Here’s a big secret that could save you some money: auto financing is not just about the loan. When you control the financing, you control the deal! In this blog I’m going to share how you can walk into a car dealership with confidence and get the best deal without falling for any expensive tricks.
When you’re making a car-buying decision, several factors come into play: the price, trade value, warranty, after-market sales, fees, and financing. Many people don’t realize that the finance process, often an after-thought, actually determines the outcome of the entire deal. The finance process is typically where most dealers make their profit.
Consider Financing First
Research shows that consumers who enter into their auto-buying transaction with pre-arranged financing (ex: loan pre-approval) are happier than those who use dealer-controlled financing. When you have a keen understanding of the numbers throughout the process, you can solidify choices, prevent surprises, and avoid buyer’s remorse. Getting a loan pre-approval also helps you protect your identity, because you won’t need to share your personal financial information with the dealers and their partners.
Know Your Numbers
Before you even start car shopping, there are some important numbers you need to know:
- How much is your trade-in vehicle worth?
- How much do you still owe on your car loan?
- How much cash do you have available for a down payment, taxes and fees?
- What monthly payment works for your budget?
Once you know these numbers, MVCU’s Auto Advisor can help you identify appropriate vehicles and a loan term that meets your needs and budget.
It’s Not Just About the Rate
Dealers often entice car-shoppers with hopes of a low rate, because what they really want is control of the loan. When the dealer controls the loan, they control the deal, and can sell more products by bumping up the payment a little or extending your loan term. You might hear them say “It’s only the price of a cup of coffee a day” …but $2 a day for 4 years is really a $3,000 decision! If they talk you into a longer loan term, you’ll pay even more in payments and interest. A win for them– not for you.
Let’s compare two scenarios for a typical $15,000 5-year loan:
- a 1% drop in rate saves you about $8 per month
- borrowing $1,000 less saves you about $18 per month
The lesson here is that you’re far better off when YOU control the deal/loan.
Protect Your Car for Less
Do you want to protect your car with an extended warranty and protect your loan with GAP insurance? After you’ve selected your car and negotiated your trade-in, you’ll be directed to the dealer’s finance office. The finance manager will present you with several options (that sound important and compelling) that are available for additional costs.
Some of the most expensive options include paint and fabric protection, tire and wheel protection, extended warranties, and GAP insurance. (See also “What the Heck GAP insurance”)
While paint, fabric, tire and wheel protection are pretty straight-forward, GAP insurance and extended warranties may require more thought. If you choose to go it alone at the dealer, keep in mind that all these product prices are negotiable. Most finance managers are paid on the number of add-ons they sell as well as profit (so they’d rather sell these products at a discount than not sell them at all).
Considering GAP Insurance?
In my experience, GAP insurance costs about half as much from your credit union than from dealers, and it’s twice the product. Your MVCU service representative or Auto Advisor can explain the considerable differences between the two so you can make an accurate decision.
Considering an extended warranty?
Purchasing an extended warranty is a big decision with several factors: Who is underwriting the warranty? Is it the manufacturer, dealer, or the credit union? What’s the term of the warranty (years and/or miles)? Is there a deductible, and what’s covered? In my experience, extended warranties offered through the credit union are a much better buy. And MVCU’s Auto Advisor can help you determine if an extended warranty makes sense for you, while comparing the many options out there.
Get Help From Your Auto Advisor BEFORE You Go Shopping!
We get it– you’ve been bombarded with low rate and low payment car ads. But now you know there’s so much MORE to financing your next car than just the rate. The better prepared you are, the better you’ll do at the dealer. If you’re considering the purchase or lease of a new or used vehicle, talk with our Auto Advisor team BEFORE you go shopping. We are here to help ensure you get the best deal (with the least amount of stress), a loan that works for you, and have a pleasant experience! What’s better than that?
*These numbers are used as an example only and are hypothetical. Contact us directly for current rate information: visit mvcu.com or call 800-356-0067.
The insurance offered is not a deposit of the Credit Union, is not protected by NCUA or any other type of deposit insurance, is not an obligation of or guaranteed by the Credit Union and may be subject to risk.
Auto Advisor works with certain dealerships within their authorized network.