May 25th, "Car Buying: How to Avoid the Extra Stress"--Mary Dittfurth

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1 May 25th, "Car Buying: How to Avoid the Extra Stress"--Mary Dittfurth The car-buying process can get pretty stressful, especially if you re not prepared for it. Car buying is supposed to be exciting, not something that makes you want to scream (and I m not talking about screaming for ice cream). I have compiled a few tips that will hopefully help you prepare and make it easier to get behind the [stress free] wheel of that brand-new (or new-to-you) ride. Get Pre-Approved. Getting pre-approved BEFORE you even start looking for a vehicle can be a great way to see what kind of car you are qualified for and what kind of rate you would be looking at. I highly suggest going through your local financial institution first. Most dealers will have financing available as well, but (especially for those with not-so-perfect credit) many times you can get a better rate or better loan products (e.g. extended warranty and GAP) at your local financial institution. Not to mention the fact that separating dealer and financer will just give you one more buffer there to make sure you are getting a fair deal. Decide if you want GAP or an extended warranty. These are both extra products that you can purchase on a vehicle to go along with your loan. Guaranteed Auto Protection (GAP) will pay the difference between what the insurance company will pay versus your total outstanding loan amount in the event of a stolen or totaled vehicle. GAP is highly recommended for anyone who finances a brand new vehicle, rolls negative equity from an old vehicle into a new vehicle, or purchases a vehicle with a high depreciation rate. Basically, unless you have a good down payment that keeps you in positive equity for the life of your loan, you should get GAP. If you find yourself in a situation where your car was stolen or totaled, but you owed more than it was worth, YOU would be expected to pay that difference without GAP. An accident is already stressful, GAP is just one way to make it easier on you. Extended warranties are another way to help keep you and your finances protected. They cover costs of qualified repairs on your vehicle in case anything goes wrong later. Many companies, from financial institutions to dealerships to third-parties, offer extended warranties, and they seem to love cluttering up your mailbox with letters. All extended warranties are not created equal. Some are more limited to what they cover and some provide extensive coverage for your car. I know that here at ECU, you can choose between three levels of coverage for your vehicle. It s important to know that you don t have to buy an extended warranty from the dealer in order for the manufacturer s warranty to stay in effect and it s best to make your decision about the extended warranty beforehand. This way, you won t find yourself tired at the end of a long day of car shopping and say yes to a good sales pitch that you may regret later.

2 Have your down payment ready. Having a solid down payment can save you money on interest, lower your monthly payment, and give you more equity in the vehicle right off the bat, especially when purchasing a brand new car. According to Edmunds.com, new cars typically depreciate about 22% in their first year. A $0 down payment offer may sound enticing, but two to three years down the road you will thank yourself for putting money down. If you have equity in a vehicle you are trading in, that can also serve as a strong down payment, but having some cash saved to put down as well can be helpful for fighting that big depreciation hit. Ideally, you want your trade-in/down payment to total at least 20% of the purchase price of a vehicle. You will also have to pay tax and title fees on your purchase. These fees can be rolled into the loan, but could take up a good chunk of your down payment, making it not go as far as you originally thought. Make a budget. This is a big one. With the average new auto loan term extending for longer than five years, you HAVE to make sure that what you are promising to pay isn t more than you can afford. Also, think about what your plans are for the next five years (or whatever your loan term is). Do you plan to buy a house? All loan payments are factored in to your debt-to-income ratio for that future mortgage application. If you ve promised to pay more than you can really afford on that new car or truck, you may find yourself really regretting it a few years down the road. Don t forget to include your projected insurance and gas costs into this budget to make it as accurate as possible. Now analyze your budget and see if you can afford it AND to see if you are still able to save for any future goals you may have. If you can, go you! Research different vehicles. There s a lot more to buying a car than just seeing which one is the prettiest. With the awesomeness of the internet, we are able to see reviews on how each vehicle drives, safety specs, Car Fax reports, and projected resale value. You can look at different dealerships websites and see what kind of cars they even have on their lot, without wasting the gas and an entire Saturday walking around a whole bunch of car dealerships. Also, especially for brand new cars, find out what month that specific dealer usually has sales or when the next year s car is going to come out to try and get a better deal on a current model. Doing a little research now can save you thousands of dollars and/or a lot of buyer s remorse later. Don t Shop Based On Monthly Payments Alone. Sure, the monthly payment is very important for you and your budget. You definitely need to know how much you can afford, but you also need to know the total cost of that vehicle. Often times, terms will be extended in order to get the monthly payment where you want it. This isn t a bad thing, but you need to decide if you really want to extend this loan for 72 or 84 months just to get your monthly payment below a certain amount. Think about what could change

3 in seven years. I promise you the new car smell will be long gone by then and you will still need to be happy with your car and the loan. I suggest using the Auto Loan Calculator on educationcu.com and plugging in different terms and down payments to see what your monthly payment and total interest paid would be. You may find that it s better to wait until your down payment is where you want it to get your monthly payment lower, instead of extending the term by 1-2 years. Be prepared to negotiate. During your internet adventures, you should also know EXACTLY how much any car you are thinking about buying is worth and EXACTLY how much your tradein is worth. I would bet on the fact that that they ll probably try to low-ball you on your trade-in at first. Don t be afraid to stand your ground based on facts and figures. The first time I ever tried to sell a vehicle I was barely 18 years old. I owned a three-year old vehicle and did a lot of shopping around, but fell in love with this car that I really, really wanted. At 18, I didn t know much about car buying (or really anything for that matter) and I was offered a $5,000 trade-in for my vehicle that had an actual trade-in value of $8,000. Lucky for me, I wasn t about to make any car decisions without my brother s advice. The next time I went to the car dealership I took my brother, who laughed at their $5,000 offer and was able to get the full $8,000. You don t have to be mean, but you do need to be stern to make sure YOU get the best deal possible. Don t be afraid to walk away. If the numbers aren t where you want them or you just have a bad gut feeling about buying that vehicle, don t be afraid to say no. Buying a car is a HUGE purchasing decision and should never be taken lightly. If you need a couple of days or weeks to think about it, that is perfectly fine. Remember that car buying is supposed to be fun, not stressful. Take your time with it and try not to cave in under the pressure of buying something that isn t right for you. We are always here for you at Education Credit Union. Feel free to give us a call anytime you have questions about vehicle financing, how it works, and how we can help. Until next time May 11th, "Maybe Money CAN Buy Happiness"--Mary Dittfurth The other day I was sitting at work and the radio started playing the country song, Buy Me a Boat. Aside from the song overall being catchy enough to get stuck in my head, it also makes a really good point. Money can t buy you happiness, but it can buy you a boat. If a boat (or anything else you feel

4 compelled to spend your hard earned money on) is what makes you happy, then perhaps you did just buy yourself happiness. Sure, simply the act of boat buying probably wouldn t be that awesome, but going out on the water with friends and family would be. I get it, just having a bunch of money and no one to share it with probably won t make you happy. Not that I ve ever had the problem of having too much money, but I can see how it could get a little lonely. Money isn t going to buy you true love or make people [really] like you, but there are a few ways that money can make you happy. Money can give you peace of mind. A lot of people are unhappy because they have money troubles. In fact, it s one of the top ten causes of divorce. There are a lot of things in life we have to worry about. Family, friends, careers, self-worth why add money stress into the mix? Having a solid savings account and financial plan can take a lot of weight off of your shoulders (not literal weight, unless you include a gym membership into your financial plan). It s hard to be happy when you re constantly stressed about how you re going to pay your bills. Money can make others happy. I absolutely love when I have found (or made) a great present for someone and get to watch them light up when they open it. It s something that makes me happy, but the truth is that even homemade presents cost money. That money was used to buy something to make someone happy, which made you happy. When you have enough financial stability to be able to give presents to your loved ones, it can be an amazing feeling. It s the same with charitable giving. If you are able to give your money for a good cause, it can also make you feel good to know you re helping someone else in need. It s hard to give your money away when you re not sure if you ll need it for your own bills, which is perfectly understandable. Once you have reached a comfortable level of financial stability, you can start putting charitable giving into your budget and really make a difference. Money can buy you priceless experiences. College is my favorite example of this. I learned so much from being in school and meeting other people who really helped me grow as a person and a professional. I don t think that I could put a price tag on that, but I certainly could put a price tag on my tuition. I would never have gotten all of those experiences if I did not pay to go to school. I can also put a price tag on the cost of every vacation I ve ever been on, but my memories of experiencing the culture in England or my first time seeing the ocean will always be near and dear to my heart. Some things that you pay for are worth every penny. You can definitely be happy without having a lot of money and you can be happy if you have a swimming pool full of hundred dollar bills. Money gets a bad rep of being the root of all evil and all that, but having control over your money and taking care of it can actually allow money to bring you happiness.

5 Until next time