This content is sponsored by PenFed
The internet has made it easy for consumers to compare different car dealers in their area or find available vehicles before they ever walk into a dealership. But while people do their homework when it comes to the make and model, they often neglect to do the math.
Tip One: Don’t Start with the Car
Before you even think about what type of vehicle you want, try checking your FICO credit score. A better score will generally translate into a lower interest rate on your loan. This also gives you a chance to correct any errors in your credit history. Keeping an eye on auto loan rates over several months can give you a better idea of what constitutes a good deal. Remember that dealer commercials will list the lowest rate possible — which is not necessarily the rate for which you’ll qualify.
Another common mistake is thinking in terms of how much of a monthly payment you can afford. To keep your monthly cost down, a dealer can always make the loan for a longer term. That means you spend more time paying for your car, you pay more interest on it, and there’s a good chance that at some point you will owe more on the car than it’s worth.
Instead, think of the overall cost of the vehicle plus the interest you’ll pay given the loan rate you can get. This will give you a better idea of the types of cars you can afford and allow you to start your search with the right expectations.
Tip Two: Think Flexibly
As you look into vehicles, remember you can adjust your down payment or remove certain extras in order to get to a number that you’re comfortable with. Try to be realistic about the features you need (e.g., seating for the whole family) versus extras that you might want, but can live without (e.g., air-conditioned seats).
Remember that you don’t have to go with dealer financing. If you get pre-approved for a loan by your credit union, you’ll start your car negotiations from a place of control.
Also, be ready to walk away if you’re not getting what you want. You can always go to another dealer or choose another type of car.
Tip Three: Get Help
If you’re having trouble finding the right car, consider using PenFed’s Car Buying Service, powered by TrueCar. Available to all PenFed members, the Car Buying Service allows you to sort through thousands of new and used cars in your area from the comfort of your home. It includes tools that help you see up front pricing from certified dealers and shows you what others paid for similar cars before you buy. Plus, if you use the Car Buying Service and finance with PenFed, you could qualify for an even lower loan rate than you would with financing alone.
To learn more about PenFed auto loans and the PenFed Car Buying Service, contact PenFed Credit Union at 1-800-247-5626 or visit PenFed.org.
PenFed is federally insured by NCUA.