7 Keys to Car Buying
May 5, 2020
Life has definitely changed due to the COVID-19 pandemic. For instance, a car is more of a necessity than ever. People are going to drive-in movies instead of theaters, participating in drive-by birthday gatherings from the safety of their vehicles, and doing their banking from drive-thru windows. Not to mention curbside pick-ups of groceries and restaurant take outs.
Buying a car looks different today than it did just a few months ago too. While many dealerships are open, you’re not likely to find a salesperson roaming the car lot to talk with you. Sales are happening within the guidelines of social distancing, including virtual appraisals, at home test drives, and even delivering vehicles to your door.
What hasn’t changed about car buying is getting the financing you need to seal the deal. Credit Unions like Unison are open and ready to help. And loan rates are still extremely low, which makes this a great time to drive away in a new (or new to you) car, motorcycle, truck or SUV.
Before you shift it into high gear though, here are a few ways to help you drive away with the best deal for you and your budget.
Get pre-approved before you shop – At Unison we encourage members to get pre-approved before shopping for a vehicle. That way you know how much you can afford, making it easier to stick to your budget. Get started by applying online or calling one of our Member Advisors at (920) 766-6000.
Comparison shop – A good way to start your search is by comparing prices online. Three of the more reliable websites include Edmunds, Kelley Blue Book and the National Automobile Dealers Association ( NADA). Each has listings for both new and used cars and can be helpful tools to research pricing before you visit the dealer.
You can also check out Nerdwallet’s Car Buying Cheat Sheet for tips on what to look for and how you can save.
Buying new or used – Whether to buy new or used depends on your individual situation. When it comes to initial cost, used cars are usually the better deal. But both have their advantages and disadvantages:
- Advantages of used:
- Less depreciation – Nerdwallet.com calls depreciation “car buying’s dirty secret,” explaining that in the first year, a new car loses around 30% of its value
- Lower car insurance rates
- Can get a higher end model for less
- Reduced stress over small dents and dings
- Benefits of new:
- Peace of Mind – Reliability
- Less maintenance costs
- Possible car-buying incentives
- Advanced technology
Total cost versus monthly payments – A popular sales technique is to pitch monthly payments instead of the total cost of the vehicle. While the monthly payment may seem doable, consider the opportunity cost (what you’ll be giving up) of having to make payments for an extended period of time. You may have other priorities four or five years from now.
Check your credit score – Your credit score is one of the tools used by lenders to help determine your loan rate. While it’s not the only measure of your risk-worthiness, it’s one of the big ones. The higher your credit score, the better the chances that you’ll pay less in interest. For a free credit report, go to www.annualcreditreport.com. By law, you are allowed a free credit report from each of the three major credit bureaus (Equifax, Experian, and Transunion) annually.
Compare financing options – Financial institutions can vary greatly as to what model year is eligible for a “new” car loan. At Unison, the best interest rates are available for models from 2011 or later, compared to other financials that may reserve their best rates for vehicles made in 2015 or after. That four-year difference can greatly reduce the amount of interest you pay, depending on how old or new your car choice is.
A few more money-saving considerations:
- Shorter repayment terms can save you hundreds of dollars in interest
- Request bi-weekly payments – you’ll pay less interest and pay off loan sooner
- Make a down payment or trade in a vehicle – Borrowing less means lower monthly payments
Whatever vehicle you decide on, the keys to saving money include doing your research, getting your credit in shape and choosing the right lender. It’s easy to apply online.
Have questions or want to know more? Our experienced Member Advisors are always ready to help! Give us a call at 920-766-6000, or contact us online and we’ll call you.