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Know before you go: Insider tips for buying a car

This content is sponsored by PenFed

The holidays are the perfect time of year to shop for a new car. Many dealers have great year-end sales and new models are rolling onto the lots every day. If you’re in the market for a vehicle, here are a few simple tips you can follow to make yourself a savvier shopper:

Smart Researching

The advent of the Internet changed car buying forever. At no other time have we had access to so much knowledge. Today, there is no excuse not to be an educated consumer. With that being said, the prospect of sorting through the sheer volume of readily available information can be daunting. Prioritizing which resources to use is key.

As you begin your search, look for reputable and objective outlets that aggregate a broad range of information. One such service, PenFed’s Car Buying Service, powered by TrueCar, is a great place to start.

Available to all PenFed members, the Car Buying Service allows you to sort through thousands of new and used cars in your area. You can view pricing from certified dealers and find out what other people paid for similar cars before you buy. You can even reserve your vehicle before you go, then show up at the dealership to make the purchase.

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.

Know Your Credit Score

Your FICO score is a type of credit score that lenders use to determine your loan worthiness. The term FICO score and credit score have come to be used interchangeably. Contrary to popular belief, your credit score has nothing to do with how much money you have in the bank or how much money you make. Instead, it considers how often you pay your bills on time, your credit history, and how much of your total available credit you are actually using.

Now that you know how important it is, how much do you know about your own credit score? Do you know your number? Many financial institutions, including PenFed, allow you to check your FICO score online as often as you like, at no cost and with no detriment to your score.

If you know you’ll be purchasing a car in 2019, check your score now so you can correct any errors in your credit history. Remember a higher credit score usually results in a better rate – which means you pay less money over the life of the loan.

As you begin your car search, watch what loan rates are doing – and shop around for the best rate you can find. If you are worried about rates going up, you may have the opportunity to lock in your rate with a lender.

Financing

Financing a vehicle can be the most nerve-wracking part of the car-buying experience, so why put it off? Instead, try getting preapproval through a financial provider like PenFed. Getting preapproved takes the guesswork out of number crunching. With preapproval, you know exactly how much car you can afford before stepping foot onto the lot.

And remember, when it comes to financing, you have options. You don’t have to go through the dealership – you may be able to find a better rate elsewhere. In fact many dealerships will even give you a day or two to change your lender after you have purchased the car. Be sure to ask.

Finally, should interest rates drop dramatically over the life of your loan, you always have the option of refinancing – just make sure that your loan agreement does not include a penalty for early payment.

Calculate the Complete Cost

When it comes to purchasing your vehicle, the number-crunching process can seem overwhelming. Taking a bird’s-eye view of things will simplify the process and give you an idea of your complete cost.

To get to your complete cost, first, ask the dealer to provide the “out the door” total on your vehicle. This generally includes the price of your car, plus state and local sales tax, DMV fees, and documentation fees.

Next, calculate the total amount of money that you will pay over the life of your car loan. For example, if you borrow $25,000, you may end up paying an additional $3,000 in interest – bringing the total amount to $28,000.

There are a number of loan calculators on the Internet that can help you calculate your monthly payment. With the calculator, you can adjust the interest rate on the loan to see the difference that a lower monthly payment can make.

In the final step in determining your complete cost, subtract any money you may be getting for a trade-in.

To summarize, to calculate your complete cost, take the “out the door” total of your vehicle, subtract the amount of your trade-in, and add any interest that you pay over the life of your car loan.

Consider Gap Insurance

If you get into an accident or your car is stolen, your insurance provider should reimburse you for the value of your car. However, this can be bad news if what you still owe on the vehicle is more than what the car is worth – this is especially common in the first three years of owning a new car.

If you are financing a vehicle, consider gap insurance – which covers the “gap” between what your car is worth and what you still owe on the vehicle. If the worst should happen and your car is totaled or stolen, you don’t want to get stuck making payments on a vehicle you no longer own. Your dealership may try to sell you gap insurance, but you may be able to get a better deal elsewhere. For example, PenFed offers competitive rates.

You Can Always Walk Away

The most important thing to keep in mind in purchasing a vehicle is this: you can always walk away. There is always another car, another dealership and another day to purchase your vehicle. Don’t let anyone rush what could be one of the biggest purchases you’ll ever make.

To learn more about PenFed auto loans and the PenFed’s Car Buying Service, powered by TrueCar, contact PenFed Credit Union at 800-247-5626 or visit PenFed.org.

To receive any advertised product, you must become a member of PenFed.

PenFed is federally insured by NCUA.