Helpful Tips

Below is a quick reference to the most common car buying information that you should read before buying your next car.

Manufacturing sites: Acura, Aston Martin, Audi, Bentley, BMW, Bugatti, Buick, Cadillac, Chevrolet, Chrysler, Dodge, Ferrari, Fiat, Fisker, Ford, GMC, Honda, Hummer, Hyundai, Infiniti, Jaguar, Jeep, Kia, Lamborghini, Land Rover, Lexus, Lincoln, Lotus, Maserati, Mazda, Mercedes Benz, Mini, Mitsubishi, Nissan, Porsche, RAM, Rolls Royce, Scion, Smart, Subaru, Tesla, Toyota, Volkswagen, Volvo

Third party sites: truecar, edmunds, autotrader

PRE-OWNED


Buying pre owned is sometimes better than buying new. When buying pre-owned, you are allowing the first owner to absorb most of the depreciation. If you do your homework, you can save significantly. No two pre-owned vehicles are alike, and vary in mileage, options and condition.

How dealers get used inventory; There are two primary ways dealers acquire used cars; trade ins and auctions. When a vehicle arrives at a dealership, regardless of miles it should be serviced before reselling.

Always assume the history of the vehicle is unknown and complete a thorough visual and mechanical inspection. A vehicle's history is usually documented publicly by the Division of Motor Vehicles and or insurance companies then republished via third parties for a fee. Please keep in mind not all vehicles are registered properly, nor are all accidents reported to the insurance company. Dealership reputation & quality of inventory are the most important things to pay attention to when buying a used vehicle.



NEW CARS


Advertising Fee: This is financial assistance given to dealers by the manufacturer to support the efforts needed to liquidate inventory. Most times this equals about two to four percent of the Manufactures Suggested Retail Price (MSRP). The majority of dealers do not own their inventory and use this money to offset the finance and advertising charges associated with selling a car.

Current Model Year: New cars are released all throughout the year. Manufacturers stagger production between models to produce a single type of car at a time. The older inventory is considered left over as dealers prepare for newer models to come in.

Factory Options: Equipment installed by the manufacturer prior to the dealer receiving shipment of the vehicle. All dealers use the same "options guide" to order vehicles from the manufacturer. There are no factory options that you can get from one dealer that another dealer can't offer. At times a particular option can slow the production of a vehicle because of that specific part's availability.

Incentives: Usually labeled Rebates, Lease Specials, Manufacturer to Dealer Incentives and Low Finance Rates. All are subsidies provided by the manufacturer to promote the sale of a particular vehicle model. Usually dealers selling the same make have the same incentives.

Invoice: The price dealers pay the manufacturer for a new vehicle.

Specials / Sales: Television commercials, print ads, radio spots etc. This is how most dealers compete for your business in their local territory. Often times this does not reflect how much you will pay for your car.

LEASING VS. BUYING


All options should be considered when deciding how you are going to pay for your car. Leasing and financing are very similar. The question is - what works best for your personal driving habits?

Leasing - When you lease, you are essentially purchasing the portion of the vehicle that you will be driving.

Example: A car costs $20,000 and the *residual value (buy-out) is sixty percent ($12,000). You finance the remaining portion of the vehicle ($8,000) over the term of your lease. The interest rate is called a money factor. The money factor is a math calculation that can be converted into an interest rate.

LEASING TERMINOLOGY


Buy / Finance - To pay for the entire car using bank financing or cash.

Cap Cost Reduction - A down payment paid by the car buyer to lower monthly lease payments.

Disposition Fee - a fee charged to the lessee for cost associated with the reconditioning and resale of the leased vehicle.

Inception fees - The basic fees needed to begin a lease agreement, they normally include first month payment, motor vehicles, security deposit and a documentary fee.

Miles per Year - Most cars start at 12,000 or 12k miles per year. With leasing you are able to customize your mileage based on your driving habits. There are even options up to 25k miles per year!

Money Factor - Term used for an interest rate when calculating lease payments.

Residual Value - Amount a car is worth at the end of a lease term.

TRADE-INS


There are several important decisions that need to be made when trading.
Your trade is viewed by the dealer the same way you view a car you intend to purchase. In other words, the dealer is making the decision whether to purchase your vehicle or not, and will review it thoroughly using industry standard publications to assess the value.

Upside Down / Negative Equity: Owing more for a vehicle than it is actually worth. There are three ways to alleviate this: by paying the difference in cash, "rolling" it into the new vehicle or leaving it out of the deal completely. That's it! Do not confuse yourself. These are the only ways it can be done.

Selling a trade on your own: If you're able to sell your trade on your own, you will usually get more for it. Before you go down this road ask yourself the following questions.

•    Are you available for test drives?
•    Do you trust strangers coming to your house or office?
•    Are you capable of handling financing?

Answering yes to all of these questions means you're a good candidate to sell on your own. If selling on your own doesn't work, there are also advantages to trading-in at the dealership such as, tax savings.You do not have to pay tax on the value of your trade and you will not have to worry about the tasks that come along with selling on your own.

How your trade-in will be evaluated: The majority of dealers use special publications to assess the value ensuring the dealership doesn't over pay. The publications that analyze national wholesale auction activity keeps trade values steady industry wide.

EXTRAS


Extended Warranties: This will extend the coverage of the warranty given to you by the manufacturer. Manufacturers are not the only option for purchasing warranty plans. There are hundreds of independent companies that offer coverage, however be sure to do your research. Prices can vary by hundreds and coverage can be significantly different. Some Extended Warranties have deductibles. A warranty with a low or no deductible is usually best.

Financing: Dealer financing can be very competitive, since dealers work with several financial institutions. Your credit application will be taken and submitted to bank(s) for the best approval, and the dealer receives compensation when you finance with them. Once the most favorable approval is identified, the price of the loan will be marked up and resold to you. The markup of a loan is regulated (most states only allow two percentage points). Always contact your Credit Union first to find out about the best programs and rates.

Other Fees: Window Etching, Destination, Advertising, and Floor Plan are fees that are sometimes negotiable and or questionable. This depends on how a particular dealer itemizes their inventory.

Standard Fees: Taxes, State Motor Vehicle & Documents are the most popular fees that dealers do not waive.

WHEN IS THE BEST TIME TO BUY A CAR?


When you are educated on the auto buying process! Buying a car is one of the most important things you will purchase, next to buying a home. As you well know, there are a variety of makes and models on the market. However, like anything else you need to know what to look for where your finances are concerned, as well as, what you need to know before even stepping onto a car lot. Educating yourself before you buy a car will save you time and money in the long run.

So what do you need to know before buying a car? Here are a few things:

1. The first place to start is your credit score. What is your Beacon score? A Beacon score is a numerical scale that rates your credit worthiness. The average beacon score ranges between 350 and 850 with 850 being nearly perfect credit. Naturally the higher your beacon score, the better deal you can get on your automobile purchase. This can assist you greatly in getting a lower annual percentage rate (APR).

2. Have a down payment. Most lenders will want a down payment on your vehicle purchase. A good rule of thumb is to aim for a 10% down payment. However, if your credit score is really good you may get away with as low as 5% down or even zero down.

3. GET AN APPROVAL FROM YOUR CREDIT UNION FIRST. You should check with your credit union before visiting a dealership. Purchasing via a credit union allows for greater bargaining power as you are buying as part of a group. This will allow you to walk in confident and ready to deal. It will also save you time and embarrassment if you cannot obtain a loan.

4. Know your budget. Your credit union is going to look at your debt to income ratio to determine if you can even afford to purchase a vehicle. This will save you a lot of time and headache when buying a vehicle.

5. Do the research. Remember, you may like a vehicle's look and features on a commercial, but once test driving it you may not like it at all. Investigate things like gas mileage and safety features. Does it have the amount of room you need? Are there any rebates or incentives offered by the vehicle maker? Researching ahead of time will give you a bigger advantage when going to the car lot.

6. Be sure to test drive. Never purchase without test driving the vehicle first. This is especially true when purchasing a used vehicle. Test driving allows you to assess the vehicle's performance, how it handles on the road, how comfortable the seats are and how features work like - navigation system, backup cameras, etc.

7. Keep an eye out for specials such as, end of year closeout sales. Many dealers try to get rid of vehicles at the end of the year so they can make room for newer models. However, the end of year is not the only time to get a good car deal, so watch out for great specials being offered throughout the year.