First, you need to understand the transactions. Buying a car isn't one negotiation, it's many: your trade, the new car you're buying, the financing, and the newest, most popular profit center - warranties, protection packages, alarm systems, and other add-ons.

 

If you don't know what you're doing, you can save money in one area and pay too much in another - no fun at all. That's why dealers can sell cars for "no profit" and still make thousands on you. And that's why you need to pay very close attention to the right steps.

 

If you really want to save money and still like your car after the fourth payment, you'll have to look at the car buying transaction in a new way. For instance, the CU Auto Online approach doesn't start with the car at all, it makes you slow down rather than speed up. Emotions in car buying should come after you've done it right.
 
We define "right" as saving money and buying the right car (and the right financing), too. Doing it our way, vs. simply following the dealership's lead, literally can put thousands in your pocket. So, throw out the conventional thinking, get a pencil, and do it like this.
 
Determine what you can afford to pay per month.   Most people find a car and adjust their budget to fit that car's payment. Smart people budget a payment instead. You need to determine your car payment threshold - the amount of money you just can't or won't exceed each month on a car payment. One rule of thumb says your total long-term debt load (car payments, mortgage payments, property taxes and insurance, student loans, and installment payments) should not exceed 36% of your gross monthly income. If you need help calculating your debt ratio just let us know - we can help!
 
Decide how many months you want to finance.   Some dealerships actually will finance for 84 months. But the truth is, financing longer means more money to the lender and less to you.
 
For instance, the difference on a $15,000 loan financed for 48 months instead of 60 months is only $2 a day. You spend more on lunch, don't you? Well, pay the higher payment, finance for 48 months, and you'll save more than $1,000 in interest.
 
Convert your payment to cash.  Cash is what you really buy with payments, not a car. For instance, if you tell us you want to pay $250 a month for 48 months at 10% APR, what you're really saying is "I want to buy $9,857 in cash." We call this figure, logically enough, "loan cash." In the example, over 48 months you will pay back $12,000, but you have only bought $9,857 in cash; the remaining $2,143 in interest.
 
How do you convert your payment to cash? Just e-mail the request or call us and ask to speak to a loan officer. Tell us what you want to pay per month and how many months you plan to pay. And ask us, "How much money we will give you in cash for that payment"? Or use our calculators to help figure loan payments, as well as the effect of longer term loans.
 
Determine your "Available Cash"!  Many cars are bought with more cash than simply the cash from a loan payment. For instance, along with your "loan cash," you also might have cash from your trade or selling your car yourself (equity), and maybe cash from savings, and/or manufacturers? rebates. All this cash together is called "available cash" - the total of cash you'll get from your payment, your trade, any rebate, and other savings. And determining "available cash" isn't hard at all.
 
First, determine the equity in your trade, if you have a trade. Equity is how much money you have left from your trade-in, after you pay off any loan. To determine your equity, you must first know what your car is worth in "trade-in" dollars. The best way to find that is to clean up the vehicle and drive to three or four used-car operations, new-car dealerships and independents and tell them you're thinking of selling your car, not trading or buying. Ask for firm "buying" offers and ask how long the offer will be good. Some dealers won't put a figure on your car but with a little effort you'll get several offers. The highest figure offered is your car's true trade-in value.
 
If you can't do this, we will be happy to give you the trade-in value of your car to use as a conservative estimate for determining your available cash.
 
Once you know the trade-in value of your car, determine the equity you have in it by subtracting any payoff left on the loan from the trade-in figure.
 
Let your available cash determine how much car you can buy. To stay within your budget, available cash is all the money you have to pay for everything-cost of car, taxes, other charges, insurance-everything. Exceeding your available cash is like bouncing a check on your budget. And you don't bounce checks, do you?

Your first visit to the dealership poses the maximum danger to your pocketbook. Those new cars look so good. And you've waited so long. Dealerships know how to turn up the fires of your enthusiasm and singe your reason. So put your emotions aside. Be wary. Slow down. Save the emotion for the moment you finally drive away in your shiny new car-on budget this time. With a couple extra thousand dollars in your pocket. Now that's something to get excited about!
 
Some simple rules to remember:

Do you see the importance of this little exercise? It shows the entire transaction in its simplest terms: If your available cash figure is greater than your maximum offer, your payment is going to be within your budget; what you expected. Wouldn't that be nice? If your available cash is less than your maximum offer, you'll need to find some more cash, expect a higher payment or look for less-expensive wheels.

A used car, wisely bought, is a much better buy than a new car for many of us: Buy more car for the money, have less depreciation, and enjoy lower payments. Three good reasons to smile.
 
But if your not careful, buying a used car can be a disaster: You might pay too much for an unsafe car that's a lemon and vastly overpriced. But do it the CU Auto Online way, and you'll be driving a better deal every time.
 
Do your homework. Which cars are safe? Which have good resale value and maintenance histories?
 
Don't worry about where you shop. When you buy a used car, where you shop isn't nearly as important as how carefully you shop. Look in the newspaper. Look on used-car and new-car lots. Even say hello to the person with a "for sale" sticker in the car window. And what about a neighbor who trades regularly?
 
Don't shop on rainy days when it's hard to see body damage and you're less likely to give the car a thorough check-over. Don't be in a hurry-each used car is unique, and a car that looks just fine can be a monster.
 
If you like a particular car, get the name and number of the previous owner. If a seller won't (or can't) give you this information, don't buy the car. Now, talk to the previous owner and ask how many miles were on the car when it was traded in and what was wrong with the car? Make a list of the car's problems, in detail. And what do you do if a seller won't give you the name of the owner? Don't buy the car.
 
Also, check the title before the purchase. Make sure the seller is indeed the owner. If the seller isn't the owner, he or she probably isn't entitled to sell the car, and you aren't entitled to purchase it. We strongly suggest you order a CARFAX report!
 
Take the car to a mechanic of your choice. Again, if the seller won't let you do this, don't buy the car. Don't even take it as a gift. With your list of problems, ask your mechanic to check the car carefully and tell you how much of your hard-earned money he'll want to put the car in "good running order." Not to make it new. Taking a car to a mechanic is the most important step you must take. Don't buy a used car if you don't do this.