5 things to consider when buying a new car
Purchasing a vehicle is a massive decision. In fact, it’s one of the largest expenses in most household budgets, second only to housing. It’s important to prepare by researching, comparing prices and choosing how to finance your new vehicle so you don’t make a costly mistake at the dealership.
Here are 5 things to keep in mind when it comes to financially preparing to drive away in a new car:
1. Know your needs
Before heading to the dealership or hopping online to compare prices on that brand-new truck you have been eyeing, take some time to consider why you are replacing your car. Maybe your family situation has changed, you’re spending too much on maintenance and repairs or you might just want to take advantage of your reenlistment bonus. There is no right or wrong answer here, but this is a wise first step in your car-buying journey.
List out the things you like and don’t like about your current vehicle. Are you wanting more tech inside and outside your car? Does there need to be an extra row of seats in the back for your growing family? Or perhaps you love the storage you have in your current vehicle. Go through your list and prioritize the features you want most.
Think about the purpose of your next vehicle. If it is for commuting, you might consider something more fuel-efficient like a hybrid. Or, if this is a fun off-roading vehicle, you may want something with a little more power behind the wheel. It is important to look at the big picture and plan ahead. Buying a new Mustang might not be the best choice if you plan to start a family in the near future.
2. Secure your own financing before going to the dealership
One of the best things you can do when buying a new car is to get pre-approved for your loan. You can easily apply for a pre-approved auto loan with Navy Federal Credit Union before you head to the dealership to help you save time and shop confidently.
This is good for a few reasons. First, it will give you an accurate idea of how much car you can really afford. The person selling you the car is not looking out for the best interest of your financial health, so don’t look to them to tell you your budget. It's really easy to talk yourself into buying more than your budget allows when sitting in those fancy leather seats smelling that new car smell. Make sure you know that number before you even set foot in a dealership parking lot.
Second, securing your own financing ahead of time can reveal the state of your credit. A good credit score is one that can get you the rate you want, so it is good to know what that number looks like before a dealership does. This also gives you a chance to clear up any mistakes that could be on your credit history and lets you know if you need to boost your score before starting your car-buying journey.
Third, when going through a dealership for financing, they may inflate the interest above the rate you qualify for. This means you could have qualified for 6%, but they charge you 9%. By securing your financing ahead of time, you know the rate you can get from another lender and can tell if the dealer is trying to take advantage of you.
3. Negotiate the price of the car BEFORE you tell them about your trade-in
If you are looking to get a new car and want to get the best deal on your trade-in, negotiate the selling price of the new car first. Don’t even tell them you have a trade-in until after they draw up a buyer's order and you see everything you are paying for in total.
If you were to tell them about your trade-in, oftentimes they will pad the value of your trade-in to make you think you are getting a good deal. Then, they will adjust the sales price of the new car to be higher than if you didn’t have a trade-in. Make sure to negotiate each separately so one doesn’t have a negative influence over the other.
With Navy Federal's Car Buying Service powered by TrueCar©, you can get an instant offer on your current vehicle online. Answer a few questions about your vehicle and then connect with one of the thousands of Certified Dealers who can pay you directly for your used car.
4. Check the cost of ownership before buying
There are a lot of factors to consider when it comes to how much owning this vehicle will cost you in the long run. Experts generally recommend spending no more than 10-15% of your take-home pay on a car. But that doesn’t just mean the final cost of the car at the dealership when you signed on the dotted line. Keep in mind this vehicle also comes with additional monthly costs such as the price of insurance, what kind of fuel it is going to take, registration prices, etc. Make sure you are able to afford the whole cost of the car before getting slapped with higher prices for months to come.
5. Buy through a car-buying service like NFCU offers
If this entire car-buying process seems overwhelming, check out Navy Federal's Car Buying Service, powered by TrueCar©. This perk of membership takes the guesswork out of a daunting process by allowing you to do it all in one place. You can search online, see upfront price offers and get a trade-in offer in minutes. Also, Navy Federal’s Car Buying Service offers additional incentives, worth up to $4,500 on select vehicles.
The Navy Federal Car Buying Service, Powered by TrueCar©1, also has special manufacturer incentives. As an added bonus, Navy Federal members could benefit from TrueCar’s© Military Appreciation Package, which includes features such as auto deductible and partial repair expense reimbursement with up to $4,000 when purchased through their TrueCar© Certified dealerships.2
Buying a new or new-to-you car doesn’t have to be an intimidating experience that ends up costing you thousands of dollars more than you should have paid. By following these five steps, you’ll make smart choices that you can be proud of every time you get in that new ride. Plus, you can help your friends and family make more strategic choices the next time they have to buy a car.
1 TrueCar operates the Navy Federal Car Buying Service. Navy Federal is not responsible for any offer, purchase, lease or service provided by or through the Navy Federal Car Buying Service.
2 Benefits not available in all states. Purchase from a TrueCar-certified dealer must be reported within 45 days. Auto deductible reimbursement of up to $500 two times a year for 2 years. Auto repair expense reimbursement of 20% of payment, up to $500 two times a year for 2 years. Additional terms and conditions apply.
This article is sponsored by Navy Federal Credit Union. Navy Federal Credit Union is federally insured by NCUA.