Lafayette Federal Credit Union
Vice President, Business Development
If you’re considering buying a car, you may be feeling overwhelmed. There are a good amount of things to consider, such as:
These questions and more can result in paralysis by analysis. Since purchasing a car is a big financial decision, you’ll want to weigh your options carefully.
Choosing the right vehicle to buy starts with figuring out what you specifically need. The best vehicle for a large or growing family will likely be very different from that best suited for a solo adventurer. For example, safety ratings, mileage, four-wheel drive, towing capacity, pricing, and room for passengers should are all important considerations when narrowing down your choices.
To getting started, compile a list of your non-negotiables. Be specific - let your list guide you towards the right choice in vehicles. Your list of non-negotiables can be seen as your needs, and those should take top priority. Once your needs are established, go ahead and add your wants to your list. If you find a few options that meet your needs, you can defer to the wants list for a tiebreaker.
It’s important to set a budget you can stick to before you go car shopping. Salespeople may offer you upgrades, or try to add on bells and whistles. However, you should stay focused on your financial parameters and stick to your guns if needed.
Experts suggest that no more than 10–15%Opens in New Window of your monthly income should be allocated for auto expenses. That means all auto-related expenses. Add up the cost of insurance, maintenance, registration, and gas to see how close you are to the 10–15% of your monthly take-home pay. Any amount left over can help you determine what kind of monthly payment you can afford for a car loanOpens in New Window (if you’re not paying in cash).
A car loan calculatorOpens in New Window is a helpful tool to run some preliminary numbers. To get an accurate monthly payment estimate from an online loan calculator, you will need to enter the following information:
You can adjust the price ranges until you get to a monthly payment that fits comfortably into your budget. Once you know the maximum price you’re willing to pay on your new vehicle, it’s time to start looking for vehicles that meet the non-negotiables you previously listed and fit within the budget you have set.
The average length of ownership is slightly over six and a half yearsOpens in New Window. If it’s been that long since you last purchased a vehicle, be aware that the marketplace has changed. Vehicles that were trending during that time might not even be offered anymore. And, new vehicle types have since hit the market. It can be overwhelming to know where to start.
With your predetermined set of guidelines in hand, it’s easier to narrow your focus and not get distracted by the sheer volume of options available. Online car finder tools like Edmunds Car FinderOpens in New Window are a great place to start your search. Edmunds has built-in tools for you to browse vehicles by style and run side-by-side comparisons of vehicles you’re interested in.
Set aside time to do your research, so that you can familiarize yourself with what is currently available. Once you narrow down your choice to a particular model that seems to check all the boxes, be sure to compare competing models. You may be able to find one that meets your non-negotiables and gives you some of your wish list items as well. Read reviews on any options you’re considering to gain an understanding of other consumers’ experiences.
Be careful not to rush this part of the process. Doing sufficient research will make the difference between buyer’s remorse and buying a vehicle that meets your needs for years to come. Set yourself a goal of identifying at least three options you would like to test drive and get a feel for.
Online vehicle search programs make it easier than ever to do your research when it’s convenient for you. Most of the major sites feature an inventory finder tool to locate vehicles in a specific area or within a set mile radius. These features can be helpful by allowing you to schedule appointments directly with a dealer to test drive a vehicle you may be interested in, or set up a visit with a private seller, rather than walking onto a lot and hoping a particular one is available.
Doing some legwork to secure financing before you go to the dealership can save you money, as well as relieve some of the stress in the car buying process. Securing an auto loan preapproval before you test drive vehicles you’re interested in will put you at an advantage. During the negotiation phase, the dealer can try to beat the APR on your preapproved loan, and if they can’t then you can rest assured that you have the best financing possible already in hand.
The best place to start looking for loan preapproval is a financial institution, such as a credit union. Because credit unions are non-profit institutions, credit unions can typically offer lower rates than banks by reinvesting profits into services and products for their members
As with any other loan application, your credit scoreOpens in New Window has an impact on your ability to secure a loan and the interest rate you will qualify for. If you have poor credit, you may want to consider holding off on your car purchase until you can improve your score (if possible).
Going to the dealership is a part of the car-buying process that can cause consumer anxiety. It can be overwhelming to go from lot to lot, test drive cars, stave off overzealous salespeople, and then negotiate a good deal. But having your research done and budget set ahead of time will serve you well.
Make appointments to test drive the top three vehicles you identified in your research. Let the dealership or private seller know you have other cars to test drive and won’t be purchasing until you’ve done so. This may not stop them from putting pressure on you, but it will may cause the seller to ease up because you’ve verbalized your intent.
Once you’re in front of the vehicle you want to test drive, inspect the exterior. Look for dings and scratches, and evaluate the tread of the tires. Also, take a look under the hood. If possible, consider bringing a mechanic or other knowledgeable person to give a solid report on the vehicle. If you notice anything of concern, bring it up to the salesperson and take some notes to refer back to at the end of your three test drives.
Pay attention to how it feels to get into the vehicle. Is it comfortable for you and does it offer sufficient room for your family, pets, and gear? Take a good look at the interior and make sure it is up to your standards. Take note of the controls and displays as well. Sometimes, people buy vehicles with all the electronic bells and whistles only to find that the tech causes more confusion than it’s worth. Make sure you’ll enjoy using the features offered with each vehicle.
Turn on the vehicle and listen to how it sounds before you hit the road. Test the radio, heat, air conditioning, windshield wipers, rearview cameras, etc. to make sure they’re all working properly. Once you start driving the car, pay attention to the feel of the steering, the brakes, and if the car is easy to handle. Make sure to test it on a freeway to see how well it accelerates and shifts from gear to gear.
Keep notes on all three of the vehicles you test-drive to refer back to them. If the vehicles are pre-owned, ask the salesperson at the dealership for a vehicle history report. Although you may be charged a small fee, it can certainly be worth the price to know the history, including how many accidents (if any) the car has been in. Additionally, consider having any used vehicles inspected by a professional mechanicOpens in New Window before making a purchase decision.
Once you’ve made your decision and have your loan preapproval in hand, you can feel confident going into negotiations with the dealership to make the purchase. Stick to the budget you’ve set yourself and don’t be afraid to walk away from a deal you feel uncomfortable with. Above all, you should be confident that you’re making the right decision when you purchase a vehicle.
At Lafayette Federal Credit Union, we provide competitive auto loan rates and terms in the Washington, D.C. metro area. Presently, we offer loan terms up to 84 months and APRs as low as 2.375%Opens in New Window. We also offer financing up to 125% (based on the Automobile Invoice Service Manual’s appraised value) on any previously unregistered or untitled vehicle purchased from a licensed dealer. Members are also eligible for the Green Auto Loan discount, which offers 0.125% percent off on U.S. EPA-designated Smartway certified vehicles. Interested members can contact usOpens in New Window or stop by one of our branch locations where a Member Service Representative can assist.
Not a Lafayette Federal member yet? You can become a member by completing an online membership application, scheduling an appointment or walking into a branch, or scheduling a virtual meeting with a Business Development Officer.
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