Making Cents Blog

10 Important Considerations When Financing a Car

Owning a new car is part of the American dream. We all fantasize about the color, model, and brand of our dream car. What’s missing from this fantasy is the place where you buy the car—the dealer.

Why is that? Many people are unfamiliar with the car buying process and are nervous or unprepared to work with a dealer. Most car salespeople work on commission—which means they may try to sell you things you don’t want or need. This might mean rebate offers, special incentives, and creative financing. Buying a car requires decisions beyond color, make, and model and with this helpful guide, we hope you will feel confidant to make informed decisions and find the car that is right for you.

  1. If you cannot pay cash to purchase the vehicle, and most people can’t, then get preapproved for a car loan somewhere other than at the dealership, such as your credit union.
  2. A preapproval will, in effect, elevate you to the status of a cash buyer. If you’re a member of a credit union, you can be assured of fair interest rates. With Alliance Credit Union it only takes a few minutes to complete an application online.
  3. Scrutinize interest rates. Dealers often mark up the interest rate of the car beyond what you qualify for. This can cost you hundreds or even thousands, so it pays to know your credit rating. Request a free copy of your credit report at  or call 877.322.8228 toll-free.
  4. Remember that even if you are a whiz at negotiating a good deal but don’t choose financing carefully, you can lose everything you saved on the purchase price.
  5. Take out the shortest-term loan you can afford. You’ll pay more each month, but a larger portion of each payment will go toward paying down the principal with a shorter loan term, which means you’ll build equity faster.
  6. You probably already know what kind of car you want. Now take the time to get more than a general idea of what that particular car costs. You can find pricing information along with reviews at Kelley Blue Book,, and Consumer Reports.
  7. After you know what the car will cost, figure out what you can spend. Set a price limit and stick to it! Once you’re in the dealership, it’s easy to convince yourself to spend more than you had planned. It’s the job of a good salesperson to encourage that kind of thinking.
  8. Don’t use the sticker price as your gauge when negotiating a deal. A salesperson may offer you a deal that’s $500 below the sticker price. That may sound enticing but unless the vehicle is in big demand and short supply, you can usually get an even better price by negotiating up from what the dealer paid for the vehicle. Or, to avoid negotiating all together, consider visiting one of Alliance’s Complete Auto Network dealerships. As an Alliance member, you’ll receive 1% off the invoice price for new vehicles – no negotiating required.
  9. You can calculate the dealer’s cost by subtracting any behind-the-scenes sales incentives, such as dealer rebates and holdbacks, from the dealer invoice price. Consumer Reports New Car Price Reports does this for you with the Bottom Line Price.
  10. Other protections include Guaranteed Accident Protection (or GAP Insurance) and Mechanical Breakdown Insurance (MBI). GAP insurance will pay the difference between what your insurance company pays on a total loss accident and any balance remaining on the loan. Be aware that the dealership is not the only place that offers these extra protection programs; credit unions often offer them at very competitive pricing. For example, Alliance offers GAP for $349.

Buying a car takes time, but doing your research in advance can save you a lot of money. Pack a lunch and a bottle of water and be patient with the process; on average, it takes around four hours before the deal is done and you are driving home in your new car.


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