Buying an Automobile at New Mexico Energy Federal Credit Union

Shopping for a new car? If you're in the market and have decided to purchase rather than lease, you'll find several financing options. These days, more and more dealers are offering low-rate loans or cash-back rebates.

While it's nice to have choices, they can be downright confusing. And expensive. In the final analysis, you may be better off with conventional auto financing from your credit union.

The low rates that most dealers advertise are for short-term loans. For example, one dealer offers 1.9% financing, but that's only available on two-year loans. A new $20,000 car with a $2,000 down payment (10% down) will require financing $18,000. This translates to an astounding $765 monthly payment—out of reach for most buyers.

The same dealer offers other options, which become less attractive as the loan term lengthens. The dealer's three-year loan has a 4.9% rate, while its four-year loan has a 5.9% rate, and its five-year loan has a 6.9% rate. Financing $18,000 on your $20,000 car at the dealer's 5.9% rate for four years results in a monthly payment of $422—a more realistic outlay for many consumers' budgets.

On the other hand, if you choose the dealer's rebate plan, you forego the low-interest-rate loan, but get a $2,500 cash rebate. Adding the rebate to your down payment can make credit union financing very attractive—because the larger down payment reduces the amount you need to finance.

So which alternative is best—taking the dealer's low-rate loan or the credit union's loan with the dealer's cash-back offer? Click here to find out.

© 2002 Credit Union National Association Inc.

A Money-Making Idea: Sell Your Old Car Yourself <index>
by Remar Sutton

How hard do you work to take home a thousand dollars? Well, that's how much you might throw away if you trade in your old car rather than sell it yourself. Follow these tips and if you're lucky, you'll keep that thousand, rather than hand it to the dealership.

2. Find out its "wholesale" value--that's all a dealership will give you for it. Just take your car to a few used-car operations and ask what they would pay to buy your car outright. The highest figure is its true wholesale value. You also can get a fair idea from classified-ad asking prices for cars like yours, and on the Internet at sites like www.edmunds.com.

3. Set an "asking price" that's high enough to allow you to dicker: Add $2,000 to the wholesale price.

4. If you owe money on your car, call your lender for instructions about paying it off before you advertise it for sale.

5. Run a short ad in your local daily paper and in any "traders." Study other ads for tips on wording.

6. Use common sense with any stranger who wants to drive your car before making an offer: Check the person's driver's license; write down the tag number of the person's car.

7. Become a salesperson: Talk up your car's good points. Has it been dependable? Have you kept careful maintenance records?

8. Don't talk trade or finance. And don't come down off your asking price too quickly. If you've marked up your car $2,000, come down in increments of $50 or $75. And remember: Any amount you receive above your car's "wholesale" value is extra profit to you.

Selling a car yourself rather than trading it in takes work and patience. And your chances of success aren't 100%. But tens of thousands of people just as inexperienced as you do it every week, and do it successfully. And wouldn't that extra thousand or so come in handy?

Editor's note: Remar Sutton's car-buying tips have been featured on "Good Morning America," "Today," "20/20," "Nightline," and in magazines such as People, Newsweek, and Credit Union Magazine. He's president of the national Consumer Task Force for Automotive Issues. He writes this column exclusively for credit union members.

Although vehicle safety has improved in the past decade, 43,000 people still die every year on U.S. highways. Which technology might save your life?

Side air bags--Research shows that protection for the head reduces death rates 45% for drivers whose side of the car is hit. Traditional front air bags don’t help much in side-impact accidents, which are responsible for 9,000 deaths annually. This optional equipment has a list price of around $345 on some models. These bags save lives and are considered well worth the money.

Electronic stability control systems--These systems stop skids with swift, automatic, computer-guided braking of selected wheels and help avoid rollover accidents. The cost is high--around $750 in some models--but it could prevent tip-overs and save lives.

Tire pressure monitors--If tire pressure is at 27 pounds per square inch (PSI) when the manufacturer calls for 32, this greatly increases the danger of tire failure, especially during long drives at high speed. If you don’t check tire pressure regularly, consider this equipment that warns if a tire falls below safe pressure.

Antiwhiplash headrests--New, dynamic head restraint systems can sense a crash impact and adjust the head restraint or seat back to reduce the possibility of whiplash. On models without this technology, don’t leave the restraint in the “down” position; adjust it so its top is just below the top of your head.

“Always get preapproved at a credit union before you shop dealership financing,” suggests Remar Sutton, an Atlanta-based auto consultant and author of the book “Don't Get Taken Every Time: The Ultimate Guide to Buying or Leasing a Car in the Showroom or on the Internet.” “Car dealerships’ entire environment is based on always finding a place to make more money on the consumer. Which means that everything becomes negotiable at the car dealership. If consumers don’t know how to negotiate, they can be hurt.”

Buying a new car requires you to take your time and do your homework before visiting a dealership. Rushing through a car deal invites a dealer to potentially take advantage of you.

“The most important thing on a purchase order is what the end price of a vehicle is going to be,” says Dianne Craft, marketing analyst at American Airlines Federal Credit Union in Fort Worth, Texas. The end price, according to Craft, is “minus the trade, down payment, and all of the fees that might be on there. You have to be sure to validate all the charges that are on a purchase order because sometimes, even though it’s on a preprinted form, that doesn’t mean it’s a valid fee.”

2. Does the dealer require an arbitration agreement in order to buy a car from that dealership?

“Arbitration agreements are bad for the consumer because they take away the consumer’s rights for any legal redress if they have any problems with that dealership,” according to Sutton.

“Arbitration agreements are being forced on many consumers because [clauses are] hidden in contracts or they’re presented at the very last minute, before a person signs the paperwork to take delivery on a car. Do not buy from a dealership that requires arbitration agreements,” adds Sutton.

According to Sutton, “Many dealerships are asking consumers to sign an acknowledgement that the dealership has a right to sell personal information about that consumer to anyone.” If a dealership asks you to sign a statement acknowledging they can sell your private information, Sutton recommends not signing it.

Some other things a dealer contract should spell out, from the Web site auto.consumerguide.com:

For more information, visit the Products and Services area at the CUNA website.

Five Tips for Buying a Used Car the Right Way <index>
by Remar Sutton

Buying used can make smart money sense--if you follow these five easy tips:

1. Always have a mechanic check out a used car before you buy it. Even if you're buying from your mother. Use an independent service shop or diagnostic center. Most charge about $125 for a complete check.

2. Budget any needed repairs as part of your purchase price. So, if a seller wants $7,000 but the vehicle needs $1,000 in repairs, budget $8,000 for your vehicle. Or, better yet, negotiate the selling price down to include the cost of repairs.

3. Forget about a used vehicle's "asking price." Smart used-vehicle buyers never negotiate down from asking price, they negotiate up from "loan value." Loan value is what most lending institutions will actually lend on a particular vehicle. Your credit union can tell you this figure. For instance, if the seller is asking $7,000, but the loan value is $5,000, you want to negotiate up slowly from $5,000.

4. Talk warranty after you've settled on the price. And never accept a 50/50 warranty--the dealer pays half of warranty-covered expenses. On any vehicle, fight for at least a 30-day, 100% drivetrain warranty. If you're also thinking about buying an extended service agreement, remember that the price of a service agreement usually is negotiable, too.

5. Always shop used-car financing rates. Most states allow dealers to charge much higher rates for financing used cars than for financing new cars. For instance, a new car might be financed at 8% while a two-year-old used car might be financed for 15% or higher. How do you find the cheapest rate? Ask the seller to give you a completely filled out copy of the finance contract, and compare it with your credit union's rate. A tip: NM Energy FCU finances used cars at or near new-car finance rates.

Helping The Kids Buy Their First Car The Right Way <index>
by Remar Sutton

Remember the first time you bought a car? Prices and sales tactics have changed a lot since then, but one thing remains the same: The first-time buyer usually is an easy mark for a salesperson. Why? Most young buyers are enthusiastic and untutored, which leads to big profits in the auto business. Here's a quick plan to rein in their enthusiasm and raise their negotiating skills.

* Teach kids to budget before they shop. How much can they spend in total dollars and/or per month? The figure should include allowances for insurance, gas, and maintenance.

* Teach them to do their homework before they shop: What cars in their price range are mechanically reliable? A search through Consumer Reports auto issues will help. What would insurance cost for a car like that? A quick call to your insurance agent will answer that.

* Teach them never to buy on their first visit to a dealership, even if they love the car. People who buy on the spot always pay more. A smart young person will find two cars at two different locations and play those two sellers off against each other. Prices tumble when real negotiating begins.

* Teach them how to recognize the best price. When they've found the car they like, ask your credit union to tell you what that specific car's "loan value" is, and make the loan value figure your targeted buying price. Negotiate up slowly from that figure.

* Teach them the power of smart financing. If your kids are paying cash, fine. But if they are financing--and particularly if you're signing with them--right now is the time to show them how to comparison-shop financing. Ask the seller to give you a completely filled out copy of the finance contract and bring that contract to your credit union. Compare each item on the seller’s contract to the credit union contract. Nine times out of 10, your credit union will be cheaper.

A first-time buying experience should be an exciting experience. Follow these guidelines, and it will be a smart one, too.

Editor's note: Remar Sutton's car-buying tips have been featured on "Good Morning America," "Today," "20/20," "Nightline," and in magazines such as People, Newsweek, and Credit Union Magazine. He's president of the national Consumer Task Force for Automotive Issues. He writes this column exclusively for credit union members.