Auto Buying Advice

Our best advice is to utilize the credit union's Auto Advisor to enjoy the benefit of a pre-negotiated low price on your vehicle. However, if you prefer to spend your time haggling at the dealerships, we offer the following tips:

To fully understand the auto buying process you must view it as three different transactions and it’s best to treat each of them separately; 1) negotiating a price 2) trade-in; and 3) financing. This strategy will help isolate each act, keeping them clear and simple, while maximizing your negotiating opportunities.

First Step:
Negotiate the right price of the vehicle that you wish to buy. The credit union may be able to provide information regarding the retail and invoice price from the manufacturer. One should always negotiate from the invoice price up and not from the manufacturers suggested retail price (MSRP) down. Paying three percent above the manufacturer’s invoice is more than acceptable. You get a fair price and the dealer gets a fair profit.

Second Step:
Negotiate the right price for your trade-in. The price of your trade-in should have nothing to do with the purchase price of your new vehicle. They are totally separate values. Negotiating or discussing these values together may result in a price for your trade-in and a higher price for your new car.

Your used vehicle has both a wholesale and a retail value. As a trade-in for your vehicle, you should expect a dealership to pay you approximately the wholesale value of the vehicle, less deductions for excessive wear and tear and high mileage. In some cases, the value might be even less due to lagging market demand or seasonal effects. On the other hand, if you are the lucky owner of a used car that is in high demand, the value may go up.

Why the wholesale value instead of the retail value? When the dealership buys your used car, they are taking on the burden of selling it to someone else. The dealership will have expenses for preparing, advertising and selling the car, and they'll need to make a reasonable profit on the sale. They also absorb the risk of selling the vehicle and have to finance its purchase while they have it on their inventory.

If you really want to get the retail price, consider selling the vehicle privately. Just remember, you'll have to advertise it, take the calls, meet the prospective buyers, let them test drive your car, and hope that the check clears.

Third Step:
To obtain financing. The third and final step of a vehicle purchase can be the riskiest. Often, consumers pay much more for financing than is necessary. Interest rates are generally determined by the information provided through the credit reporting agencies. Consumers with “good” credit histories (without bankruptcies, collection accounts, late payments, etc.) pay a lower interest rate than those consumers with “bad” credit histories.

You should always check with your credit union to obtain financing. Obtain a pre-approval for your loan before you visit a dealership. The credit union can compare your approval with what the dealership is offering and if the dealership offer is better, they will tell you! The credit union’s goal is to save you as much money as possible!
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