Buying a car or truck is a bit different than buying other items. A big ticket buy like this requires saving up for a downpayment, hunting for financing, and some savvy deal making. The process can be a bit intimidating, especially if you’re buying your first car or truck. Fortunately, we have some advice to help you through it.
Find financing first
Though this may seem backwards, your first step should be to investigate financing. Your credit score will determine the interest rate you’ll get, which will have s big impact on your budget. (PenFed members can see their FICO credit score for free, and we have some tips on how to improve it, if you need to.) Higher interest rates mean either higher monthly payments or a longer loan term — in either case, you’re spending more. If you hunt for financing first, you’ll have a good idea of how much automobile you can afford, so you can avoid overspending.
Getting financing in line before you even visit a dealership can also help you avoid a bad deal. While sellers typically offer their own financing, you may not be getting the best rates — which can cost quite a bit over the life of a loan. Having financing arranged beforehand means you’ll never feel pressured to take a bad deal just because you want to drive home in your new car today.
Set a budget
Now that you know what your financing costs are, it’s time to work out a budget. Determine how much you can afford to put down on a car and then decide how much can you afford to pay every month, and for how long. Shorter loans mean you’re paying less in interest, while longer loans mean lower monthly payments.
Military members should bear in mind potential future deployments or change of station when making any major financial decisions. You don’t want to commit to a car or truck you won’t be able to afford if your situation changes.
Start with research
At this point, you may be tempted to head to the dealership and start shopping, but slow down. Instead, start by researching your perfect vehicle online. Look in to makes and models that interest you, taking note of prices. Will a base model suit you fine or will you want to upgrade to a more expensive trim level? Knowing what you need and what everything costs will help you when meeting with the dealership salesperson and begin test driving vehicles..
Your next decision is whether a new or used vehicle makes sense for you. A new vehicle less likely to leave you with surprise repair bills (and if it does need repair, it may be covered under warranty), while a used vehicle will lower your total cost but may require some repairs sooner. If you’d like a new car or truck but don’t quite have the budget for it, consider buying late in the year when dealerships will be trying to unload 2017 models to make room for 2018 models. You can often find deals, though you’ll be limited to what’s still available. Another option is to buy a certified pre-owned car or truck from a dealer. These are often vehicles that were leased, and are now a few years old with light wear. They can come with a dealer warranty to help you avoid unexpected car costs. (Though be sure to read the fine print so you know exactly what that warranty covers.)
Whether you’re buying new or used, Edmunds and Kelley Blue Book can help you research. Both will have prices for every make and model to help you determine what’s fair as well as offering reviews and listing features. It makes for easy comparison shopping!
Consider the total cost of ownership
What you pay for a car or truck is more than the sticker price. Remember that you’re on the hook for registration fees, insurance, gas, maintenance costs, and repair bills — all of which you’ll want to consider when you’re budgeting.
Different makes and models will have different repair costs and insurance costs. So when you’re researching, look for these numbers, too. If these extra costs will strain your finances, you’ll want to consider cheaper vehicle, a longer loan term, or saving up for a bigger downpayment, all of which will lower your monthly costs.
Remember that you can negotiate
Unlike many retail purchases, cars are negotiable — and the cost on the price tag is often inflated to take haggling into consideration. Because you’ve done your homework and know what the vehicle is worth, you’re in a good position to negotiate. While you can haggle as much or as little as you’d like, you should never take the sticker price as a given.
And if you feel as though you aren’t getting a good deal, don’t be afraid to walk away. There are always other cars and trucks and other dealers. A great resource that takes the haggle out of vehicle buying is PenFed’s Car Buying Service through TrueCar. You’ll get to see what others paid for the vehicle that you want, including detailed price reports, and have access to a certified dealer network.
Beware of scams
Going into a dealership being aware of costs will help you avoid overpaying, but you still need to be careful. Some sellers and lenders may try to tout their military ties to earn your trust before giving you a hard sell on a lousy deal. Don’t let anyone bully you into taking a deal you’re not certain of — and make sure you read and understand any paperwork before you sign it.
Ready to buy?
PenFed offers financing for both new and used vehicles with competitive rates as low as 1.49% APR for new vehicles. The afore mentioned PenFed Car Buying Service can also help you through the car-buying process and offers even better rates as low as 0.99% APR. If you’re ready to buy, start by applying for an auto loan today!