Keys to Confident Car-Buying

Courtesy of USAA

Nearly 17 million Americans will purchase a new vehicle this year. Savvy car-buyers should take the proper steps to find, finance, and insure their new car and protect their financial well-being before making such a major commitment.

Choose Carefully Don’t let that new-car smell cloud your judgment. Analyze your financial situation to determine what monthly payments you can really afford while still devoting some disposable income to paying off debts, saving, and investing.

Make a list of “needs” (such as cargo space) versus “wants” (a sunroof) to help you decide what type of car is right for you. Compare competing models in the same class, and don’t forget to account for insurance costs. A vehicle that is less safe, more expensive to repair, or has high records of theft may cost more to insure.

Once you decide on a make and model, enlist a service that can quickly scan dealer inventories nationwide to locate a car with the features you want. It might save you money and the trouble of driving all over town.

Drive the Deal Most dealerships will negotiate on the Manufacturers Suggested Retail Price (MSRP). Researching what the dealer paid for the car, and what incentives they receive for selling it, can work in your favor as you approach the bargaining table. In most cases, there’s room to lower the price and still allow the dealer to earn a reasonable profit.

If you’re not comfortable “wheeling and dealing,” try using a negotiating service that can work with dealers on your behalf. Some banks offer this service for free.

While getting the right price is important, how you pay can dramatically affect how much you pay. Dealerships offer financing, but it’s not your only option. It may be possible to find a lower interest rate through a vehicle loan from a bank. A few percentage points off the dealer’s rate could save you thousands of dollars.

Insure with Assurance Perhaps the most overlooked source of auto-related costs is insurance. When you change cars, your auto insurance needs may change, too. If you carried only liability insurance on your older vehicle, your new car may require collision and comprehensive coverage. Also think about adding uninsured/underinsured motorists, towing, and rental reimbursement coverage.

Ask about discounts for having multiple vehicles on the same policy, anti-theft systems, and even for young people getting good grades in school. Of course, driving safely is the easiest way to keep insurance rates in check.

Compare insurance companies. Consider price, as well as a company’s customer service and financial strength ratings.

Next to a house, cars are often the most expensive item you own. Some extra effort to get the most for your money and protect yourself for the future often will pay off down the road.

Avoid Top car-buying blunders As the summer car-buying season heats up, you may be tempted to snatch up what sounds like a good deal. Before you rush out, make sure you don't:

1. Let Emotions Rule Your Decision That red sports car might make your heart go pitter-patter, but if you need room for car seats, keep moving. Your dream car can become a nightmare if it doesn't fit your lifestyle or the monthly payments and insurance bills stack up to more than you can afford.

2. Neglect Research Car salespeople are masters at negotiating the best deal possible — for themselves or the dealership, that is. Don't go shopping unprepared. Use the Internet, auto magazines, or Consumer Reports to read car reviews, compare vehicles and options, and print out detailed pricing information. Save your in-person homework for test drives.

3. Ignore Pricing Cycles It may be fun to buy a new car as soon as it hits the showroom, but you could pay a premium for that privilege. That's because when next year's cars first reach dealers in August and September they tend to sell for closer-to-full price. Prices drop as each month passes.

4. Forget to Shop for Car Loans Waiting until you're at the dealership to think about financing limits your options. Many dealerships count on you being unprepared so they can finance your car — and too often it's not at the most competitive rate.

Check your credit report first, shop for loans, and get pre-approved. Getting pre-approved means you've set a limit on what to spend — so no one can talk you into more. You can also shop like a cash buyer. But to get the lowest price possible, keep that information to yourself until you're ready to buy. You can always accept a dealer's financing if the rate's better.

5. Offer Your Trade-In Right Away A trade-in should never be part of the initial negotiations — save this discussion until after you've agreed on a price for the new car. Dealers may offer a below-market price for your trade-in and use the difference of what you should've received as a discount on the new car's price. Don't go for it. If they give you $2,000 for a $4,000 trade-in value and then take $2,000 off the new car price, you're simply at break-even and haven't gained a thing. Insist they keep the trade-in amount and any discounts separate.

6. Pay the Sticker Price Except on the hottest and rarest models, you have power to negotiate if you know the going price for cars in your region. Car-buying web sites, such as edmunds.com, cars.com, autoweb.com, Kelley Blue Book and caranddriver.com, also can provide these details. Don't be afraid to say: "Most local dealers are selling it for $2,000 below sticker." You can also get several dealer offers and then play them off each other.

USAA means United Services Automobile Association and its affiliates. USAA, a diversified financial services company, is the leading provider of competitively priced insurance, investments, and banking products to members of the U.S. military and their families. The company’s 5 million members around the world rely on the convenience and accessibility of USAA’s financial products, backed by industry-leading service. For more information about USAA’s products and services, or to learn more about membership, visit usaa.com. Some USAA products and services are available to the public.