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Buying a Car

Before you start shopping, determine what you can afford. Experts suggest all of your monthly payments should be less than 40% of your gross or pretax income.

Do Your Homework

Once you’ve set the price range for your new car purchase, the next step is finding the make and model within that range that meets your needs.

It’s tempting to make this decision based on looks alone; however, you’ll need to depend upon your new vehicle for many years to come, and carefully considering a range of factors is key to ending up with the car that will best serve you and your family in the long term.

Here are 3 important points to consider during your search.:

1. Reliability

No matter how beautiful a car is or how throaty its engine sounds when you start it up, a vehicle that can’t be depended on to get you to work every day should be avoided. A number of key resources can help you zero in on the cars in your price range that are known for their easy maintenance and low repair bills–as well as alerting you to those vehicles that have the potential to become a money pit.

Consumer Reports gives reliability ratings to a wide range of new and used vehicles, highlighting the best (and worst) cars in terms of reliability in each category. Edmunds conducts long-term road tests for many popular vehicles, making it an excellent resource to dig deeper into the reliability of the cars on your list.

Of course, don’t discount word-of-mouth; a good or bad experience with a particular car by a friend or family member can be very illuminating as you make your final decision.

2. Safety

Much like reliability, a car’s general safety rating trumps its aesthetic value. After all, whether you’re planning on making frequent long road trips or simply need to get your family to work and school, a safe vehicle can go a long way in protecting the most valuable things in your life.

A good first stop for researching a particular model’s safety reputation is the Insurance Institute for Highway Safety’s ratings website. The IIHS tests vehicles in several key categories, including crashworthiness and crash avoidance; vehicles receive a grade from poor to good in all individual categories, making it easy to compare the relative safety of several different models.

Keep in mind that while certain critical safety features such as electronic stability control and airbags will come standard in all new vehicles, used vehicles may not have them; if you’re considering a pre-owned car, be certain to look closely at which safety features are included.

3. Fuel efficiency

The true cost of any new car isn’t simply the sticker price that the dealership quotes you. Any monetary outlays that you must make to maintain your car add to its lifetime cost, and one of the biggest pieces of the overall cost of car ownership is the price of fuel.

Researching a vehicle’s fuel efficiency in advance can save you thousands of dollars over the course of its lifespan. The U.S. Department of Energy’s fuel economy website makes it possible to compare both new and used models side-by-side, and the website also maintains lists of the most fuel-efficient vehicles in each category for easy review.

All of the above factors are important to research whether you’re buying a new or used car–but anyone considering purchasing a pre-owned vehicle has additional work to do.

While you can certainly find a reliable, safe and fuel-efficient used car (and generally for a lower price than a new vehicle), you’ll need to take a few additional steps prior to purchase:

  1. Read over the vehicle history report: Even if a car looks like new, it could have been involved in a major accident that led to serious internal damage. Reviewing the vehicle history report from a company like Carfax may reveal hidden issues and help you avoid a costly mistake.
  2. Ask for a pre-purchase inspection: Request that your own mechanic take a look at the car prior to committing to purchase. Like reviewing the vehicle history report, this inspection can uncover hidden concerns which the seller may not even know about.
  3. Confirm that the title history is clear: Particularly if you’re buying from an individual instead of a dealership, confirm that the title history is clear and that the seller is actually the true owner.

Financing Your Purchase

Vehicles, especially new ones, are expensive items — ones that most people don’t pay for with cash. Of course, loans can cost a lot of money, too. Be sure to consider options beyond what a dealership offers you — particularly an auto loan from your credit union. (Check our current rates.)

Here are a few additional auto loan components that we can save you money on:

Gap insurance

No matter how much you love your new car, it already lost a significant amount of value the second you drove it off the dealer’s lot.

That’s why gap insurance–also called guaranteed auto protection insurance–is so important. Most standard auto insurance plans only cover the replacement cost for your vehicle at current market rates.

On the other hand, a gap insurance policy will cover the difference between the current market value of your vehicle and the loan amount you still have outstanding if your car is totaled or stolen, protecting your investment and making a heart-breaking scenario slightly easier to handle.

Payment protection

Unexpected catastrophes can hit at any time. The loss of a job, a long-term hospital stay, the onset of an ongoing disability or the death of one of the loan holders can make meeting your car loan obligations extremely difficult.

A payment protection plan can provide peace of mind in case such unfortunate circumstances arise. This type of coverage allows you to cancel your monthly payments on your auto loan up to an agreed-upon maximum without penalties, additional interest or negative reports to credit bureaus.

Facing a personal disaster is hard enough; payment protection for your auto loan can make the process less difficult to bear.

Mechanical repair coverage

For most Americans, a car repair that costs a few hundred dollars is potentially prohibitive–and as Americans are keeping their vehicles for much longer periods than ever before, the odds that the average American car owner will face a large repair bill continue to grow.

Mechanical repair coverage can help defray these expenses by covering many repairs, even if the manufacturer’s warranty has already expired. In fact, you won’t have to pay any out-of-pocket expenses for covered repairs, making it easier to keep your life moving.

Making the Payments

After closing the deal, you have more than a new car: You have a credit history. Take good care of it by making all your payments on time. If you don’t want the hassle of writing a check every month, sign up for payroll deduction. That way your payments will be deducted from your account automatically.