Take the Wheel Program Recap

Thank you to Jaime Gangone from the Credit Union of New Jersey for sharing information about getting the best deal when purchasing a car.  Purchasing a new or used car can be a hassle, but you there are some things you can do to take control and ensure you are getting what you want at a fair price.  Follow these tips:

1. The most important part of buying/leasing a car is determining how much you can afford.   Make sure to create a budget to determine the limit to what you can spend.  Secure a pre-approval from your bank or credit union to have an accurate number for what your spending range should be.
2. Shop around, either at dealerships or online.  By researching the car you want, you can pick the features, check to see what others in your area have paid for the car, and see what discounts or offers certain dealerships may be giving to help lower the cost of the car.  Additionally, you may be able to find out the safety record of used cars or determine the value of your trade-in.  Try to visit at least 3 dealers to get the best price and be sure to take someone with you; 4 eyes are better than 2!
3. Determining the actual price of the car can be difficult.  The MSRP does not include optional equipment, dealer fees such as destination charges, or market adjustments.  The total price of the car is the “sticker price” which is usually at the bottom of the window sticker.  Additionally, there may be rebates, offers, and dealer incentives that can decrease the cost of the sticker price so make sure to ask about them.  Ideally, you want to negotiate to about 2% over the dealer invoice price.
4. Negotiation is an art and car salespeople do this many times a week.  Be sure to talk about the invoice price rather than the sticker or MSRP.  Negotiate the price first before discussing any payments or trade-in values.  The salesperson knows what the lowest price is so do not wait around for a manager’s approval; this is a stall tactic to make you think about buying impulsively.  As always, shop around to get the best deal because each individual dealership controls the final price of the car, not the manufacturer.  With the high-demand for used cars, you may get a better value for your trade-in by selling it to an online retailer like AutoLender or Carvana, rather than the dealership.
5. One way dealerships try to sell you a car is by offering discounts on financing, such as 0%.  However, if you take the financing option through the dealership, you usually loose out on other rebates, such as cash back.  Financing through your bank or credit union, while it won’t give you 0%, you will still be qualified for the other rebates, which may be greater than the interest you will pay on the loan.  Additionally, the dealership may make several hard inquiries on your credit while checking several lenders they work with while your bank or credit union will only make one.
6. When buying a used car, be sure to get a copy of the Buyer’s Guide, which dealers are required by law to provide.  This will tell you if there are any warranties, the major mechanical and electrical systems, and if there are any potential problems with the car.  Always get deals in writing and always have the car inspected by an independent mechanic before purchase.
7. Every new car comes with a factory/manufacturer’s warranty, but dealerships may offer an “extended warranty” at an additional charge.  These are not actually warranties, but service contracts.  Before adding this on, ask about duplication through the manufacturer warranty, what is and is not covered, the cost, who handles the claims, and the types of parts used in repairs.
8. If you are going to lease a car, your monthly payments are generally lower, but you do not own the car.  Lease agreements will have a term length and mileage limit; you are responsible for extra fees if you go over the mileage limit.  Make sure that the buy-out price is 66-67% of the total cost of the vehicle.  Also consider gap insurance, which will help cover the cost of the loan if the car is totaled or stolen.
9. Make sure you have insurance!  In NJ, you are required by law to have car insurance in order to operate a motor vehicle.  A vast majority of car contracts, whether you are buying or leasing, require you to have both liability and collision until the loan terms are satisfied.  Make sure to shop around as rates are always changing.  Look for discounts through bundling with home/renters as well as discounts for high-school/college students.

There are many resources out there to help you when buying a car.  Consumer Reports has reviews as well as a booklet to purchase that lists the dealer invoice prices for a given year.  Edmunds will also tell you the invoice price for new cars and provide fair market prices for used cars.  Cars.com is a great way to shop around for the features you want and see what others have paid in your area.  Kelly Blue Book is the gold standard for determine the value of your used car, but they will also provide information on new cars.  The Federal Trade Commission has good information on all aspects of the car buying process, especially in terms of leasing a vehicle.

If you have any questions about the webinar or buying a car, please contact Jaime at jgangone@cunj.org.  Please download a copy of the handout at https://www.njstatelib.org/wp-content/uploads/2018/11/Take-the-Wheel-Handout.pdf.  Additionally, you can view a recording of the webinar at https://youtu.be/vai6Q_dKCI8.