MCCU Vehicle Buying Guide

Welcome to our website!

The Members Choice Credit Union Car Buying Guide - Tips to Maximize the Car Buying Process

Introduction

Free Leather and Navigation! Just click here, our lenders will get you the vehicle you have always wanted! One-only deal! We have 0% financing, will pay off your trade, and give you $5,000 cash!

These are just a few of the offers you will see across your television screens, in the newspaper, or in advertisement banners across the Internet. Don’t be fooled – getting an exceptional car deal isn’t as simple as “click here now” or “only today – call now.”

Keep in mind, no matter how good a deal you get, the dealer is not losing any money! By selling you a vehicle below invoice, minus current incentives, dealer cash and manufacture rebates, the dealer will still make a profit from “hold back,” which is paid directly from the manufacturer to the dealership. 

It’s important for you, as a consumer to understand that 0% financing may cost you more than financing at your local credit union, even if the credit union’s rate is 6%.

You must also know as a consumer that the Internet does not prevent you from having to interact with the dealer. At some point, you will have to conduct part of the transaction with the dealer. The Internet has become a new business tool for people (including dealers) to capture your information, including your privacy, credit, and money!

For over 15 years, I have closely studied and monitored the automotive industry, especially the financial sector of the industry. I have held positions within dealerships as well as financial institutions. This entire Vehicle Resource Center (VRC) and lending web-site was created to share our knowledge of the industry with you…to make you the best informed consumer possible. Our mission is to exceed your expectations during any part of your vehicle purchase process or loan transaction. So remember, we are just a phone call, e-mail, or short visit away from you via online or at any of our branch locations in West Houston and Katy, Texas.

Our Commitment to Our Member-Owners

This guide, our lending web-site, the VRC, Preferred Dealer vehicle purchasing program, and dedicated staff all have one goal in mind – to get you the best deal and keep hundreds or even thousands of dollars in your pockets, rather than onto the balance sheets of dealers. Members Choice Credit Union (MCCU) wants to educate our members and future members with sound advice that cuts through all the confusion, pressure, and deception that takes place at so many dealerships. We want to share our skills and expertise in providing you with assistance in making sound financial decisions that are in YOUR best interest. Our products, services, and business partners have been very carefully chosen to ensure that your best interests are always our paramount concern. Many dealers or other financial institutions have two main objectives: 1) to sell you their product or service (regardless if you need it or if it’s in your best interests) and 2) to sell it to you at the highest possible price you will pay.

We’re not just speaking words either…Since you (as a member) own part of the credit union; Members Choices Credit Union’s financial well-being is directly linked to your financial well-being. In other words, when you grow and prosper financially, so do we as a credit union. And since MCCU is a not-for-profit full-service financial institution owned by you, the credit union’s prosperity translates into more money for you in the form of lower interest rate, better prices on products and services and service that will exceed your expectations!

Thank you for visiting us…and remember to check back often, we are always adding new and exciting features for our member-owners!

Shawn Nelson

Vice President of Lending and Product Delivery

Main Menu/Outline (Hyper-Links)

1. Introduction
2. The Dealership Experience
3. Buying a Vehicle
4. Research
5. Buying a NEW Vehicle
6. Negotiating
7. Buying a PRE-OWNED Vehicle
8. Leasing
9. 10 Important Tips To Remember!

The Dealership Experience

In order to get the very best deal in any vehicle transaction, you have to understand how a dealership operates and why they conduct their business the way they do.

The high-stakes pressure game starts before you even go into a dealership, either in person or online. Take the earlier examples in the introduction as examples. Dealers make promises such as low payments, big sales, and full retail for your trade. However, like most sales tactics, they all come with very fine print and 1-only offers that really never existed in the first place. Remember, there is a big difference between the meanings of “sale” and “save.” As a consumer, it is very important that you don’t automatically equate a dealership vehicle sales promotion with the word “save.” Teaser sales promotions such as “Just $199 a month for a brand-new loaded vehicle” are attempts to get you excited so you will rush down to the dealership, ill-prepared and not thinking logically.

Here is an important equation to remember:

Unprepared Member + Excitement + Dealership Pressure (Rushing) = You paying more than you should!

Now let’s go over the various types of dealership tactics so you will understand all of the different environments within certain dealerships. Keep in mind, all of these systems/tactics have only one goal in mind: to “work” you into a sale. All dealership systems are designed to be highly engaged and will take over and rush you along recklessly whether you like it or not.

The “Menu-Track” System

A Menu-Track system is a vehicle and sales program designed to put every customer through the same sales steps with the major intent of selling the customer as quickly as possible at the highest possible profit. The dealership quickly puts the customer through their established system in order to turn you over (sign the dotted line) fast. This system includes a sales system/tactic that directly links to how much you are willing to accept in a monthly payment. For example, let’s say you want a payment of $400 a month. A keen dealer will attempt to get you to pay $500 instead…or they will sell you another vehicle for $450 a month instead – but it will be a vehicle you probably could have bought for $350 per month to begin with. Remember, the dealer is not qualified nor do they care what payment you can afford, they only care about making the sale!

The “Turn-Over” System

Imagine that you are sitting in a car salesperson’s office. You have been there for what seems like hours. You’re tired and growing increasingly impatient while you think about all the other things you need to get done. In a Turn-Over system, the salesperson disappears and eventually returns with another person by their side. The new smiling person asks for more money or presents another offer that only shifts the numbers around in a fashion that only benefits the dealership. The Turn-Over system’s primary function is based on the idea that a new face can work more profit for the dealership.

The “Repeat Note” System

Some dealerships utilize the Repeat Note system rather than the Turn-Over system. In this case, the Repeat Note system replaces a new face for a new piece of paper. In a Repeat Note tactic, the Salesperson runs back and forth from where you are sitting to the “Sales Tower” where the Sales Manager sits. Over and over, the Salesperson goes back and forth with a new offer. Each time the dealership wants you to think you are getting a better deal, but often they are just shuffling the numbers around in an attempt to mask better terms for the dealership, increasing their profit at your expense while making you think that you are a hard negotiator. In the end, they will use terms like “We are hardly making anything on this deal.”

The “Square” System

The Square systems is a long-standing sales tactic and is probably the worse tactic out there. Sometimes this system is used after all the other tactics haven’t produced the result the dealership wants, or a commitment from you. The salesperson folds a piece of paper into four squares and then asks you to put one thing you want in 3 of the squares…information such as what you want for your trade, how much you are willing to pay for the new vehicle, how much you want your monthly payment to be, and how much money you are willing to put down. In the fourth square the Salesperson or Sales Manager usually asks for your signature and requires a deposit.

The dealership then begins to “wear you down” on each square separately. Slowly but surely, the salesperson or manager constantly negotiates with you, scratching through figures over and over in each square. By the time they are done, the figures no longer make sense, you’re “worn down” and you have probably agreed to pay more to the dealership than you originally started out with.

The “Spot Delivery” System

“You can just take the vehicle now and we will finish everything up later”…That statement is probably the most expensive any dealer can make to you. If a dealer wants to rush things so quickly that the proper paperwork can’t be completed, then you haven’t had enough time to think about it and you are probably going to make a decision based on emotion and excitement rather than being rational and using common sense.

Basically, Spot Delivery is when a dealer delivers a vehicle to you on just about any terms you want. A few days after you’ve taken delivery, the dealership calls you up and says “We are sorry, your contract wasn’t approved at the figures you wanted; we will need an extra $1,500 and your payment will go up another $100.”

There is little you can do when this happens. The dealer has probably already sold your trade-in and you probably signed an agreement allowing the dealer to change the terms under various circumstances.

In order to prevent Spot Delivery, never buy or take delivery on the first visit to a dealership or website.

The “Finance or Business Advisor” System

Even if you pay cash for a vehicle, you will more than likely have to go through the dealerships finance sales office. As a matter of fact, even if you go to a fleet representative to purchase your vehicle, many dealerships are structured in a way that makes you finalize the deal and sign the paperwork within the Finance Department of the dealership. Why do high-pressure finance salespeople want to talk to you so badly? Most dealerships make more money in the Finance Department than any other area of the dealership, including the actual sale of the vehicle. Many dealerships will try just about anything to convert you to their financing, including bending the truth somewhat.

Usually if a dealership converts you to their financing, they will sell you credit life and credit disability along with a Vehicle Service Contract (VSC). More often than not, these insurance products are always more expensive than a credit unions…after all, usually they present it as “pennies per month” coverage. On top of that, the Finance Department will also try to sell you “protection” packages such as: rust proofing (mop and glow), undercoating, and fabric/leather scotch guard or conditioning “for just $19.99 per month.”

The dealer makes it sound so easy, everyone can afford it! However over 72 months, you will pay over $2,000 for products that cost the dealer around $150.

Dealerships and online selling organizations are getting more and more sophisticated in their delivery and tracking systems. For example, many dealerships track customers’ actions by computer, rate their moods on scales entered in computers, and show their progress in the buying process on computers so managers and salespeople can track the dealerships’ careful plan to sell.

Buying a Vehicle

Buying a new vehicle is a multiple transaction: your trade-in, the new vehicle you are purchasing, the financing, insurance products, and aftermarket add-ons. If you don’t educate yourself about the entire process, you can save money on one transaction and spend way too much on another…after all, we have all heard dealers say they are “hardly making a dime” on the vehicle they are selling you. That’s why it’s very important for you to pay close attention to all the transactions of the vehicle purchasing process.

The Members Choice Way, One Step at a Time  

If you want to save money and not get buyer’s remorse after making just a few payments, you will have to look at the vehicle purchasing process in an entirely different way. It’s a common (and potentially serious) mistake to find a vehicle and adjust your budget to fit that vehicle’s payment. You do not want to have to adjust your lifestyle in order to make a monthly vehicle payment.

The Members Choice way is to start with your budget first. After you have a thought-out budget, then you can start the vehicle research process. The Members Choice way encourages members to slow down rather than speed up. Excitement and emotions should come after you have completed the vehicle purchasing process correctly. The “choice way” is saving money and buying the perfect vehicle too. Following the Members Choice way rather than following the dealerships lead, can save you hundreds, even thousands of dollars. So, forget conventional thinking and consider this:

• All vehicles are bought for cash
• No vehicles are purchased with trade-ins or payments
• Trade-ins and payments only provide you cash

Currently, based upon your budget and your trade-in, you have an exact amount of money available to you in order to purchase a new vehicle. That exact amount of money is called “Available Cash,” and it’s made up of all the cash you have available to buy a vehicle.

“Available Cash” is comprised of the following things:

• The cash your payment will buy you, called “Loan Cash.”
• Any cash your trade-in may give you after paying off your current loan. This cash is called “positive equity.”
• Any other cash you may have or that is applicable such as rebate money, dealer cash, manufactures incentives or savings, for example.

Understanding “Available Cash” assists you in understanding your budget clearly!

The following is an example of “Available Cash” –

1. I take home $2,500 monthly after taxes and deductions
2. I drive a three and a half year-old Chrysler Sebring Convertible
3. I have $13,000 that I still owe on it
4. I want to trade in my vehicle
5. I don’t want to make more than 48 payments
6. So, what can I afford to purchase?

If you enter all that information into the Cash Calculator or Loan Advisor available online to our members via our website, and you will get the following answer:

‘According to the information you entered, based on your budget and trade-in, you have $26,000 in Available Cash to buy a vehicle.’

As long as you know your Available Cash figure/amount you will always be on budget!

You want to know your personal Available Cash figure?

We can help you determine that. Please utilize our Online Calculator after you complete the following steps (You may also utilize our Loan Advisor Available Cash Worksheet).

1.  Research the average wholesale value for your trade-in without any additions, however make sure you subtract for high mileage (if applicable).

‘Wholesale’ value is the amount of money an average dealer will pay for your trade-in. This value can vary from dealer to dealer. Obviously, the dealer will try to give you the least amount of money for your trade-in as possible in order to increase the spread when they re-sell your trade-in.

The best way to determine the market wholesale value of your trade-in is to:

• Clean up your vehicle as good as possible. Bring your trade to one of our credit union offices (branch locations can be found on our website) and our Financial Service Representatives (FSRs) will assist in putting a figure (value) on your vehicle. It always helps to make an appointment before coming in to meet with an FSR.
• Take your trade-in to several different dealerships (3 or 4) and tell the manager you are thinking about selling your vehicle outright, not trading it. Usually the highest offer you get from the 3 or 4 dealerships is more than likely what the market wholesale value is for your area.
• Go to the Pre-Owned/NADA tab located at our website to look up the current value of your vehicle. Note: this is probably the least accurate method.

If you still owe money on your current vehicle that you are wanting to trade-in, please obtain a 10-day payoff from the financial institution you are paying your note to. This is important in order to find out the “positive equity” (you owe less than what the market value of your vehicle/trade-in is worth) or “negative equity” (you owe more than what the market value of your vehicle/trade-in is worth).

Remember to write down/enter your pay-off and equity on your Loan Advisor Available Cash Worksheet.

2.  Determine how much you really feel comfortable paying monthly on a vehicle.

What is your main goal in trading-in or getting a new vehicle? Some of the questions you may want to ask yourself are: Do you want your new payment to be lower than your current note? Do you mind a higher vehicle payment on your new vehicle in order to have something newer/more dependable/meets your needs/has a better warranty, etc.? Weighing the pros and cons is an important step in the process. If you need more guidance, or to find out if it is possible to get a new vehicle without increasing your payments, please call the credit union at: 281-398-9900 or 1-800-753-2428 and discuss with a Financial Service Representative (FSR).

Once you determine a payment you are comfortable with, please write/enter the payment on your Loan Advisor Worksheet.

3.  How many months would you like to finance your vehicle?

Members Choice Credit Union will finance a vehicle up to 96 months, subject to underwriting qualifications. Members Choice Credit Union strives to make sure you are comfortable with your payment, however it is important to remember that the longer you finance your vehicle, the more interest you will be paying. The shortest possible term is always the less costly option as it pertains to interest charges. Also, the longer you finance a vehicle the more exposure you will have to its depreciation if you wanted to sell it or if the vehicle is totaled from an accident, etc. Keep in mind, loan terms up to 84 months qualify for our GAP insurance coverage (sold separately).

You can utilize our Loan Advisor program to assist you in the decision in how long you should finance your vehicle for. You can also write/enter that number in your Available Cash Worksheet:

I would like to make $____ payments for ____ months.   

4. How much cash down do you have or are you planning to put towards the vehicle you are purchasing?

We strongly encourage you to take advantage of every manufacturer incentive and rebate available. Make sure you include any of these incentives along with any applicable cash down from your own savings, in the Loan Advisor/Cash Calculator Worksheet.

After completing all four of these steps, you should have an excellent idea on what your Available Cash is. Remember: A Credit Union Loan Pre-Approval and Available Cash gives you extra negotiating leverage with the dealer!

Research

Now that you know your Available Cash, you should begin the research phase of a vehicle purchase. It’s very important to know what vehicles fit your budget/Available Cash and your personal preferences.

Some of the questions you should ask yourself during the research phase are:

• What vehicles fit your monthly budget?
• What is the actual dealer cost (invoice) of the vehicle?
• What are some of the most important vehicle features to you such as: fuel economy, crash test ratings, insurance ratings, depreciation record, maintenance/operational costs, reliability record, etc?

Vehicle Resource Center (VRC)

There are several online resources located on our Vehicle Resource Center (VRC) at www.memberschoicecars.com . Some of the features you may find useful at our VRC include: an interactive Loan Advisor that will guide you in your decision on what the best loan options are for your specific needs, current manufacturer rebates/incentives available in the market, frequently asked questions about lending products and services, build your dream vehicle, print brochures, read vehicle reviews, find a preferred credit union dealer representative and get a price quote – just to name a few!

Buying a NEW Vehicle  

Ok…good job on hanging in there and following the best process to save you money on your vehicle purchase. The next step is actually buying your new vehicle at the dealer. There are a few simple steps to remember:

1. Make sure you have narrowed your search down to just one to three makes/models before you actually go shopping at a dealership. Remember to only speak with the preferred/fleet dealer representative from our preferred dealer network. The current list of our preferred dealers and representatives can be found at our website. When you first go to a dealer, you are being closely monitored and one or more of the dealership systems discussed earlier in this guide will start taking place. Most dealers probably already have you in their database and will want to immediately pull a current credit bureau on you to see if you are “worth their time” or to guide you along the path the dealer thinks will maximize their profits. It’s common for a dealer to ask for a copy of your insurance and drivers license in order to allow you to take a vehicle out for a test drive. However, do not sign an application for credit at this point. By signing an application for credit, you are giving the dealer permission to pull your credit report and send it to several of their lenders. It is very important to remember – do not allow the dealer to pull your credit report unless you definitely plan on financing the vehicle at the dealership!
2. Choose a couple of our preferred dealers from our website at (www.memberschoicecars.com). Even by choosing a couple of our preferred dealers within the network, it is still very important that you follow the steps in this vehicle purchasing guide.
3. Decide on only one vehicle at each dealership. Many dealers love to interchange the numbers on you when you are interested in multiple vehicles on their lots…often they will interchange the numbers in order to maximize their profits. By choosing more than one vehicle to negotiate a price on, you will only be opening yourself up to unwanted confusion.
4. You must maintain control of the transaction! Do not allow yourself to be rushed by the dealer. If needed, tell the salesperson that you are not buying a vehicle today under any circumstances, but you will be in the market to buy one soon. Do not allow the dealer to entice you by saying that incentives will end tonight or any other excuse they may make to force you into a rush purchasing decision. Remember, the dealers train their salespeople to get you committed on your first visit to the dealer before allowing you to leave the dealer. Your first visit to the dealer should be a fact-finding mission and to test drive the vehicle. Be firm with the salesperson and leave if you feel pressured in any way.
5. Copy or make a note of important information located on the Manufacturers Suggested Retail Price (MSRP) window sticker before leaving the dealership. Do not concern yourself with any other stickers the dealer may have on the vehicle…those are often items the dealer is trying to add to the vehicle at a very high profit margin (i.e. protection packages, aftermarket accessories, etc.).

Often, the dealer will have the stock number of the vehicle on the window or key. If this is the case, write it down and then visit the dealerships web site and search for the inventory number. Once you find the vehicle on the site, there is probably a link that will allow you to view the MSRP of the vehicle directly from the manufacturer.

6. Let’s now compute the dealerships invoice cost. Members Choice Credit has resources located at our website that will assist you with this process (website links, new vehicle CHROME guide, current rebate information, etc.). You can always call the credit union directly at 281-398-9900 and speak with a Financial Service Representative for assistance with this step as well. One of the reasons we recommended that you do not pay any attention to the dealer’s sticker price, is because the dealer wants you to negotiate down from their inflated asking price of the vehicle (with all their add-ons). By having the true MSRP price of the vehicle and knowing the true invoice cost, you will be in a much better position to negotiate down to the invoice price right off the bat. The paramount purpose of this step is to know what the dealer paid for the vehicle you like and negotiate from that.  
7. Verify that the vehicle you have chosen fits your “Available Cash”. After you pay for the vehicle, including tax, title, and license fees, will you still be in budget? We have several financial calculators and PDF forms that you can find on our website to assist you in comparing your figures in order to determine this.
8. Determine what a fair profit to allow the dealer is. Obviously, the dealer must make a profit when selling you a vehicle in order to stay in business. The purpose of this guide is to limit the amount of profit you allow the dealer to have in order to keep more money in your pocket. Remember, your main objective is to pay the least amount of profit to the dealer, so you will need to start negotiating up from what the dealer paid the manufacturer for the vehicle. Most of the time, the dealer will accept you paying invoice cost of the vehicle (excluding any hard to get models), rather than losing a sale altogether. Even if the dealer sells you the vehicle at cost minus any applicable rebates, they are still making a profit through dealer cash incentives and holdback money given directly from the manufacturer to the dealership.

Your next visit to the dealership is the buying visit. By now, you have done all your homework and you are well prepared. Let’s recap what you have learned at this point:

• You know how much money you can spend (your “Available Cash” figure) as well as your pre-approved loan through the credit union.
• You know what the one vehicle you like the most cost the dealer.
• You know what your old vehicle is worth based on current market conditions.
• The dealer should be the only one under pressure – They can lose a sale if they don’t do it YOUR way.
• Remember the paramount information in saving the most money during your vehicle purchase is to stay in control, keeping things as simple as possible, and never feeling rushed.

Before going to the dealer again, follow these important steps:

1. Make an appointment with one of our preferred/fleet dealer representatives at a dealership in our preferred dealer network.
2. Make sure you have the following information with you when you visit the dealership:

·         The current wholesale market value of your trade-in (if applicable).

·         Your available cash figure (or pre-approval amount/certificate from the credit union).

·         Your maximum offer on the one vehicle you like.

·         The absolute lowest price you are willing to take for your trade (if applicable).

3. When you arrive at the dealership, ask to go directly to the preferred/fleet representative’s office. Do not speak to another sales person that comes up to you. Ask specifically for the preferred/fleet representative only! Tell them that you are interested in purchasing a vehicle, but are still making up your mind and looking at other dealers. Saying this may increase your bargaining position. Beware of dealers that refuse to give you the true market wholesale value of your trade upfront. They will often want to talk about a trade “allowance,” which is a meaningless figure, or worse, they may refuse to have your vehicle appraised at all at this point. If you experience this situation and the dealer refused to deal straight with you, leave and find another dealership to purchase from.
4. If you have a trade, ask to have it appraised at this point. Do this before finalizing the figures on your new vehicle. It is very important to keep the two transactions separate to avoid confusion of interchanging the numbers by you or the dealer.
5. Agree on a final amount the dealer will give you for your trade. Remember, negotiating the price of your trade is acceptable, especially since you have done your homework and know what the true market wholesale value of your trade is.

6. Make an offer, and be prepared to negotiate on the new car. You are done talking about your trade. You have agreed on a number that they will purchase your trade-in for. It’s now time to discuss the price you are going to pay for the new vehicle. Your goal at this point is working the best deal on your new vehicle without allowing the dealer to make up for what they gave you on your trade-in transaction by adding additional profit in the new vehicle. On the new vehicle, do not hesitate in negotiating back and forth in order to get the best deal…you already know the invoice price of the new vehicle and are trying to get as close to the invoice price as possible (minus any manufacturer rebates, incentives, etc.).

Here is an example of how this part of the transaction might go:

Ø  Salesperson: “I can give you 10% or $1,500 discount off the new vehicle.”

Ø  You: “No. I will offer you $18,000. Invoice cost on that car.”

Ø  Salesperson: “But, my Sales Manager will never accept that!”

Ø  You: “Well, why don’t we offer it and see? I will even sign a buyer’s order saying I will buy at that figure.”

Ø  Salesperson: “Okay. Let me fill out this sheet. And I will need a deposit before I can take this offer to my Sales Manager. To show him you are serious, you understand?”

Ø  You: “I’m sorry; I won’t give you any deposit until my offer is approved in writing.”

Ø  Salesperson: “But we are not allowed to do it like that.”

Ø  You: “If you can’t, I will go to another dealership that will.”

The salesperson will probably leave to speak to their Sales Manager. More than likely, they will return to do it your way. You offered $18,000. They now counter with $20,000.

Ø  You: “I’m sorry, no. How about $18,050?”

Ø  Salesperson: “What?”

Ø  You: “Okay, make that $18,075.”

You are setting the scale of bargaining in your favor. Raise your offer a time or two by small amounts. Never give a deposit until your offer is approved in writing. Dealerships use deposits simply to make it harder for you to escape the deal. Some dealerships may even ask for your credit card information for a deposit. Never allow this under any circumstances.

7. After reaching an agreement with the dealer and you are looking at a completely filled out “Buyers Order or Purchase Agreement,” compare the “amount due” line to your “difference” figure from your Vehicle Buyer’s Fact Sheet that you obtained from the credit union’s website. Beware of any hidden fees (Extended Warranties, GAP coverage, Protection Packages, etc.) in the price that are not itemized on the Buyers Order/Purchase Agreement. If you don’t see the difference figure, ask the salesperson. Make sure it includes tax and title fees, and any other dealer charges, such as Dealer Inventory Tax. Are you in budget? If this final figure is below your difference figure, you are set to go!
8. If the figures are okay, give a small deposit if required by the dealer. Some dealers may ask for large deposits…don’t give it to them. Any amount of money makes a contract legally binding. $50-$100 should be enough.
9. At this point, be prepared to deal with up to three different “salespeople.” You are not done yet! Even if you are paying cash; even if you have a credit union pre-approved certificate, many dealerships will make you talk with a Finance Manager/Financial Counselor/ or Business Manager. This person will try to sell you extended warranties, GAP coverage, protection packages (paint sealant, fabric protection etc.), and aftermarket add-ons such as alarm systems, window tint, etc.
10. Be prepared for the dealer to try to switch financing from the credit union to one of their other lenders or to a lease financing product. Don’t automatically fall for a promised low payment. The dealership wants to convert you to leasing because the dealership usually makes more money leasing or financing you a car than they do on selling you the very same car. If you are interested in leasing, please visit the credit unions “lease like” financing program called SmartChoice which can be located on our website.
11. If you are interested in purchasing, Members Choice Credit Union recommends a simple approach for evaluating the value of dealership financing, insurance products, protection packages, vehicle warranties, and other after-market add-ons. After the sales pitch, simply say this:

“That sounds fine. And if your loan and products are less expensive, I will certainly consider you. Now, would you mind giving me a copy, completely filled out, of the contract you want me to sign so that I can compare it to other sources such as my credit union?”

The credit union will gladly give you exact figures. The credit union will be more than happy to help you compare costs and benefits between what the dealer is offering and what the credit union offers.

Certain product may make sense for you to purchase. However, it never makes sense to spend hundreds or thousands of dollars more than you have to for these products. The dealers make more money on these products than they do re-selling your trade and selling you the new vehicle. In the current market, dealers are charging $1,800 and more for fabric protection they used to sell for $200; they are trying to sell $900 extended warranties for $2,500 or more. At those rates, how could you not compare products and prices with the credit union?

12. After you have finished with the finance person, you may not be done yet! If you are financing at the dealership, many will insist that you take the vehicle home right then. This is called “Spot Delivery.” Do not allow this. Go home and “cool down/relax.” Re-check the dealerships figures again. Give the dealership time to detail the vehicle well for you. Make sure you check over the new vehicle well to ensure there are no scratches, etc. before taking delivery of the vehicle. If you are financing with the dealerships lender, make sure you have copies of all your paperwork necessary for their loan.
13. When you finally pick up or take delivery of your vehicle, check it over very carefully. Don’t look at it in the rain when it may be hard to see dents, scratches, or other flaws. If everything looks fine, you are done! Congratulations!

If you don’t want to go through most of this process, Members Choice Credit Union recommends utilizing our Preferred Dealer Network and Vehicle Purchasing Program.  Members Choice Credit Union maintains a relationship with a group of preferred dealers who have agreed to sell their vehicles at “fixed” prices, and have also assigned a special representative to work with members. Use the network, and follow the steps in our Dealer Network Program, and you’ll definitely have less work.

Buying a PRE-OWNED Vehicle

A pre-owned that is wisely purchased, is a much better buy than a new car for many. Often, you can buy more of a vehicle, lose less in depreciation up front and enjoy lower payments. However, if you are not careful, purchasing a pre-owned vehicle can be a disaster! You might pay too much for an unsafe vehicle that is a lemon and massively overpriced for the market.

1. Again, determine your Available Cash (as discussed in the “Buying a Vehicle” section) of this guide.
2. Don’t shop on rainy days. On rainy days, it’s hard to see body damage and you are less likely to give the car a thorough check-over. Don’t be rushed! Every car is unique. A car that looks fine on the outside can be a monster under the hood.
3. Get previous owner information, if possible. If you are looking for a vehicle by yourself at a dealership, and have found one you like, without fail, get the name and number of the previous owner. If the dealer won’t (or can’t) give you this information, don’t buy the vehicle unless you have it thoroughly checked out by a mechanic. If the dealer will tell you the previous owner’s name, ask the previous owner:

a)      How many miles were on the vehicle when it was traded in?

b)      What was wrong with the vehicle? Make a list of the vehicle’s problems, in detail.

Get the vehicle inspected by your mechanic before you set the price. Take the vehicle to a certified mechanic of your choice. If the seller/dealer won’t let you have a vehicle inspected, don’t buy the vehicle.

Vehicle service centers, such as tire dealers or department store auto service facilities, are good for pre-purchase inspections, as well as independent diagnostic services that do not make repairs (such as Auto Exam). Also utilize our Vehicle Resource Center website and order an AutoCheck report on the vehicle you are interested in.

With your list of problems from the prior owner, ask your mechanic to check the vehicle carefully and tell you how much he will want to put the vehicle in good working condition – not to make it like new. Taking a vehicle to a mechanic is the most important step you must take!

4. Use the estimated repair costs to negotiate a better price on the vehicle you are interested in. Budget the repair costs and use them as bargaining leverage. If your Available Cash figure is $10,000, and a mechanic says you need to spend $2,000 on repairs, you can’t spend more than $8,000 on that particular vehicle.

Start bargaining up from loan value (or less). You can use a third-party, commercial, or online price guides, all of which can be found within our Vehicle Resource Center website, to get an accurate pre-owned vehicle value. You can always call or stop by the credit union for assistance from our Financial Service Representatives as well.

5. Negotiate extended warranties after the pre-owned vehicle price is agreed upon. After you agree on price, negotiate a warranty. You don’t want to be put in a position where the dealer automatically adds the cost of a warranty hidden into their selling price without informing you. Remember, the credit union offers extremely competitive extended warranties on pre-owned vehicles as well! Whatever you do, avoid any warranty that is 50/50. Meaning: you pay half and they pay half. In other words, if you have a $50 repair, some dealers repair shops will bill you $100. Your 50 percent now just happens to be the whole bill, costing the dealer nothing.  Extended Service Agreements can be a great product, however dealerships often charge two or three times as much for their service agreements than what they are worth or in relation to what the credit union can sell one to you for.

Leasing

At some point during the vehicle buying process many dealerships may try to switch you from buying to leasing. If you have been to a dealership lately, visited an automotive website, or read the automotive section of the newspaper, you probably already know this. Dealers often get customers into leases by utilizing sales tactics such as these:

1. “More car for less money!” Sounds good doesn’t it? And if you listen to all this excitement, leasing delivers that wish. “Lease it for just $198 per month!” And the advertisement is talking about a car you would pay nearly $400 a month to buy conventionally.
2. “No haggling, no confusing negotiations!” This is the dream of every car shopper. Lease a vehicle, the sales pitch says, and there’s no pressure or confusion!

The reality is something much different than this. Leasing is another way to finance the use of a vehicle. A lease itself isn’t a bad idea – it’s simply a financing tool. Dealers often push leasing in order to maximize their profits. Remember, dealers often make more financing a vehicle for you than selling you the actual vehicle!

A lease is similar to renting a vehicle. You pay for the use of the vehicle. In a lease, you use the vehicle, you do not own it. There is one big difference in leasing and renting; if you are renting a vehicle, you can usually turn it in early if you want without paying a big penalty. If you are leasing a vehicle, you may pay a large penalty to break the terms of the agreement to turn it in early.

Lease payments are often lower than conventional financing because the lease payment is based on the fact you are only using the vehicle – you don’t own it at the end of the lease term. Your payment is therefore based on USE not on OWNERSHIP. For example, let’s say you are leasing a $25,000 car that going to be worth $10,000 at the end of the lease term. When you lease, you only make a payment based on $15,000. If you were buying the same vehicle, your payment would be based on the total $25,000.

Due to different regulations, leasing disclosures can be confusing. Lease agreements often don’t show you the interest rate you are paying while you are “renting” the vehicle. The disclosures may not even tell you what you are receiving for your trade-in (if applicable). The wording on a lease may also include terms you have never heard of or in small print on the back of the leasing documents.

Some of the other dangers of leasing are unrealistic mileage restrictions, complicated terms that explain excessive wear and tear charges, etc. etc.

Some of the questions you should ask yourself if you are considering leasing include:

1. Do you generally continue to drive a vehicle after you have made the last payment, and enjoy owning a car without payments?
2. Can’t I just lease a car to get the low payment and then buy the car at the end of the lease? Yes. However, do you really want to make payments for 7 years or longer on the same vehicle? Probably not.
3. Do you always trade for a new vehicle before the old vehicle is paid for? If you are this type of person, that is fine – so are most of us. If you are comfortable with the payment and don’t mind always having a payment, then leasing may be for you.
4. How stable is your job situation. If you had problems making the payment due to a job loss, are you going to be able to sell the vehicle to pay off the loan? If you lease a car and have trouble making the payments, you don’t have the same rights. You are breaking the terms of the lease and will often own much more than the vehicle is worth. Leasing is safest for those who hold a secure job and are in good shape financially.
5. How many miles do you drive a year? If you drive a lot, than leasing may not be for you. Excess mileage charges can add up to thousands of extra dollars you will owe when turning your vehicle in at the end of the leasing term.
6. Are you stable financially, but want more vehicle for the payment? Then leasing may be a good option for you. If you are more comfortable with constant payments but want more car for the same payment, then a financing tool such as a lease can be a good option for you.

Members Choice Credit offers a great leasing alternative. The SmartChoice program is a lease-like program that eliminates many of the negatives of dealership leasing offerings. You can find out more about SmartChoice by calling the credit union or visiting the Vehicle Resource Center website and utilizing our Loan Advisor program/tool.

10 Important Tips To Remember

1. SLOW DOWN!

Speed in the car business is very dangerous to your financial health!

2. TALK TO US!

Members Choice Credit Union operates differently than most dealerships and banks: since you are a member-owner, we want you to save money, not spend it unnecessarily. That is why you never have to negotiate with us. And that is why we will give you answers without confusion or pressure.

3. BUDGET BEFORE YOU SHOP.

Know what you plan to spend on a vehicle before you begin to shop. Use the financial calculators in the Vehicle Resource Center website at www.memberschoicecars.com to assist you in determining this amount.

4. DO YOUR HOMEWORK/RESEARCH.

Is safety and reliability important to you? How about mechanical reliability? Dealers won’t tell you if the cars they sell are unsafe or mechanically unreliable. Our Vehicle Resource Site and Financial Service Representatives can help.

5. DON’T SHOP AT DEALERSHIPS THAT REQUIRE YOU TO SIGN A MANDATORY BINDING ARBITRATION AGREEMENT.

Call dealerships before you visit them and ask. If they require such an agreement, tell them you plan to take your business elsewhere.

6. DON’T BUY ON YOUR FIRST VISIT!

All dealerships want to sell you the first time you are there. They are trained to do this! Why? They make more money if you don’t shop!

7. NEVER LEAVE A DEPOSIT UNTIL THE DEALER AND YOU HAVE AGREED ON A PRICE.

Dealers want your deposit so you can’t leave or to make you feel obligated to them.

8. DON’T FALL FOR “SPOT” DELIVERY.

You know: take it home “on the spot,” the first time you have seen the vehicle. Spot delivery means your emotions, not your pocketbook, are ruling the transaction.

9. STOP THE TRANSACTION IF YOU FEEL PRESSURED OR CONFUSED.
10. REMEMBER THAT THE PRICE OF THE NEW CAR IS NOT WHERE DEALERS MAKE THE MOST MONEY! SO ALWAYS COMPARE DEALER FINANCING AND PRODUCTS TO THE CREDIT UNIONS! THE CREDIT UNION IS USUALLY LESS EXPENSIVE!

Many dealers will sell you a vehicle for “cost” but still make thousands on you – on financing, on your trade-in, on add-ons and products such as credit insurance, extended warranties, and protection packages.