Car shopping probably isn’t something you do every day, so whether you’re buying your first or your fifth car, breaking down the basics can help.
Here are a few steps to consider when you’re ready to shop for your new vehicle:
1. Determine how much you can afford.
Setting your price range early can help you get an idea of your realistic options.
A great place to start is reviewing your monthly expenses compared to your income. You’ll probably find that lenders will do this for free!
Next, consider interest rates for auto loans. These vary from lender to lender, so shop around for the best deal before you commit. Keep in mind that auto loans for new vehicles are usually for three to seven years. Loans for used vehicles are usually for two to four years.
Lenders include credit unions, banks, financing companies and dealerships. (By the way, at Purdue Federal, you can get up to .60% subtracted from your qualifying loan rate depending on your My Member Perks rewards program status.)
A note for first-time buyers: When you apply for an auto loan, your vehicle is the collateral for the loan. This means the lender partially owns the vehicle until the loan is paid in-full. At that time, the lender will sign over the vehicle title—a document that shows who owns the vehicle—to you.
Looking for some specifics on what to expect? Check out these calculators to help you know how much vehicle you can afford, what your payments would be, and more.
2. Research vehicles you’re interested in.
There are plenty of vehicles to choose from when you browse dealership websites, so narrowing down the characteristics that matter to you can help keep you from feeling overwhelmed.
Here are a few things to consider to make a smart choice:
- Vehicle value
- Common problems
- Available features
- Fuel efficiency
When it comes to finding this info, we’ve compiled a few helpful sources:
- National Highway Traffic Safety Administration
- Insurance Institute for Highway Safety
3. Get pre-approved for your auto loan.
Affordable rates make it easy to purchase the new or used car, truck or SUV that fits your needs and your budget. At Purdue Federal, financing terms range from 12 to 72 months with extended terms available for recreational vehicles including campers and RVs valued at more than $15,000.
Getting pre-approved is simple. You can even start the process online at most financial institutions. You’ll just need:
- Verifiable Income
- Unexpired Government-Issued ID
- Social Security Number
- Loan Amount
- Primary Savings Account
4. Be aware of possible fees.
You don’t want to be surprised by fees when you’re at the dealership. Be aware that additional costs may exist in the form of:
- Documentation or registration fees
- Extra protection costs
- Finance charges (which can be transparent if you’re pre-approved by your credit union or bank)
5. Consider gap insurance.
If your car is lost or stolen, you may owe more than it’s worth depending on when the incident occurs. But most auto insurance will only cover its current value.
Gap insurance will cover the difference between the value of the car when it’s lost or stolen and what you owe on the loan, so it’s a good idea to consider it when purchasing a vehicle.
For more resources, check out these articles from our partners at Banzai about getting a new car!