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By Erienne Andvik
MoneyMix Contributor

What's your reason for buying a new vehicle? Still driving that high-school junker that costs more to repair than it's worth? Or have you been out on your own working for a few years and you want an upgrade? Whatever your reasons—and whatever your price range—you definitely want to get the most for your money.  

If you're like me, buying a car is one of the biggest purchases you will make at this point in life. Not to worry—we'll guide you through the process and you'll be showing off your new car in no time.

think outside the brand

When you start putting serious thought into what kind of car you want, avoid naming makes and models. Instead, figure out what features are most important. You may say to yourself, "I want a reasonably priced, compact, fuel-efficient car that's fun to drive." Many makes and models fit that description, and although one or two might come to mind, there probably are several others you haven't heard of that might be a good fit, too.

Credit union auto loan rates generally are better than dealership rates.Focusing on the type of car you want instead of specific brands can save you money, since the most popular brands and models can charge a premium price. Sometimes two different automakers sell similar or identical car models. Check out both versions—one likely sells for less. Web sites such as Edmunds.com, cars.com, and Kelley Blue Book show side-by-side comparisons of similar models. Use these as a starting point to get you thinking creatively. Independent testing organizations, such as Consumer Reports, can give you an unbiased vehicle comparison as well.

get preapproved

Before you set foot on the car lot, get preapproved for a loan at your credit union. Getting preapproved means you'll know what kind of loan rate you'll pay, and what size loan you're qualified for.

There are several ways to apply for preapproval. Depending on the credit union, you can apply online, in person, or over the phone. If you have detailed questions about how much you can afford or how financing works, stop by your credit union. A loan officer will be happy to walk you through any questions you have.

To get preapproved, you'll need to show:

  • Name and address
  • Social Security number
  • Driver's license number
  • Employer information—name, hire date, gross income
  • Current housing information—monthly payment, time in current residence
  • Debt obligations—current credit card debt, home association dues, auto insurance
  • References, if applicable

Your credit union lender likely will give you a letter you can take car shopping showing the amount that you're approved for. The time that this information is good for will vary, but it's easy to renew your loan application if needed.



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Getting preapproved is a big advantage; it shows car sales staff that you're a serious buyer. It also removes the pressure of negotiating financing contracts at the dealership, and allows you to focus your attention on finding the right vehicle. And, if you need another incentive ... credit union auto loan rates generally are better than dealership rates.

negotiate the purchase price

Determining the actual vehicle price is the first thing you should do once you've settled on a vehicle.

You need to know how much the dealer paid for the car so you can negotiate the price. For new cars, Web sites like Edmunds.com and MSN Autos will give you the dealer's cost for the car you want, known as the dealer's invoice price. In calculating this number, remember to add in any optional equipment you're likely to want. Not counting rebates, aim to pay no more than 2% over the invoice price for high-volume models.

You can check if your target is reasonable by looking at the "True Market Value" price on Edmunds.com. This is the current average selling price for a given model, though that price doesn't include many popular options.

The auto industry still is struggling due to the economy, so many manufacturers are offering big cash-back incentives on new vehicles. Don't stop there—dealerships usually can budge some from this price, too.

"Negotiating is trickier with used cars, since every one is different," says Jerry Edgerton, an automotive writer in New York. Edgerton suggests first looking at the model you're interested in on Kelley Blue Book to see what you should be paying. But be sure to check the suggested retail value—not trade in or private sale.

Then look at the Edmunds True Market Value, says Edgerton. You also should look on Autotrader.com and see what the dealer ads in your area are for the same model used car. Then negotiate from there.

"Keep in mind that unlike new cars, you can't really know what the dealer paid because the dealer took the car in trade or bought it at auction," Edgerton adds.

get a good price on your trade-in vehicle

After you've established a purchase price, you can move to the trade-in value on your current car; it's important to keep these transactions separate. Research the car value before you head out to the dealership. Web sites like Kelley Blue Book or Edmunds can help you find the approximate value of your car. Generally, selling your car independently can get you a little more money for your vehicle, but it also can be a hassle. You don't have to trade in your car at the dealership if you don't think you're being offered a fair price.

You don't have to trade in your car at the dealership if you don't think you're being offered a fair price.

Other money-saving tips:

  • Keep your eyes peeled for corporate discount opportunities lurking in unlikely places. Your employer may have a discount program with auto manufacturers. Even your gym membership could score you a deal. Some credit unions also have member discounts with auto companies—check at your credit union to find out what's available.
  • If the exact car you want isn't available on the lot, negotiate a lower price on a car that's in stock. The longer a car goes unsold, the more expensive it is for the dealership. Sales people often are eager to sell an in-stock model, even at a reduced price.
  • Make a list of 'must-haves' and 'nice-to-haves' before you hit the showroom. It's easy to be wooed by upgrade features that increase a car's price. Write your list down—even if you feel like a nerd—and bring it with you. There's a lot going on when you're car shopping, and you won't be able to remember everything.
  • Take into account the total monthly cost of car ownership, besides just the monthly payment. Don't forget gas, insurance, and maintenance. Additional charges can vary widely from model to model.

Remember, you're in control of your car-buying experience. As with all big purchases, you'll have to do some research to make sure you're getting the best deal. If you're not 100% sure about a decision to purchase, walk away and sleep on it. There always will be another 'dream car' out there, so don't feel pressured to make a decision you aren't comfortable with. 

Getting a good deal on a new vehicle isn't quite as easy as spotting a good sale at the mall but, with some preparation, your car buying experience can be—yes, I'm going to say it—fun.

Erienne Andvik has loved cars since she could talk, when she'd announce the comings and goings of her neighbors based on their car models. She currently drives a 2002 Honda Civic, and figures she has at least five good years left in her car. She'd rather drive an older car for a few more years until she can afford her dream car (a Saab 9-3 convertible—used, of course).

Published April 29, 2010

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