Written by: Pier Alsup, American Eagle Credit Union, Chief Community Engagement Officer
April is National Financial Literacy Month. A month devoted to highlighting the importance of financial literacy and teaching Americans how to establish and maintain healthy financial habits. Last week, we covered a Credit Card Checklist of things to look for when selecting a new card, or deciding whether to keep using the one(s) you have.
In the next article in our series, we are discussing things to know when considering to buy – and finance – a new or used vehicle.
Buying a car doesn’t have to be stressful or confusing. It’s a purchase that many of will make multiple times in our lives. It’s not as a “big” as buying a new home, yet it’s not as “small” as buying a new pair of shoes. There are some key things to KNOW to make your purchase – and financing that purchase – a smart decision.
Your vehicle needs
You need to pinpoint the type of car/truck/van you need (versus the type you want!) Do you need seating for 2 or for 5? Do you need cargo space for large items like a golf bags? Do you need an MP3 and phone charging jack? Do you need all wheel drive?
Your total cost of ownership
Know the initial purchase is just the beginning, when it comes to affording a vehicle. Once you drive off the lot, you need to consider:
- Maintenance costs such as oil changes, car washes, and wiper blades and wiper fluid
- Repairs, such as a new windshield or new tires
- Sales tax and personal property tax
It is important to know how much car you can afford BEFORE visiting a dealership online or in person. Focus on the overall purchase + ownership cost … not just the monthly payment.
Your credit score
This is a big one— know if your credit report is in order, and most importantly, know your score. Much like buying a house, check your credit report before car shopping. If there are any mistakes on your report, get them corrected ASAP. The better your credit score, the lower the interest rate on your auto loan.
It makes it less stressful when you know you have your financing approved before shopping. It’s easier to negotiate, whether you are purchasing from a dealership or an individual. It also keeps the buying process focused on the car purchase and not the financing purchase!
Do your research online first
- Understand all of the fees the dealer charges
- Understand the warranty and understand extended warranties. Know where to purchase the best extended warranty, if needed.
- Understand if you will need gap insurance? (additional insurance that will pay the “gap” between the value of the car and the balance on your loan should your vehicle be totaled).
You can shop independently for warranties, gap insurance, and roadside service plans. Take the time to read up, and then do some number crunching BEFORE going to the dealership so you’ll understand if the products and plans being offered are a good deal for you.
Get pre-approved for your financing BEFORE shopping
Shop on a weekday afternoon versus the weekend when the lots are busier.
Beware of option … and price … creep.
Getting a new or a new-to-you vehicle is always fun! For some of us, it’s every couple years and for others of us, it maybe once every 8 to 10 years! It’ important to remember not to get caught up in the moment. Just because you can afford an auto that’s fully loaded with all the latest and greatest options, doesn’t mean you need a car with all the latest and greatest options. If you’re a car enthusiast and tech savvy, then yes— you might understand and use all the technology in a car you buy. But, if you’re like most, are you really going to use all the bells and whistles? Basic model cars are not only more affordable, they can also be easier to manage and maintain.
American Eagle Credit Union focuses on financial literacy YEAR ‘ROUND with:
- Seminars (for adults) – topics including budgeting, home buying and college planning
- Teaching (for grade school & high school students) – our in-house programs plus with partners such as Junior Achievement
- Free online suite of tools, calculators, and tutorials
- Free financial counseling programs, debt management plans and credit report reviews with our partner, GreenPath Financial Wellness.
More info: ameaglecu.org/