Education: articles

Step By Step Guide

Before you begin…
What traits do you need in a vehicle? Do you need a lot of space because you carpool, haul, live in your vehicle; or, do you commute a long way and need a car with great gas mileage. Analyze what you need from your next car. What have you wished your current car had or what options do you never use or even notice. Think about your lifestyle rather than concentrating on looks.

Qualifying for a loan
Loan approvals are mostly based on your credit history and ability to pay. If you are just starting to build credit, it's best to have money saved for a down payment, thus proving your budgeting ability and lowering a financial institution's risk by lowering the dollar amount financed. The Credit Union offers the Auto Club for this specific purpose. Some experts say your annual income should be at least twice the price of the new vehicle you buy; other say that it shouldn't be more than 15% of your monthly income. Both are great advice. Be realistic. If you haven't reviewed your expenses do it NOW—before you start looking. This will eliminate frustration later. Check out the budget worksheet form available on our web site, or stop by the office for your free copy. It will help give you a snap shot of your current financial situation. Then you can calculate car and insurance payments and see what type of vehicle works within your budget. You can logon to our web site for a loan calculator and budget worksheet or visit one of our Loan Counselors. They would be happy to work with you to see how much car fits into your budget.

Calculating Fair Price on a New Vehicle
Once you have narrowed your selection down to three or less vehicle. Get all the sticker information and ask to see the wholesale sticker. If the dealers won't show you the wholesale sticker, use the invoice price of the vehicle.

Total the dealer wholesale/invoice price for the model and equipment

• Add 3% for fair profit. (Hot selling cars may be more)
• Add the destination charge
• Add the sales tax and MVA fees
• Deduct any incentives or rebates.

This equals fair price; everything else is not necessary and negotiable. Make sure this price fits into your budget; not only does the car have to be affordable but the car insurance too.

Leasing vs. Buying
Leasing is another way of saying depreciation payments. In English: you are 'renting' the vehicle and paying for it to age. You're paying for it to become less valuable with time (the time you have it). There normally are restrictions on mileage when leasing. This is the dealers' way of having their vehicle (that you are renting) age gracefully. At the end of your lease and your payments, you have the option of buying the vehicle for the current value or turning it in for another vehicle. Either of those options means more payments.

Leasing does make sense in some cases; business owners and/or people who trade their car in every year.

Buying gives you an asset. Yes, you are still paying for depreciation, but it's for something you own. It still has value because you get to keep it. A well-maintained car – any car – will generally depreciate from its current value by about 50% every four years. The first four years are generally the most expensive.