Monday, November 16, 2015

Things to Consider when Shopping for a Vehicle

What features in your new car features can help you save?
If you are looking for a new or used car, there is a lot more to consider than the sticker price. Long-term expenses, from gasoline to repair bills, can turn into a big financial headache. If you want to keep your costs low, both up-front and over time, here are a few things to consider when you’re shopping for a vehicle.
Gas mileage.
One of your biggest expenses over time is going to be gas, but fortunately it’s especially easy to find out what kind of mileage cars get and how much you’re likely to spend on gas. If you are browsing cars on the lot, pay attention to the window sticker: under the “Fuel Economy and Environment” section, you’ll find out how many miles per gallon the vehicle gets, what you’ll pay for fuel in a year, and how much you’ll save on fuel compared to the average vehicle. Though all of these numbers are based on average driving statistics, they still offer a good rule of thumb for how economical it will be to pay for gas for a particular car.
If you’re shopping online, you’ll want to head to, where you can search for specific vehicles, browse classes of vehicles, or take a look at which vehicles offer the best mileage.
Hybrid or electric vehicles.
The biggest way to save money on gas is to buy a hybrid or all-electric vehicle. But while these vehicles can save you money over time, they have a higher up-front cost than a traditional vehicle—some a much higher up-front cost. Weigh the cost difference between the hybrid or electric vehicle and the gasoline vehicle you are considering, and then consider the difference in mileage each gets. You will probably want to break out a calculator to determine how many miles you’ll have to drive before the hybrid or electric car pays for that difference—if it’s longer than you’re likely to keep the car, it’s not worth it.
However, also bear in mind that sometimes you can find hybrid or electric models that are a few years old at a more moderate price—and, additionally, you may qualify for tax rebates that could make going green more appealing.
Insurance rates.
The insurance rate you will get isn’t the same for every vehicle, as newer cars with better safety ratings tend to get lower insurance rates. Once you’ve narrowed your search for the perfect car down to a few specific models, call your insurance company to see what it would cost to insure them. You may find that a lower rate makes you prefer one model over another.
You should expect warranties with new and, sometimes, used cars (especially used cars that are sold “dealer certified” off a dealer’s lot). A warranty can cut down on out of pocket expenses if something goes wrong, so you will want to take a look at what kind of warranties are on offer for any vehicles you consider. How long do they last? What do they cover? Can you purchase an extended warranty that will expand coverage? Though you don’t necessarily want to be upsold on an excessive warranty plan, depending on the price and the coverage that extended warranty could be a good buy that will save you money over time.
Repair costs.
Different makes and models of vehicle can have vastly different repair costs—and if you’re looking to keep your costs down, you’ll want to consider how much you could spend on repairs over the life of the vehicle. Is it reliable or does it break down often? Are parts reasonable or pricey? If you have a trusted mechanic to talk to, they can be a great resource for information on this. If you aren’t buying new (and it’s not a car that comes certified from a dealership), you will want to take the car by a mechanic regardless to give it a thorough once-over before you buy: this will help ensure you’re not getting a lemon.

Thursday, November 12, 2015

Four Questions to Ask in Financing a Vehicle

When it's time to buy a vehicle, one of the big issues to deal with is how to handle financing. Here are four key questions that you can use to help put yourself in the best buying position.  

1. What's the right amount of cash to pay upfront?

Buyers with substantial savings sometimes decide to pay cash for their vehicles to avoid car payments or interest. But kicking out $30,000 or more may not be the best idea. If paying cash leaves your emergency fund depleted and something bad happens, you may have to borrow money at much less favorable terms. Many buyers need a loan just to afford a car. But financing the entire purchase also may be unwise.
Taxes and fees add to the sticker price, so with no down payment, you'll owe more than the car is worth as soon as you drive off the lot. And depreciation could leave you further "upside-down" on your loan. If you need to sell the car or if it's totaled in an accident, you'll get less money than you need to pay off the loan and may have to pay thousands of dollars out of pocket.
Many financial experts suggest making a down payment of 15 to 20 percent of the purchase price.

2. What's the best place to get a loan?

The dealership is one place to secure vehicle financing, but experts say it's good to shop around.
It's possible that you'll get lower interest rates at your credit union or other lending organizations where you're a member and they might be more likely to work with you on the terms. 
It can also be helpful to get preapproved for an auto loan before you're ready to buy. With a loan lined up, you can focus on negotiating the price and not fall prey to slippery sales tactics. If the dealership offers you a better financing deal, that's even better. Make sure you look for application fees, other miscellaneous fees and your loan term so you are making an apples-to-apples comparison between loans.
Be on the lookout for offers to lower your interest rate through a lender, vehicle manufacturer or dealership. 

3. What length of time should the loan be for?

The longer the loan period, the smaller the monthly payments will be. That tempts many car buyers to finance their cars over five, six or even seven years. But that's not always the best choice, experts say. 
Choosing a vehicle that you can pay off in three to five years is preferable, they say. 
Longer term loans are risky for two reasons. First, stretching out your payments means you'll pay more interest and typically, a longer loan term comes with a higher interest rate. Second, since new vehicles typically depreciate quickly, a longer loan increases your likelihood of being upside-down. It's not a good idea to finance a vehicle for longer than you plan to own it. 
4. What incentive should I look for?
Many dealers will offer either low-rate financing or a hefty cash rebate on a new vehicle. Which is better?
Basically, choose the one that will most lower your payments.
Use this auto loan payment calculator to guide your decision. And if you can take the dealer's rebate and find a low-rate loan from a third-party lender, it might be possible to have your cake and eat it, too.
-With contributions from USAA