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Economy Project: Car Shopping

By Sam Baker, KERA Morning Edition Host

Dallas, TX –

Whether you need to or want to, it's a good time to buy a new vehicle. Auto dealers and manufacturers continue to offer incentives and interest rates remain competitive. But car shopping can be a daunting task if you're not prepared. So said Lee Strickhouser of Resource One Credit Union. In today's KERA Economy Segment, Strickhouser talked with 90.1's Sam Baker about ways to prepare to buy a car.

Lee Strickhouser: There's so many resources available that people have access to easily that they didn't have access to five, even ten years ago. Like, a big one I think a lot of people know about. But you have and, which are two sites that tell you not only a little bit about the cars, but also the values - what they're worth used or new, so you know what you're dealing with when you get to the store.

Sam Baker: So what kind of homework should you do before you set foot at a car dealership?

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Lee: The first thing you should do is kind of figure out what you're looking for. Go to the dealership knowing what kind of car you want. Do I want a station wagon? Do I want an SUV? Do I want a sedan? Do I want a compact? Does it get great gas mileage or just reasonable? Once you figure out what you think you need, you can find out what other things fit what you need: Does it spend a lot of time in the shop? Does it, eh...

Sam: How specific should you get on that list?

Lee: You know, it depends on your lifestyle. Does it fit my budget and does it fit other categories I need it to match up with.

Sam: Should you arrange financing before you go to a dealership?

Lee: A lot of dealerships are going to want to your financing for themselves, so what I would do is, you know, get your financing lined up and come in and say "Hey, here's what I have. If you can do better than this, I'd be happy to see what we can do."

Sam: Now on that note, a lot of car manufacturers, a lot of dealerships are offering incentives - usually cash back or some low interest rate. Is one better than the other?

Lee: Well, every deal's different. There are calculators out there to help you figure that out. A lot of time dealerships offer the zero percent all over the place because they think zero percent can't be beat. Well, sometimes zero percent can be beat. Let's say you were going and you got your financing set up at your credit union and let's say you were at 4.25% for 60 months and you're buying a $20,000 car. Well interest on a 60 month term on a $20,000 car is going to, um, $2,000 to $3,000 -rough estimate. But if you're getting a three to four thousand dollar rebate, it would be better to take the rebate at say $3,500, pay the $2,500 in interest and you still make a thousand dollars better than if you had zero percent, because you can't the zero percent and the rebate.

Sam: A car dealer I knew years ago once told me the best time to shop for a car is at end of the month, or at the end of July or August.

Lee: I would say the end of the month is good because these guys are trying to get their deals in before the end of the month because that's how they get their commission cause a lot of them work that way. Personally, I think the end of the year or early in the year like we are right now are good times to buy, especially if you're looking for the previous year model. So right now early 2011, you can get some bargains on some 2010s because dealers want them off their lots. And it's still a new car.

Sam: At what point and to what degree do you start talking money with a dealer?

Lee: I would say once you've decided "this is the car" for you. This is the car you want and you're close enough to being in the price range you want to be that you know, or even if you land where you're at, you're going to be okay on your budget.

Sam: Before you get to that point, should you just mainly stick to the overall price of the car as opposed to talking monthly payments?

Lee: I always recommend people talk the price of the car, especially if you have your financing set before, because you already know, cause if you called and talked with a loan officer and got your approval, they've already gone through "If you go to this amount, this is what your payment's gonna be. You're buying a new car or a 2008 or whatever you can afford, here's what your payments are gonna be." So you've already had that conversation with you loan officer, and now you can negotiate price the way you should because a dealer can always find a way to get you into the payment you want because they'll find a lender that'll put you at a term that's not necessarily the right term for you.

Lee Strickhouser is the consumer lending manager for Resource One Credit Union.

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