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New Car Financing: Myths & Facts
(adapted from NAFCU, 1991 Financial Education Corporation)
So-called cheap credit can end up being pretty expensive when you fall for the myths and ignore the facts. Remember that the person selling the car is unlikely to give objective, unbiased advice. Don't get locked-in to a deal you don't like. Talk over your options with people you trust and who have knowledge about your options. We care about you and your financial well being - not the car salesman who is trying to get your cash.

#1
The car dealer is the best source of information on the value of your trade-in.

The car dealer will usually be the best source of information on the lowest value of your trade-in. Don't bargain in the dark. Contact your credit union to learn about the resources available for gauging the maximum value of your trade-in, or check out Kelly's Blue Book.

#2
The total price is not really that important; more important is affordable monthly payments.

The affordable monthly payments are indeed important, but total price directly affects how much you pay each month. Plus, if payments have been stretched out to accommodate an inflated price you could lose.

#3
Discount car financing is the manufacturer's way of passing along cost-savings to customers.

At times, discount financing can provide cost savings. More often it is simply a sales gimmick, and can result in a final sales price substantially higher than with independent financing. Price is more important than interest rate in determining both monthly payment and total price. Check out the sample below:

	MFG financing	CU financing
APR	%	%
Car price	$	$
Down payment	$	$
Manufacturer's Rebate	$	$
Amount Financed	$	$
Repayment terms	months	months
Monthly Payment	$	$
Total Re-payment	$	$
Total savings over the life of the loan		$

You could save even more by negotiating the vehicle price down.
*Annual Percentage Rates are only for the purpose of illustration.
** Monthly and Total Payment and Total Savings are approximate figures and are not guaranteed figures.

#4
If the salesman knows how much you can afford, he will be better able to put together a package to fit your needs.

Your particular budget is for you to know and the salesman to find out, after you've signed a contract. That's smart negotiating. Your best assurance of a good deal, and livable financing, is to arm yourself with all the facts. Your credit union has a wealth of information to help with the car-bargaining process from budgeting tactics to data on current car prices.