What to Consider When Buying a Car

Ruth Jenkins
President & CEO

Q:  When it comes to financing a new or used vehicle, what should you consider before actually going to a dealership to purchase?
A:  Many people hate the car buying process, between the haggling for the best deal possible, to financing the new purchase.  With a little homework and research, the process can become less intimidating when you are well prepared before you make the decision to purchase a vehicle. 

Q:  What would you suggest is the first step in the car-buying process?
A:  Consider your “NEEDS” VS. “WANTS”

  1. Who doesn’t want to drive the newest model vehicle? Just make sure you are purchasing a car that meets your needs, not just your wants:
    a. Consider how you will use the vehicle
    b. How many passengers will you carry?
    c. Do you have a long commute?
    d. Do you need a lot of cargo capacity?

Q:  A lot of prospective buyers are intimidated by the buying process. What can they do to help make the process smoother and less overwhelming?
A: Know the value of what you’re buying and what you’re trading

  1. Knowledge is power and it helps so you don’t overpay. Do your research on the vehicles you are interested in before arriving at the car lot.
    a. Online research tools offer a wealth of information on both new and used vehicles relating to quality, safety and pricing:
    i. Some examples are Autotrader.com, Cars.com, Consumer Reports,
    vehicle manufacturer websites, True Car, Kelley Blue Book and
    b. With new vehicles, focus on the “invoice” price to help negotiate your best price.
    c. If buying new, ask about rebates or incentives that might be available.
    d. With used vehicles focus on “retail” value from NADA (National Automobile Dealers Association) to help negotiate your best price.
    e. With trade-in vehicles focus on the “trade-in” price from NADA to determine the value of your current vehicle if you are trading in.

Q: When setting a budget ahead of time, what should the buyer consider?
A: It is important to consider:

  1. How much can you really afford to pay for a car each month? The rule of thumb is limiting the monthly payment to no more than 10-15% of your monthly net income.
  2. Once you know what you can afford, consider what you are willing to spend. This can differ depending on your future goals.
  3. Consider the cost of insurance payments on the vehicle. People generally forget that along with the loan payment, there is the monthly insurance payment that goes along with it.
  4. Also, consider the cost to service and maintain the vehicle from month to month. If you don’t have a savings for these expenses set aside, consider purchasing coverage to help with these expenses.  For example, HFCU offers:
    a. Guaranteed Asset Protection, or GAP insurance.  If your
    insurance falls short of covering the full balance of your auto
    loan at the time of loss, GAP can pay up to the remaining
    balance of your auto loan after an insurance payout and
    provide you with additional funds to finance your next vehicle
    with us.
    b. Major Mechanical Protection (MMP) is coverage available at
    different levels to offer protection beyond your typical vehicle’s
    warranty and can cover any number of mechanical failures.
    c. Debt Cancellation can be purchased to cover your loan balance
    and/or monthly loan payments in the unfortunate event of your
    death, disability or involuntary unemployment.

Q: Is getting pre-approved for a vehicle loan a good idea?
A: Absolutely!  At HFCU, pre-approval is quick and easy and we have excellent rates for both new and used vehicles:

  1. Getting pre-approved for your purchase before going to the dealership will allow you to have the financing you need pre-approved before finalizing the purchase.
    a. This gives you the knowledge of what your monthly payment
    will be and your credit score (or FICO). Ultimately the FICO can
    drive the rate and pricing–a higher FICO score can mean a
    lower interest rate on your loan (along with other

Q: The buyer has done their research and has been pre-approved.  What next?
A:  Shop around! 

  1. It pays to get out and look at several dealerships for the particular vehicle you are interested in.
    a. The best way to maximize your time is to review the dealership’s
    websites for the vehicle you are interested in. Most car
    dealerships have an extensive listing of their new and used car
    b. The inventory at dealerships changes frequently with new/used
    vehicles coming in almost daily.
    c. Make sure to take your time to insure you are getting the exact
    vehicle you want.
    d. Never be afraid to ask questions if you don’t see what you are
    looking for.

Q: Once the buyer finds the perfect vehicle, are they done?
A: In order to ensure that the perfect vehicle remains the perfect vehicle for them, I would suggest:

  1. Always test drive the vehicle.
    a. Make sure that you are comfortable with how the car looks and
    feels to you.
    b. Make sure it is the right fit for your needs.
  2. Negotiate the price of the vehicle, not the monthly payment.
  3. Make sure to consider the “out the door” price, which will include all taxes, fees, and maintenance or service contracts if selected.
  4. If you don’t have a safety savings set up, consider purchasing protection or insurance items.
  5. Remember your budget and stick to it!
  6. Enjoy your new vehicle!