Anytime Adviser—Used Car Buying Coach

Welcome.

This interactive guide offers you strategies for finding and buying a quality used
car.

Let's begin.

Introduction
You’re at an auto dealership, looking at four used cars—all priced around $12,000—
each three model years old. Which is the best vehicle for you?

Match each car with its top characteristic.

Cars Characteristics

Toyota RAV4 Rated as highly reliable

Mercury Sable Very safe in crash tests
Jeep Grand Cherokee Poor gas mileage
Honda Insight Good gas mileage

Interested in a little guidance finding a square deal on the right used car for you?

Spend 10 minutes here.

Objectives
This quick guide offers you a used-car buying approach that can save you time and
money and help you avoid frustration.

• Determine what you want in a car.

• Learn where to find reliability ratings and the current retail value on a
specific model.
• Develop a strategy for staying in control at dealerships.
• Practice negotiating the price with a salesperson, and
• Learn why buying a car should begin at the credit union.

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© 2003 Credit Union National Association Inc.
Set Priorities
Finding the perfect used car at the right price can be a challenge.

First, let’s figure out what your needs are as a buyer. Are you…

• A first-time buyer?
• Buying for yourself or family? Or
• Buying for a teen?

As a first-time buyer, consider inviting a family member or experienced friend to

join you through the process. It’s more fun this way, and you’ll have a second
opinion to consider before making your choice. Before you turn to the classifieds,
take a look at the complete cost of car ownership. Your monthly payment may be
just half of the expense of operating and maintaining a car.

Before you shop, set your priorities. If the car is for family use, have each driver set
priorities, and compare your lists. Reaching agreement now on “must have”
features can make shopping for a vehicle go smoothly.

If you’re buying this car for your teenager to use, consider stating your
expectations up front. You’ll want to reach agreement on your prio rities in selecting
a car as well as who will pay for the car, gas, oil changes, and repairs.

You should now have a sense of the features you’re looking for in a car. It’s time to
figure out what you can reasonably afford to spend.

Start at Your Credit Union

Where is the best place to shop for a used car?

• In the newspaper?
• At the dealership?
• On the Internet?

Actually, you’ll do better by starting at your credit union.

Remember, dealers and Web sites are out to make money from you. Your credit
union is a not-for-profit cooperative, working for you. Here you’ll find resources to
find the best vehicle for you. If you need financing, you’ll probably find the best
loan here, too. Your credit union returns every dollar after expenses to members in
the form of better services and lower loan rates. You’ll find their car loan rates
typically are lower than other financial institutions.

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© 2003 Credit Union National Association Inc.
Two important questions you’ll be able to answer at the credit union are:

• What can you afford? AND

• What will a loan cost you?

Some experts suggest all your monthly payments (rent or mortgage, auto, credit
cards, student loans, and so on) should equal less than 40% of your gross (before
taxes) income. Call your credit union for its evaluation criteria. A loan officer may
even preapprove your loan application.

By starting at the credit union, you’ll know how much you can reasonably afford to
spend on a car.

And remember, the purchase price is just part of the cost of ownership.

If you own a home, a credit union home equity loan might look even better. The
reason, of course, is that home equity loan interest payments may be 100% tax
deductible (consult your tax adviser to see if you’re eligible).

Once you know what you want and can afford, look for models that match your
needs.

Find the Right Car

You’re ready to narrow your search to a handful of models. With your completed
Used-Car Priority Work Sheet in hand, circle any features you rated as “must
haves.”

Remember, if this will be a family car, reach agreement on priorities before

continuing.

Your next step is to identify models with these features.

Reliability is a key concern with any used-car purchase. You may save considerable
money on repairs by limiting your search to only those models considered as
reliable. While each person’s definition of a reliable car may vary, here are some
resources:

• Consumer Reports annually determines the best and worst models for
reliability.
• Also, Edmunds’ Web site offers its own list and compiles satisfaction and
reliability ratings.
• And consider personal experiences of friends and families—Ask those you
trust about their satisfaction with their vehicles.

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© 2003 Credit Union National Association Inc.
Safety is another feature consumers look for in a car. Features such as air bags and
antilock brakes are proven in reducing accidents and injuries. To see how a vehicle
rated in crash tests, link to the Insurance Institute for Highway Safety Web site.

Mileage and impact on the environment are of growing interest to used-car

shoppers. The U.S. Department of Energy maintains mileage and emission figures
on most vehicles.

Once you’ve identified a handful of models that meet your priorities, it’s time to
hunt for actual vehicles in your area.

Where should you shop?

If you’re looking for a good price, consider buying from a private party, but expect
to hire a mechanic to inspect before you buy.

Many dealers offer “certified” cars, which already have passed a rigorous
mechanical inspection. But expect to pay more. A dealer also may include an
extended warranty.

You’ll find used cars everywhere. Start with the classified section of your local
newspaper, especially on Saturday and Sunday. Check message boards at work and
in grocery stores, watch for signs in cars sitting in yards, and ask friends and
family. There are Web site versions of the classifieds, and many dealers even post
their used-car inventory on Web sites. For no-pressure shopping, drop in at a
dealer or lot on a Sunday to check the inventory.

Where to find used cars:

• Newspaper classifieds
• Message boards
• Signs in yards
• Friends and family
• Autotrader.com
• Local dealership Web sites
• Dealers and used-car lots

When you’ve found a few vehicles that interest you, contact the sellers for details.
If a vehicle doesn’t have the features you’ve selected as “must haves,” you’ll save
yourself a trip.

When you’ve identified a few vehicles you’re interested in test-driving, set up the
appointments. Before any test-drive, though, research the current value of the
vehicle.

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© 2003 Credit Union National Association Inc.
Values on used cars vary considerably. Your best bet is to call your credit union for
the loan value for each vehicle you’re considering. If you currently have a vehicle
you’re planning to sell or trade, check its current value as well.

Now that your research is done, it’s time for a test drive.

Test Drive
Show up for the test drive equipped with these essentials:

• A flashlight
• A flexible refrigerator-type magnet
• A rag
• A Used-Car Test Drive Checklist
• And a Friend—after all, you’ll want someone to fill in the checklist while
you’re inspecting the car.

Wear comfortable clothes that can get dirty, since you will be looking under the car.
Check under the hood, then under the vehicle and inspect the body. Be sure to
stand behind the car while the seller starts the engine. If that first burst of smoke is
heavy or blue or black in color, the car may have engine problems.

While you drive the car, have your friend complete the test-drive section of the
checklist. After the drive, you can check the interior.

If you like the car, it meets your priorities, it rides well, and it’s in your price range,
you might be tempted to make an offer on the spot.

Now, if you truly believe that four more buyers are coming today to see this car and
if it would destroy you to see someone else get this car, then make an offer, but
expect to pay more.

When buying from a private party or used-car lot, insist on two things while
negotiating:

• First, the vehicle must have a clear title.

• Second, the vehicle must pass your mechanic’s inspection. If you don’t have
a mechanic, find one. A professional opinion now will either put you at ease
or steer you away from a car with problems. Further, you can use any
problems a mechanic finds to renegotiate the selling price.

If you’re buying from a dealer, a few tips can help you remain in control of
negotiations.

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© 2003 Credit Union National Association Inc.
First, consider timing. If you can plan ahead, think mid-December. Everyone’s
shopping, but NOT for cars. You can land a great deal during the last two weeks of
the year. The next best time to buy a car is the end of the month. Dealers are
looking to squeeze in a few more deals to make end-of-the-month quotas.

Next, find out who owned the car and ask for maintenance and repair records.
Also, the car you’re considering may be “certified.” This means that it has passed a
mechanical inspection. Some dealers back up this inspection with a warranty of one
year or longer. Ask to see a printed copy of the inspection and any warranty.

Is the title clear? Ask for the vehicle identification number to run a title search.

Set a target price. From your research, you know the average selling price on this
model. Set your target and an upper limit. Be prepared to walk away from anything
higher.

Finally, keep the trade-in separate. If you choose to trade in your current
vehicle, first settle on pricing for the new car, and negotiate the trade-in separately.
This will help you keep track of the true prices of each transaction. If you choose to
trade in your current vehicle, first research its value.

Now it’s time to practice negotiating!

Negotiate!
Test your skills with our friendly car salesperson, Keisha.

In this negotiation simulation, you are looking at a car priced at $15,000 in a

dealership. Your target is $13,000, and your limit is $13,600 for this vehicle.

Select the best answer to each of Keisha’s questions.

“Hi, I’m Keisha. How are you today?”

a) “I’m in a hurry, so can we cut to the chase?” (Although this might be how
you feel, be businesslike. Show that you’re prepared to carefully weigh your
options and expect thorough answers.)

b) “Good to meet you, Keisha.” (Yes! You can negotiate better by being
pleasant than by being harsh.)

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© 2003 Credit Union National Association Inc.
 c) “Great, I’m so excited about buying a car today.” (Slow down—an overly
eager buyer gives up bargaining power. You have to be prepared to not buy
if the deal isn’t right.)

“Wonderful. So, how can I help you today?”

a) “Well, Keisha, I’ve decided I want to buy a car in the next week. I called
yesterday, and it sounds like you have a couple of cars with the options I
want.” (Yes! You’ve made it clear that you’re a serious sho pper and you
know what you want.)

b) “I think I want to buy a black SUV, but I’m not sure what I can afford.”
(Oops. Start at the credit union, so you’ll know what you can afford. Also, be
careful what you reveal about yourself—if you say color is most important to
you, you might not be taken seriously.)

c) “I’m interested in a used car. Can you make me a really good deal on one?”
(Caution: You might get a car loaded with options you don’t really want.
Research the pricing of specific vehicles before you visit the dealer.)

“Let’s head out to the lot…. Say, did you want to trade in your Chevy?”

a) “I suppose so. What could I get for it?” (Keep these transactions separate, or
you’ll end up with an offer of "your car plus $$" and not know what price
you’re really getting on either vehicle.)

b) “Perhaps, but let’s work on just this car first. Then we can compare your
appraisal on my car to the offer I have from a used-car dealer.” (Yes! Keisha
now knows she has competition, but she also sees her time may yield two
deals—one for the used-car sale, another for the trade-in.)

c) “Look, right now I just want a price on this car, nothing more.” (Is this true?
If you are considering trading in, be honest. With a trade-in, you might
increase your sales representative’s motivatio n, since her dealership now has
two opportunities to make a profit.)

“This one just came in off a lease. We did all the servicing here, so it’s in
great shape. Would you like to take it for a drive?”

a) “Sure. Now, does this road connect with Route 40? I thought I’d take the
local road out and the highway back.” (While it’s a great plan to test drive on
various road types, complete the first three sections of the Inspection
Checklist. It may reveal problems.)

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© 2003 Credit Union National Association Inc.
 b) “Just in off lease, as in this week? I thought I saw this car in your ad last
month.” (You may be right, but keep this point to yourself. Use this
knowledge to offer less on the vehicle.)

c) “Yes, I would. But would you mind popping the hood first? I want to check a
few things before starting the engine.” (Great move! You’re staying in control
and following the Inspection Checklist.)

After test driving the car …

“Isn’t that a great car? Smell that leather! I can’t get over how well it
handles for a car in this price range.”

a) “Actually, I didn’t much care for it.” (This probably won’t help you in
negotiating. Say it only if you mean it, and move on to the next one on your
list.)

b) “Yes, I agree. It was quite responsive on the highway.” (Yes! You’ve

conveyed that you’re ready to negotiate on this car, but you’re not falling for
emotional appeals.)

c) “I guess it’s okay for the money.” (Frowning is unnecessary. You can talk up
the car as long as you don’t talk yourself into an on-the-spot decision above
your price limit.)

“So, should we write this one up? I had a guy driving this car yesterday,
and he’s thinking about it. But if you put down money today, it’s yours.”

a) “Maybe, Keisha, let’s see what your best offer is and go over the certification
inspection.” (Good. You’re remembering to ask for details about the car, and
you’ve given Keisha the motivation to come straight out with an attractive
offer.)

b) “Okay, Keisha, would you take $9,000 plus my car in trade.” (Handle buying
a car, trading your current car, and financing as three separate transactions.
Settle on the price of the new car first. Then consider the options for your
current car—trade in, sell yourself, or sell to a used-car dealer).

c) “Keisha, I want to buy a car this week, but I’m not buying today at any
price.” (Is this true? Keisha knows her odds of selling to you drop
tremendously if she doesn’t close today. She’s just lost interest in you.)

“Okay, if you put down $3,000, I can send you home today in this beauty
for about $300 a month. How does that sound?”

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© 2003 Credit Union National Association Inc.
 a) “Just $300 a month? I can afford that. Sure, go ahead and appraise my car.”
(Even if $300 is your monthly payment target, settle on a final sales price
first. Then compare financing terms with those offered at your credit union.)

b) “I really don’t want a payment higher than $250.” (Negotiate on the selling
price, rather than monthly payment. You’ll probably do better with a credit
union loan.)

c) “Since I’m financing through my credit union, let’s talk in terms of your best
offer on the selling price.” (Yes, negotiate on the selling price, rather than
the monthly payment. Besides, your credit union typically offers the best
rates on auto financing.)

“It’s a shame you’re passing on the financing—it’s a really great deal. So,
just this car—no trade-in—I can go to $14,500. Like I said, it just came in,
and I don’t think it will sit around long.”

a) “I really love the leather. Sold!” (Wait. Try to keep your emotions in check
and continue negotiating. If you must have this vehicle, expect to pay more.)

b) “Keisha, that still sounds high. Is that your best offer?” (Actually, this is a
pretty good response, but you’ll reach a final offer sooner if you give Keisha
a counter offer she can take to her manager.)

c) “Hmmm. I won’t pay $14,500. Will you take $12,500 contingent on a clear
title check?” (Yes! You’ve offered a price below your target and demanded a
clear title.)

“Okay, I’ve written up your offer of $12,500. Just sign here, and I’ll need a
down payment of, say, $500 to show my manager you’re serious.”

a) “Great, here’s the check.” (Stop. You may be walking into a trap. It sounds
like Keisha expects your offer of $12,500 to be accepted. More likely, she
just wants your check to keep you at the dealership while the manager
pressures you to come up to $14,250.)

b) “If your manager agrees to my price, I’ll sign this agreement and write a
check, but not until then.” (Yes! You’re in control.)

c) “Keisha, I’m not giving you a check. I know this is just a ploy to keep me
here. I’ve heard how you people will hang on to a check until a customer
gives in to a higher price.” (You’re right not to offer a check, but exposing
Keisha’s tactics may just make her mad. You may be sitting quite a long time
while Keisha takes your offer to the manager.)

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© 2003 Credit Union National Association Inc.
Frank, the sales manager comes in…

“Keisha tells me you want the Dodge for $12,500. Boy, I couldn’t make
that good a deal for my own wife. But I do have another Dodge. It’s a year
older, but it’s loaded with options. It’s priced at $14,000, but I’ll let you
have it for $12,500 if you buy today.”

a) “Sold. I never thought I’d get that great a deal.” (Stop. You’ve just agreed to
a car that you haven’t even seen, much less researched. Stick with the first
car and the first salesperson.)

b) “Well, let’s have a look at this car, first.” (Caution. Since you haven’t had a
chance to research this car, you don’t know its value. You’re not prepared to
negotiate on this vehicle today—you might want to stick with the first car and
the first salesperson.)

c) “Frank, I’d rather work with Keisha, directly. Would you ask her to step back
in?” (Good work. You didn’t fall for the switch. Stick with the first car and the
first salesperson.)

Keisha returns.

“Okay, the best, the very best I can do today is $1,100 off. That’s a great
deal, and you’ll be moving up into a car with much better mileage.”

(Remember the dealership list was $15,000, and you’ve set a limit of $13,600.)

a) “So that would be $13,900? I won’t go that high. Thanks for your time. But
do give me a call next week if you can drop the price another $300.” (Yes.
The final price was higher than your limit, so you’re walking away. Time to
test drive the next vehicle on your list.)

b) “That’s more than I wanted to spend, but I will save some on gas. Okay,
what would you give me for my car on trade?” (Don’t let Keisha push you off
track with her talk about better gas mileage. You set your limit at $13,600,
so walk away.)

c) “Keisha, you’ve got a deal.” (You’ve just paid $900 more than your target
and $300 more than your limit. Unless you absolutely must have that car,
you would do better to walk away. The price may come down in a week if the
car doesn’t sell.)

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© 2003 Credit Union National Association Inc.
Seal the Deal
When you settle on a price for a car, be sure it is contingent on a clear title and a
mechanical inspection.

If you’re buying from a dealership, the business manager will attempt to profit
further by selling you on his financing. Listen, and then say "No thank you." Your
credit union financing is most likely the best deal in town.

The dealership also may offer to sell you an extended warranty. Check first, to see
if any part of the car is still covered by the original manufacturer’s warranty.
Extended warranties are really insurance policies. You’re paying a set fee up front
rather than paying for repairs when or if they are needed.

Every warranty is different. If you’re considering one, read the actual contract. Take
note of length of the coverage in months and miles, any deductibles, where the
servicing is done, and exactly what is covered. Finally, remember that extended
warranties are a big profit center at some dealerships.

Review—Do and Don’t

DO

• Set a target price and limit.

• Call the credit union for the car value.
• Look for a car that meets your needs.
• Research the reliability of the car.
• See the credit union for financing.

DON’T

• Shop on your own.

• Give a deposit with an offer.
• Make trade-in part of purchase price.
• Buy without proof of a clear title.
• Get your heart set on a certain car.

Congratulations! Enjoy your car!

Was this guide helpful? E-mail [email protected] to let us know.

Anytime Adviser—Used Car Buying Coach 11

© 2003 Credit Union National Association Inc.