Take the Wheel. Take the Wheel: Get the Best Car Deal

Take the Wheel:

Get the Best Car Deal

Seminar objectives

 Determine how much car you can afford

 Use a car inspection and test-drive checklist

 Negotiate the best car price

 Decipher financing options and warranties

 Don’t forget about insurance

Ready … set … time out!

Look at your credit history:

 Are you paying all debts on time?

 Is your credit report “clean”?

 (annualcreditreport.com)

 Or, are you living paycheck to paycheck?

 If so, adjust purchase expectations

 Meet with credit union staff to get finances under control before car shopping

How much car

can you afford?

 Check your budget:

 List total income; list fixed and variable expenses

 Keep all monthly payments—including rent or

mortgage—less than 40% of monthly take-home pay

 Factor in:

 Down payment, manufacturer rebates, value of trade-in, and money you can afford to borrow.

 What monthly car payment can you afford?

Get preapproved—first!

 Get preapproved for a loan from your credit

union before you visit a dealership

 Keep the amount to yourself until

negotiations are complete

 Compare dealer offer with credit union rate

Factors to consider

 Quality, reliability (Consumer Reports – great tool)

 New, used vs. certified pre-owned

 Highway vs. city driving (fuel economy, hybrid)

 Size and safety requirements (haul kids)

 How long do you plan to keep it?

 What’s your budget? Don’t forget insurance and maintenance.

Tips to get you started

 Educate yourself

 Shop around

 Is dealership conveniently located?

If you use the Web to

shop around …

 Check out the choices

 Check classifieds online – Autotrader.com is a good resource

 Check local dealers’ Web sites for inventories

 Find current manufacturer rebates

 Check prices on our Groove Car site

Shopping tips

 Decide make, model, options, and color

 Visit at least three dealerships or car lots

 Take someone with you

 Prepare a list of “must have” options

 Consider gas mileage

Test-drive checklist

 Size and seating

 Visibility, comfort

 Radio sound quality

 Road feel and noise (turn audio off)

 Heating and air conditioning

 Don’t forget to test drive beyond the neighborhood

Pricing …

on the window sticker

 Manufacturer’s Suggested Retail Price (MSRP)

 Optional equipment

 Destination charge

 Market adjustments

 Total price or “sticker price”

Pricing …

not on the window sticker

 Dealer invoice price

 Rebate

 Dealer incentive

 Dealer’s true cost

 Groove Car tells it all at your fingertips

What’s it worth?

Do your homework

 Know dealer’s invoice price

 Know “true market value” price (current

average selling price, minus popular options)

 Know value of your trade-in

Dealing with dealers:

Negotiate the best car price

 Know preapproved loan amount per credit union

• Aim to pay < 5% over invoice price

 Don’t settle for something you don’t like

 Don’t let emotions show

 Don’t let dealers pressure you

 Don’t be afraid to walk out

More negotiation tips

 Talk about invoice price, not MSRP or list price

 Don’t talk about trade-in until price is set

 Negotiate price first, then payments

 If manager’s approval is required to offer a better deal, say you’ll wait just a few

minutes—no more

New car warranty

 Ask:

 How long? (example: 3 years/50,000 miles; 8 years/80,000 miles)

 What does it cover? (examples: bumper- to-bumper, body rust, normal wear)

 Maintenance agreement?

 Is a dealer network readily available with service/warranty?

Full warranty on used car

 Anyone who owns the vehicle during warranty period is entitled to service

 Service provided free

 Replacement or full refund given if dealer cannot repair a covered system or part

 You only have to tell dealer that warranty service is needed to get it

Do you need the

new-car extras?

Don’t pay for things you don’t need.

Examples may include:

 Rustproofing

 Fabric protection

 Paint protectant

 Etching your VIN on windows to deter thieves

 Service contract (extended warranty)

Thinking about a service

contract? Ask …

 Does it duplicate warranty coverage?

 Who backs the service?

 What does it cost?

 Will I pay a deductible? How often?

 What’s covered? What’s not?

 How are claims handled?

 Are parts new or reconditioned?

 What’s the length of the contract?

Deciphering financing options

 With rebate, you forego the low-interest-rate loan

 But, adding rebate to down payment makes credit union financing even more attractive

 0% financing sounds great, but …

 Only available for buyers with pristine credit

 Usually short-term loans, slow-selling cars

 You’re unlikely to negotiate the price

Rebate vs. 0% Financing Comparison

Amount Borrowed $24,000 w/$2,000 Rebate or 0% Financing

Option Payment Term Total of Payments

MHFCU &

Rebate Savings

0% Financing $400.00 60 $24,000.00 $285.60

Rebate Finance @ 6.99% $435.59 60 $26,135.40 $2,421.00

Rebate Finance @ 2.99% $395.24 60 $23,714.40

Upside-down loan

What is it?

 Owe more for car than it’s worth

 Common with five- or six-year loans

Alternatives:

 Don’t finance for longer than you plan to own it

 Make down-payment of 10 to 20%

 Choose shorter-term loan, if possible

 Buy vehicle that will hold value longer

Term and Monthly Payments

Amount Borrowed Interest Rate Term Monthly Payment

$22,000.00 2.99% 48 $486.89

$22,000.00 2.99% 60 $395.24

$22,000.00 3.59% 72 $340.13

Is leasing right for you?

Factors to consider:

 Don’t own the vehicle

 Monthly payment each month

 Drive new car every two or three years

 Low mileage

 Who will be driving the vehicle

FTC: Lease shopping tips

 Negotiate all lease terms

 Understand end-of-lease—and extra—charges

 Does manufacturer’s warranty cover entire lease?

 Consider gap insurance

 Covers difference between what you owe and what the car is worth if stolen or totaled

 Read dealer contract carefully—extra fees tacked on?

Tips for buying used

 Hire mechanic to inspect vehicle

 Ask for car’s maintenance record

 Take a test drive (hills, highways, heavy traffic)

 Contact repair shop where most work was done.

 Regular maintenance done?

 Repairs completed—or not done yet?

 Run Vehicle History Report

 Totaled, salvaged, rebuilt, flooded, failed inspection, odometer rolled back?

Used car inspection checklist

 Exterior—dings, scratches

 Interior—worn or clean

 Spare tire and equipment

 Hubcaps and moldings

 Electrical items—function properly

 VIN—match with contract

 Accessories—clock, light, stereo function properly

FTC’s Used Car Rule

Dealers must post a Buyers Guide in every used car they offer for sale, which tells:

 Whether it’s sold “as is” or with warranty

 Percentage of repair costs dealer pays under warranty

 Get all promises in writing

 Keep Buyer’s Guide for reference after the sale

 Major mechanical and electrical systems on car

 Have it inspected by independent mechanic

If you buy from a

private party …

 Private sales not covered by Used Car Rule

 Use Buyers Guide list of auto’s major systems as shopping tool

 Seller must live up to promises in contract

 Sales are “as is”—usually not covered by implied warranty

 Some warranties and service contracts may not be transferable

Auto insurance coverages

 Liability

 Uninsured

 Underinsured

 Medical

 Auto collision

 Comprehensive

 Miscellaneous

Save on car insurance

 Shop around—rates vary widely

 Take defensive driving course

 Ask about membership discounts

 Buy car with safety features – ex.

install car alarm

 Keep driving record clean

 Keep credit report clean

 Consider “gap” coverage

 Policy discounts

Insuring a teenage driver

 Shop around for teen-driver prices

 Choose their car carefully (safe, used)

 GPA of B or better: 5% to 10% discount

 Consult with insurance agent when teenager gets permit

 Maintain a good driving record

Soured by a lemon?

To get refund or replacement for

defective new car:

 Keep good records

 Provide the right notice

 Use arbitration program where required

 Follow state laws (carlemon.com)

Car Buying Summary

 Fits your needs

 Fits your budget

 You control the process—not pressured

 Priced a little over dealer’s true new-car

cost, or

 Priced at reasonable used-car price

Checklist: Are you ready?

 I have a good credit history and know my credit score

 I plan to get preapproved before car-shopping

 I know how much car I can afford

 I know what kind of car I need and want

 I know how to research safety and reliability ratings

 I know how to find dealer invoice and other prices

 I understand various financing and warranty options

 I know what to look for on a test drive

 I know how to negotiate the best price