick off the table (unless the dealer is willing to give you a better annual percentage rate).

Now that you’ve done your research, it’s time to arrange some test drives.

Next week we will discuss, going for a Test Drive, whether or not to sell or trade-in your current vehicle, getting your insurance ready and Seal the Deal!

(Partially reprinted from Consumeraffairs.com)


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