FIVE STEPS IN BUYING A CAR

How do you prepare for car shopping? There are five basic steps that all shoppers should follow. Please note that four of these steps should occur before you set foot on a car dealer's lot.

1) DETERMINE WHAT YOU CAN AFFORD:
The single, most serious mistake a car shopper can make is to visit a dealer without knowing what you can afford.

If you have to borrow money to purchase a car, you should consider ahead of time what monthly payments you are willing and able to make. If you need help in determining how much you can or should borrow, ask about the "debt service ratios" that PenFinancial uses to determine whether a borrower can afford a loan.

PenFinancial also has educational materials on setting up personal budgets and savings plans. (Note: Credit Union members can apply for a pre-approved car loan before shopping. This allows the member to shop with the knowledge that a certain amount of credit is already approved if you wish to use it. There is no obligation to follow through on the loan if a better dealer-financing offer is obtained. The Car Facts Centre can also help you with an "apples to apples"comparison of various financing offers.)

2) DETERMINE HOW MUCH CASH YOU HAVE AVAILABLE:
The bigger the down payment, the safer you are. Buying a car with no down payment puts the buyer in the position of actually owing more than car is worth. (Remember: a new car depreciates about 35% the moment you drive it off the lot!)

In determining your available cash, you have four sources: 1) personal savings; 2) rebate money from the dealer; 3) the money you can obtain for your old car; and 4) money that you borrow. The more you can obtain from the first three sources, the less you will have to pay for loan interest costs.

3) LET YOUR AVAILABLE CASH DETERMINE HOW MUCH CAR YOU BUY:
This is the most critical step. Know what you can comfortably afford and fix that figure in your mind before you even consider visiting a dealer.

4) DO YOUR HOMEWORK BEFORE YOU GO SHOPPING:
Once you know how much you can spend, do your research on what type of car will best meet your needs. The library has all of the major consumer guides to new and used cars. Their books provide excellent comparative information on the features and prices of all types of cars.

5) SHOP FOR A CAR THAT FITS YOUR BUDGET AND NEEDS:
You are ready to visit the dealer is: 1) you are clear on what you can afford to spend; and 2) what type (s) of car will meet your needs.

Once you are in the showroom, be prepared. You will be subjected to some very subtle (or not so subtle!) sales techniques that are designed to "upsell" customers. Regardless of what you say you are willing to spend, the salesperson will try to determine if you can be persuaded to spend even more. "this car over here is just a little above your range, but I think you'll like some of the extras. It won't hurt to take a look. You know, I bet the monthly payments wouldn't be that much higher, either."

Remember: it's your hard-earned money. You have already decided what you can afford and what you need. Stay focused on your objectives, not the salespersons.