Besides a house, a vehicle is likely the largest purchases you will make. If you plan and research before buying, you can save hundreds or thousands of dollars — and stay within your budget so you can meet your other financial goals.
1. How much car can I afford?
Your budget should determine how much you can afford to spend on a vehicle per month. If you don’t have a budget yet, now’s a great time to create one! After you know how much you can afford to spend each month, use our car loan calculator to get a sense for the total vehicle cost you can afford. Keep reading to learn the true cost of a vehicle.
2. Know the true cost to own a car.
Remember that a vehicle costs much more than just the monthly payment. Your monthly transportation expenses also include:
- auto insurance
- gas or charging costs
- registration and other government fees
- regular maintenance
Some of these costs – especially gas or charging, insurance, and maintenance – will be much lower or higher based on the vehicle you choose, e.g. a compact car versus a luxury SUV.
3. Check your credit score.
Check the accuracy of your credit report at annualcreditreport.com or 877.322.8228. An accurate credit report and higher credit score can help you get a better rate if you’re financing a car. If you would like a certified credit counselor to review your report with you, call BALANCE at 800.777.7526 — it’s free and one of the many ways Patelco is looking out for you. BALANCE counselors can even offer advice on raising your credit score before buying a car, truck or SUV.
4. Choose the right vehicle.
Will you be using your vehicle to cross snow-covered mountain passes with hairpin turns? Or for something more challenging, like chauffeuring your children? Create a comparison chart to keep track of the attributes that matter most to you.
Many online publications provide car reviews and information, including Consumer Reports and Edmunds. These are a great place to start your research, and to find out how each vehicle stacks up based on the attributes you want. Find out MPG and other things that will affect the true cost of the vehicle too.
Do test drives of vehicles you’re considering. If you’re worried about a high pressure salesperson, consider doing test drives while your credit is frozen and your checkbook is at home – that way there’s no way you can buy the car you’re test driving!
5. Consider new or used and whether you should lease or buy a car.
Do you prefer less wear-and-tear and increased reliability of a new car, even if it means a sharp loss of value when you drive it off the lot? Or would you rather buy a used car that has some wear but has already depreciated from its original price?
Many brands offer “certified pre-owned” vehicles that can help you mitigate the reliability risks that can come from a used vehicle. Often, these vehicles will be in better condition, although also a bit more expensive.
Figure out if you would rather buy or lease the car. If the idea of always driving a newer vehicle matters more to you than likely saving money in the long run, leasing might be a good option.
6. Get the best price on the vehicle.
Know what your preferred model (or models) are selling for. Companies like Kelley Blue Book, TrueCar and Edmunds specialize in tracking the average price of vehicles, plus the rebates and incentives available.
Negotiate each piece of the deal separately. Beware of salespeople who roll the different components of the transaction – purchase price, financing, trade-in, extras – into one deal, or who make an offer in one area of the deal that sounds too good to be true. Zero percent financing sounds fantastic, but know that the dealer will be looking to make that money up elsewhere, like raising the total price of the vehicle.
Walk away if you are not happy with the deal. You know what you can afford and ultimately you control this transaction. Let the salesperson know you know where the door is and that you won’t hesitate to use it if they can’t meet your number.
7. Know your legal responsibilities.
Know the insurance necessary for your state. The Insurance Information Institute’s website at iii.org lists the minimum requirement for each state. Visit your state’s DMV website to see what’s necessary to register your vehicle. Finally, remember that entering into a loan or lease has legal responsibilities to pay the loan.
8. Get financing.
Arrange your car loan before you go to the dealership to buy. (Remember you can always test drive before you’re ready to buy – doing the test driving and the buying at different times may help you avoid making an emotional decision!)
Patelco offers market-beating car loan rates, and you can even check your personalized auto rate online in minutes with no impact to your credit score1. To help you gauge how much you can afford, you’ll see your pre-qualified amount, interest rate, monthly payment and loan terms — so you can select what’s best for your budget. And if you want to talk to someone about your options, visit a branch or call 800.358.8828. We’ll help you decide on a loan that will fit your budget and your goals.
¹ Patelco runs a "soft" credit pull to determine which pre-qualification offer you qualify for –this doesn’t affect your credit score. If you choose to proceed with a loan application, Patelco will request your full credit report from one or more credit reporting agencies, this will be a "hard" pull and may affect your credit.