MSUFCU encourages car buyers to research before purchasing a vehicle
Thursday, September 8, 2016
Looking at buying a new or used car? Thinking about financing an auto loan? Buying a car is typically the second most expensive purchase anyone makes, next to buying a home. That being said, MSU Federal Credit Union offers the following five tips to help you research and determine what you want in a vehicle and how much you can afford, guaranteeing you are happy and satisfied with your purchase in the long run.
- Determine your budget – Vehicles can be expensive purchases, so it's important to be sure you know what you can afford. A good rule of thumb is to budget no more than 25 percent of your monthly household income for all the cars in your household. Your calculation should include your monthly auto loan payment as well as operating costs such as fuel and car insurance. Pull out a calculator and determine what your income and monthly expenses are, this will help you determine the price range you can afford before shopping for a vehicle.
- Narrow your list – Start by researching a few cars that have caught your eye to see if they fit within your budget. Visit the automaker’s websites and independent auto information sites to assess the car’s features and get an idea of inventory available in your area. Choose cars that are at least five percent (5%) less than your monthly budget to give yourself some room to cover your operating costs, including gas, car insurance, repairs, and maintenance. If there are features you’ve been wanting and aren’t willing to go without, make sure to include those in your search and in your budget. Remember, don’t settle for the first option you find, shop around for the best deal to ensure you’re getting the most for your money.
- Consider leasing – The choice between leasing and buying a vehicle can be determined by a few different factors. How often will you drive your vehicle? Can you afford a down payment? How long do you want to keep it? Leases often have lower monthly payments and short-term contracts. Leasing allows you to try out different kinds of cars and to get a new car every few years. However, there are also mileage stipulations in conjunction with a lease. This means that if you drive more than the allotted mileage on your contract, you could have to pay for the extra miles you drove at the end of your lease. Make sure you consider all the differences between buying and leasing as you decide what works best for you, your lifestyle, and your budget.
- Choose whether to buy new or used – If you decide that buying is the right choice for you, the next decision you have to make is whether to buy a new or used vehicle. Think about which option would best suit your lifestyle and your budget. You may be attracted to the appearance and feel of a new vehicle, but it may have higher monthly payments than a previously owned, slightly older version of the same vehicle. Consider your options carefully, because there are pros and cons to purchasing a used vehicle as well. Even though a used vehicle may have lower monthly payments, loans on used vehicles sometimes have higher interest rates and the vehicle may require more maintenance throughout the term of your loan.
- Find the lowest interest rate – If you end up purchasing a vehicle with a loan, you will want to make sure that you end up with the lowest interest rate you qualify for, which will help lower the overall cost of your loan. Less interest means more savings! While dealerships partner with financial institutions and are able to finance your loan, your local credit union may be able to provide you a better interest rate, lower monthly payment, and no hidden fees.
“Getting pre-approved for an auto loan can take some of the pressure off when shopping for a vehicle,” said Deidre Davis, Vice President of Marketing and Communications at MSU Federal Credit Union. “Before you shop, visit your local credit union to help you determine the maximum loan amount you’re preapproved for and can afford. Many credit unions offer products and services to make your car buying experience convenient and stress free. When you know what you can afford, you can focus on getting the best deal for the car that you want.”