How to Prepare to Purchase a Car

The average monthly payment for a used car was $526 in the fourth quarter of 2022, and new cars were sitting higher at $716, according to Experian. As a first-time buyer, numbers this steep can feel intimidating and even more overwhelming when you aren’t familiar with the process. But confidence is all about preparation, so take the time before heading online or to a dealership to understand the key steps to take when buying your first car.

1. Determine how much you can afford

The key to a successful buy is to first determine how much you can afford. Your credit score, monthly income and the type of car you want should all factor into this decision. The key is to strike a balance between fitting your budget and finding a car right for your needs.

When budgeting, look at the out-the-door price, not just the sticker price that you see advertised. The true out-the-door price is the entire cost that you will be expected to pay, including dealer fees and taxes. Once you have that number — or a suitable estimate — factor in your typical salary and take advantage of a car loan calculator, which will help you determine what the monthly cost to finance the vehicle will be.

It is always a great idea to get pre-approved for your loan before you shop.  You can fill out a loan application online, we will fax an application to you or you can come to either branch of the credit union. We will be able to determine your rate and let you know what your payment will be on a certain amount.

It is smart to have this knowledge before you actually go to a dealership.

2. Save for a down payment

The down payment for your future vehicle is the initial lump sum that you pay for it. Aim to cover at least 20% of the purchase price, which might take some time.  Being patient and saving up for a large down payment is likely worthwhile if you can delay getting a car until you have the funds. It will save you money overall and lower your monthly costs.  If you can’t wait, you can make a lower down payment. You might also consider a less pricey vehicle instead. The less you pay overall, the less you will need to save for a down payment.

3. Take a look at your credit history

If this vehicle is your first large financial investment, it is possible that you don’t have a lengthy credit history. If this is the case, check your credit history to determine what loan options are available.

Your credit score is the primary factor lenders consider to determine the interest rates that you will be offered. The better your credit, the more favorable your interest rate will be.  Check your credit score before talking to a potential dealer. You can do so online through Experian or for free  at AnnualCreditReport.com. It is worth waiting to get your credit in good shape before applying for vehicle financing if you can.

4. Decide what car is right for you

Choosing which vehicle is best for you takes a lot more consideration than just color or style. Consider other factors, such as the vehicle’s durability, size for your needs, technology, safety features, gas mileage and the weather where you live. Check out Edmunds and Kelley Blue Book for these stats — and extra information on how much the vehicle you are interested in typically sells for.

This is also a good time to determine if you want a new or used vehicle. While a new car is exciting, certified pre-owned (CPO) can give you a lower price tag while still boasting new features and a manufacturer-backed warranty. And if you aren’t in a bind to get behind the wheel as soon as possible, you can save money by waiting for seasonal sales or deals.

5. Prequalify for financing

After you gather some information on the type of vehicle you wish to purchase and your financial history, apply for prequalification. This step is vital to saving money and putting you in control when it comes to choosing the best financing option available.

Prequalification, or preapproval, differs from full approval, so even after the prequalification process ends, it’s not a done deal. Rather, preapproval will give you an idea of potential rates and terms. You will still have to fill out a formal application after, but you will have an idea if you can afford it ahead of time.

You will need the following when you apply to prequalify:

• Average income and finances.
• Personal information.
• Employment information.
• Any current debt.

6. Head to the dealership — in person or online

After prequalifying for a loan and setting your sights on your dream car, it is time to begin the car buying process. Ideally, you should look online to see what vehicles are available in your area. Most dealers have their inventory listed on their websites and allow you to set up appointments.

It is important to get behind the wheel of your potential car and take it for a test drive before you buy. Be sure to adjust the seat, measure if it fits in your garage and can handle your day-to-day routine.  But you are not limited to the dealers local to you. Online dealers like Carvana, TrueCar and Vroom give you access to a national inventory of used cars. You can browse and get financing without leaving the house, and when you pick a car, you get up to a week to test drive your car and have it inspected by a mechanic.

Check out AUTOLINK, a car-buying service, on our website, www.wkfcu.org.  You can see nearby inventory, check prices, take a virtual test drive and more from the comfort of home.

7. Negotiate

Negotiation can feel intimidating but getting the best deal comes down to standing up for yourself. Come prepared with any paperwork needed, a firm understanding of your credit history and the right questions to ask. Focus on the purchase price, not the monthly payment. But the bottom line is this: be prepared to walk away if you can’t get the deal you deserve.  When the time has come to close the deal, remain steadfast on the agreed-upon number. You can expect the dealer to push for additional fees and add-ons. Say no to options like fabric or paint protection when an add-on like gap insurance might be more useful.

(Partially reprinted from www.bankrate.com)