The Confident Car Buyer Presentation Outline

Some things to consider.Shopping for a car can be complicated and timeconsuming. It involves balancing your desires withyour economic reality, deciding whether to buy orlease, and knowing what is the best deal for you.To make the process efficient and improve yourchances of driving away happy, you will need toconsider: Your Needs – Think about your transportationrequirements. Does your car need to be largeenough for a family of five, or small enough tofit in tight city parking spaces; tough enough tohaul firewood, or chic enough to drive clientsaround? Your Wants – Your desires certainly play a part inthe car buying decision. Make, color, options, andstyle are all important to being happy with yourfinal choice. Read car-oriented magazines andwebsites for ideas. Your Budget – It is easy to get carried away andend up with a car that is out of your price rangeand a monthly payment beyond your capacity.Your budget, not a salesperson’s opinion, shoulddictate your decision. Review your income andexpenses to see what you have available eachmonth for auto expenses.It involves balancing your desireswith your economic reality.Determine how much you canafford.Complete the worksheet on page 3 to see howmuch money you have available for car expenses.Make sure you include a monthly car payment,insurance premium, gas expense, the projectedcost of maintenance and registration, and anyparking expenses. If you need to estimate, useconservative figures. If you find there is little or nomoney available for auto expenses, you may need torework your budget by reducing or eliminating nonessential expenses.Save for a down payment or totalcar cost.While it is possible to buy a car with no moneydown, you will end up paying a lot more for it if youdo so. The more you borrow, the more the car willultimately cost.To decrease the amount you finance, it is wise tomake a significant down payment. With enoughsavings, you may be able to purchase a car outright(typically an option when buying a used car, ratherthan a new one).Effective saving begins with first determining howmuch you want to save (determined by usingthe budget worksheet on page 4), then setting areasonable date to achieve your goal. Use automaticdeduction to make the process easy. Arrange withyour financial institution to have a set sum deductedfrom your checking account and automaticallydeposited into savings.New or Used:Advantages and Disadvantages of EachAfter you determine how much you can afford to spend, the next step is to decide between buying new orbuying used. It is important to be familiar with each option’s positive and negative aspects. While leasing acar may enable you to get “more car” for less money each month than what you might be able topurchase, it is important to remember that leasing means renting. When the term of the lease is up, youreturn the car. At that point, you have the option of paying any outstanding fees for mileage or damage, orpurchasing the car outright. Often, you will pay more over time by leasing and then purchasing than youwould have had you simply bought the car in the first place. If, during the course of the lease contract, youchoose to return the car, very high penalties will likely apply. (Review the chart on page 5.)WWW.CONGRESSIONALFCU.ORG2

MONTHLY EXPENSESMONTHLY EXPENSESRent / Mortgage Car Payment #1 2nd Mortgage Car Payment #2 HOA (Association Dues) Gasoline Property Taxes Maintenance / Repairs Homeowner / Renter Insurance Auto Insurance Gas / Electric (Average) Auto Registration Water / Sewer / Garbage Tolls / Parking / Mass Transit Telephone / Cell Phone Other Groceries Other Household Items Other Health Insurance Other Prescriptions / Doctor Visits Other Daycare / Babysitting Other Alimony / Child Support Total Monthly Expenses Tuition / Lessons / Student Loans Taxes (Monthly Repayment) Life Insurance Union Dues Job Storage Fees Spouse’s Job Beauty / Barber Part-Time Job Movies / Video Rentals Rental / Room Board Income Internet Access Commissions / Bonuses Cable / Satellite Tax Refunds Dining Out Investment Income Sports / Hobbies / Clubs / Gyms Government Benefits Vacation / Travel Unemployment Benefits Books / Music / DVDs Alimony / Child Support Clothing Purchases Support from Family / Friends Laundry / Dry Cleaning Other Home Maintenance Other Pool / Hot Tub Service Total Monthly Income Gardening Gifts / Cards Pet Care Banking Fees / Postage Total Monthly Income Alcohol Total Monthly Expenses- Religious / Charity Over / Under MONTHLY INCOMEMONTHLY INCOMEWWW.CONGRESSIONALFCU.ORG3

Advantages and Disadvantages: New, Used and Leased CarsADVANTAGESDISADVANTAGESBUYING A NEW CARYou can order the exact make, model and options that aremost important to you.New cars can be very expensive, with a high purchaseprice, requirements for full insurance coverage, and costlyregistration fees.There are consumer protection laws on your side.The value of the car depreciates almost immediately.The car has value and becomes an asset as the loan isrepaid.New cars are typically most reliable.Most warranties cover repairs and parts.BUYING A USED CARYou may be able to use savings to purchase the caroutright.A used car’s history is usually unknown. It may have beeninsufficiently maintained, and therefore less reliable.Used cars are less expensive than new cars.Used cars rarely have warranties.As loan is repaid, the car becomes an asset.Older cars tend to wear out; the maintenance costincreases over time.LEASING A CARThe monthly payments are comparatively low.The car does not belong to you.Leases are relatively short-term, so you can drive a new car It is very difficult and expensive to get out of a leaseevery few years.contract.Typically, leased cars have comprehensive warranties.You must pay for any additional mileage or damagebeyond basic wear and tear.The required up-front cost of a leased car is low.Leased vehices often require more robust insurancecoverage requirements.You can often get a luxurious model for small monthlypayments.They come with mileage limitations; often 10,000, 15,000or 18,000 per year.FLEX AUTO LOAN – A LEASE / OWN HYBRIDThe car belongs to you.It is very difficult and expensive to get out of a leasecontract.The monthly payments are low.Leased vehices often require more robust insurancecoverage requirements.Required up front costs are low.You must have good credit.Monthly costs can be comparatively lower than buyingnew.They come with mileage limitations; often 10,000, 15,000or 18,000 per year.Most warranties cover repairs and parts.You must pay for any additional mileage or damagebeyond basic wear and tear.The car has value and becomes an asset as soon as theloan is repaid.WWW.CONGRESSIONALFCU.ORG4

Credit reports and credit history.Financing options and implications.Your credit history will have a serious impact onthe interest rate you will be offered. The betteryour credit score, the better rate you will beeligible for. Other factors, such as length ofemployment, income, and expenses may also beconsidered when determining the type of financingyou may qualify for.Because financing increases the total cost of thecar, the loan you get is very important. Make sureyou understand the following aspects of the loanagreement before you sign any documents:Some financial institutions may offer special loansfor first time buyers. These may enable you to geta loan at a reasonable rate even if you have alimited credit history.The total amount you will pay for your car dependson its price, the annual percentage rate (APR), andthe length of the loan. When shopping for the bestdeal: Don’t be fooled by an advertised low monthlypayment – if the length of the loan is long andthe interest rate high, you may be paying more. Be wary of extremely low promotional APRs.Though you may qualify for particularly lowrates by making a large down payment, it maybe more affordable to pay higher financingcharges on a car that is lower in price or tobuy a car that requires a smaller downpayment.Look for manufacturer’s incentives.Dealers may offer cash back on specificmodels. Shop for your next new or used carusing Congressional Federal Car BuyingService. You’ll get to research andcompare prices so you know you’regetting a good deal, lock in your priceat your preferred dealer, and enjoy ourlowest available financing. It’s hassle-free.Exact price you’re paying for the vehicleAmount you’re financing and finance chargeAnnual percentage rate (APR)Number and amount of paymentsTotal sales priceBeware zero percent financing.Shop for the best deal. Zero percent financing sounds like an amazingbargain – after all, how can you beat a no interestloan? Often, you can. Such “deals” frequently comewith inflated prices for extended warranties and loaninsurance, high application fees, and pre-paymentpenalties. And because you forfeit the rebate option,you end up paying a higher price for the car. You mayalso be required to repay the car in three years orfewer – resulting in a very high monthly payment. SeeTable A below.While the 0% interest offer seems to make sense,giving up the rebate and having a short-term loancan make for pretty steep monthly payments. Andin the long term, it only costs 60 more to take the5% loan over five years, with much more reasonablepayments.Zero percent financing can be elusive. It is onlyoffered to those with very good credit, as determinedby the lender. And it is often not available for themost popular cars and trucks.Table A: Zero Percent FinancingPRICE 20,000 20,000DOWN PAYMENT- 2,000- 2,000MANUFACTURER REBATE- 2,000- 0AMOUNT TO FINANCEINTERESTLOAN PERIODMONTHLY PAYMENTTOTAL COST 16,000 18,0005% interest loan0% dealer loan60 months36 months 301 500 18,060 18,000WWW.CONGRESSIONALFCU.ORG5

Dealer and finance companyloans.Negotiate.At an auto dealership, you will be encouraged touse dealer financing. While not all dealer loansare bad, in most cases a loan from your financialinstitution will be preferable. Table B below showsthe difference between a loan at 5% interest (agood rate), and one at 15% (a rate often offeredby finance companies). The higher interest rateincreases the loan payment by 80 per month,resulting in an increased total cost of nearly 4800.Table B: Comparison of DealerAMOUNT FINANCEDINTERESTLOAN PERIOD 16,000 16,0005% interest loan15% interest loan60 months60 months 301 381 18,060 22,838MONTHLY PAYMENTTOTAL COSTTo get the best price on your new car, you willoften have to negotiate with the salesperson.Honing your bargaining skills will be worth it toyou in the end, as it can often save you 10-20% ofthe advertised price. You may be able to negotiatea particularly good price on overstocked or lesspopular cars.But remember – a deal isn’t a deal if you endup with a car you don’t really want. Sometimesordering a car will save you more money thannegotiating for one on the lot, as you won’t bepaying for unnecessary options.Never walk onto a car lotunprepared.Be prepared.Trade in your old car.Never walk onto a car lot unprepared. Before yougo, you should already know:If you already have a vehicle, you will likely beselling it and using the profit to pay for all or partof your new car. To get the best price, make sureyou know your car’s worth. Check reference booksor the Internet to know its value. CongressionalFederal Credit Union offers complementaryClearbook Value when shopping for a used carthrough the Congressional Federal Car BuyingService. Visit www.congressionalfcu.org/GetClearbookValue to appraise your vehicle. Youcan also try www.kbb. com and www.nada.com.After that, you have two options: The model and options you are looking forYour transportation needsHow much you are willing to spendHow much you can afford to financeHow much you can spend on a monthly paymentGain a good understanding of price, models andfeatures by conducting research using car-buyingmagazines, books, and the Internet. Be sure tocompare models and prices in ads and at dealershowrooms. Visit your financial institution beforeyou shop, so you can seek your vehicle armed withthe knowledge of how much you can spend.A great place to start your research is theCongressional Federal Car Buying Service. Simplyvisit www.CongressionalFCU.org/Car Buying Service and get started. Sell the car yourself. You will usually get thebest price this way, but will have to allow forthe time it takes to sell, as well as the effort ofplacing the ad, talking to and seeing a lot ofpeople, and negotiating with buyers. Trade-in to the dealer. This is often the easiestoption, though typically not the best deal. Toensure you get the most from a trade-in, do soonly after you’ve negotiated the best possibleprice for your new car.WWW.CONGRESSIONALFCU.ORG6

Used car test drive checklist.Before you drivemm Get the Vehicle Identification Number (VIN)so you can check the vehicle history report atwww.dmv.org or with another vehicle historyreport provider.mm Test the horn, turn signals, windshield wipers,door locks and dome lights.mm If you have a child who uses a safety seat, checkto make sure your safety seat will work with thevehicle.mm Check the National Highway Traffic SafetyAdministration’s website at www.nhtsa.gov forany recall information.mm Turn the key to the accessory position – the oneright before the engine is engaged – and makesure all the dash warning lights illuminate.mm If you have a friend or relative who isexperienced with cars, bring that person alongfor the test drive.WindowsEnginemm Do all the windows go both down and up?mm Check the engine oil, transmission fluid andcoolant levels when the engine is cool.mm Examine hoses and belts for signs of excessivewear.mm With the engine running, listen for anyknocking, ticking or tapping.Exteriormm Are there any cracks that could develop intobigger problems?Drivingmm Does the transmission shift gears smoothly?mm If the car has a manual transmission, is the clutcheasy to engage and are the gears easy to shift?mm Briefly take your hands off the wheel while youare driving at a low speed. Does the car veer toone side?mm C onfirm the VIN. In more recent models it’susually visible at the bottom of the frontwindow on the driver’s side.mm When your car is idling at a stop sign or light,does the engine sputter? Does it lurch forwardwhen you take your foot off the brake?mm Check the car’s body for potential signs ofundisclosed accidents, like unevenness in thepaint or ripples or dents in the exterior.mm Does the car vibrate excessively at high speeds?mm Check the ground beneath the car before andafter the engine has been running to see ifthere are any fluid leaks.mm Take out your ruler and place it inside one ofthe grooves of the tire’s tread. The tires shouldhave at least 1/4 inch of tread.mm Check the tires for signs of excessive oruneven wear, cracks or splitting.mm Make sure the tires have no objects lodged inthem, like nails or screws.mm When you check for rust, pay special attentionto the underside of the car, the wheel wells,the edges of doors and windows, and thetrunk.Interiormm Are there any rips or stains on the seats?mm How does it smell?mm Do the heating and air conditioning work?mm Does the cruise control work?mm Are there blind spots that could make lanechanges difficult or dangerous?mm Intentionally hit a few bumps to see how thesuspension feels on uneven surfaces.mm In an empty part of a parking lot, turn the wheelas far as it will go to both sides while you aredriving and listen for any strange noises.mm While you are still in the parking lot, apply thebrakes quickly and firmly while driving at 30mph.mm Look at the gauges while you are driving in theparking lot to make sure they all work and thatno warning lights are on.Othermm D oes the car have a spare tire (in goodcondition), jack and tire iron?mm Check that all the lights work, including thebreak and hazard lights.mm Open and close and lock and unlock anythingthat will – all doors, sunroof, trunk, glove box, etc.mm If you can afford to, have a trusted mechaniccheck out the car for you.WWW.CONGRESSIONALFCU.ORG7

Save on car insurance.Leasing and Lending LawsCar insurance premiums (monthly payments) canbe a substantial expense. However, you can improveyour chances of getting the best deal.The following federal laws protect your rights as aconsumer. Improve your credit score. Insurers may useyour credit score to determine the premium.Pay down excessive unsecured debt, pay offcollection accounts, and pay your currentfinancial obligations on time, every time. Establish long-term residence or become ahomeowner – both connote responsibility. Avoid tickets, particularly moving violations.Attend traffic school if you can’t. Lower your coverage amounts and increase yourdeductible. If you are a careful driver with a gooddriving history, it may be worth the risk. Buy a used car – premiums are cheaper. Avoid 4-wheel drive and high performance cars,which often carry higher premiums. Compare prices from local and nationalcompanies. Credit Union Insurance Serviceswill compare insurance rates and provide youwith just the right policy, free for CongressionalFederal members. Visit www.congressionalfcu.org/cuis to learn more or simply call800.622.1256 for your free no obligationinsurance quote.Truth in Lending ActRequires creditors to provide written disclosureof APR, total finance charges, monthly paymentamount, payment due dates, total amount beingfinanced, length of the credit agreement, and anycharges for late payments.Federal Consumer Leasing ActRequires the leasing company to disclose the totalamount of the initial payment, the number andamounts of monthly payments, all fees charged,annual mileage allowance, whether the lease can beterminated early, whether the car can be purchasedat the end of the lease, the price to buy at the endof the lease, and any extra payments that may berequired at the end of the lease.Credit Practices RuleRequires creditors to provide a written notice topotential co-signers of their liability if the otherperson fails to pay.Equal Credit Opportunity ActProhibits discrimination related to credit because ofgender, race, color, marital status, religion, nationalorigin or age.Federal and State Agencies Federal Trade Commission877.382.4357www.ftc.gov Federal Reserve ov Better Business Bureau703.276.0100www.bbb.orgSome state laws may provide you with additionalrights. Contact your state’s consumer protectionagency or Attorney General’s office (www.naag.org).WWW.CONGRESSIONALFCU.ORG8

Auto terms glossaryACTUAL DEPRECIATIONCUSTOMER SERVICE INDEX (CSI)Decrease in a vehicle’s value due to passage of time andday-to-day wear and tear.An auto-dealership rating system based on customersurveys regarding their experience at the dealership.ADVERTISING FEEDEBT INSTRUMENTAn amount charged to the dealer to cover the cost ofnational and local advertising. This fee may be passed tothe buyer excluding any markup and may be viewed onthe invoice.Written promise to pay.AMORTIZATIONPaying down a debt by making regular payments ofprincipal and interest.ANNUAL PERCENTAGE RATE (APR)The interest rate computed for an entire year (annualized)rather than just a monthly rate applied to a loan.AUTO INSURANCEDEFAULTFailure of a debtor to meet an obligation on a debt.DESTINATION CHARGEThe fee charged for shipping, freight, or delivery of thevehicle to the dealer from the manufacturer or port ofentry. This charge is passed to the buyer excluding anymark-up.DOWN PAYMENTUpfront funds given typically as cash at the time ofvehicle sale to lower the loan amount.Automobile protection that pays for damage or injuryyou cause to others while driving your vehicle. Insurancewill also cover damage incurred to your vehicle, or injuryto you or others in your vehicle, if you are in an autoaccident.EQUIPMENT PACKAGEAUTHORIZATION NUMBERA contract that covers specified breakdowns after amanufacturer’s warranty expires. Manufacturers andindependent companies sell extended warranties.A number assigned to you and sent to the dealership inregards to your vehicle request.AUTOMATIC PAYMENTSPayments that are automatically deducted from achecking or savings account.CAPITALIZED COST REDUCTIONAlso considered a “down payment.” Can be in the formof cash, trade-in net allowa

The Confident Car Buyer Presentation Outline The purpose of the Confident Car Buyer seminar is to provide tips and tricks on the car buying process. This seminar will review the key car buying stages: 1. The Pre-buy stage – what do people need to know before deciding to buy a car?