Big purchases can feel overwhelming, especially when it comes to financing. In this episode of Your Money Playbook, Emily calls in with questions about buying her first vehicle and navigating the loan process. Consumers Credit Union Coach Heather Gould explains how individuals can secure financing directly through participating dealerships, what to expect when comparing loan options, and how budgeting, credit scores, and loan terms can help you make a confident financial decision.

 

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0:00:05.5 Lynne Jarman-Johnson: It’s Your Money Playbook. And today, we are talking from Kalamazoo, Michigan, about big purchase items. Now, you might be a little bit leery about that, but think about it, it could be a car. And you know what? We have a caller who has a question. And Coach Heather’s going to help us out throughout this podcast today. Let’s hear what the caller has to say.

0:00:26.2 [CALLER] Emily: Hey, my name’s Emily, and I’m a graduate student living outside of town. Between tuition payments, my part-time job, and all the driving I do for school and work, my old car is starting to feel pretty unreliable. I want a used 2014 Toyota RAV4; that seems like a great fit, and it’s actually in my price range. But I’ve never gotten a car loan before, so I’m not really sure where to start. I’ve been trying to compare rates online, and it’s honestly getting to be pretty overwhelming. Do I need to get financing lined up before I go to the dealership? And if the dealer is offering financing, is that usually a good deal? Or am I better off talking to a credit union first? I just want to make sure I’m getting the best rate possible, and not making a big expensive mistake. What would you recommend for somebody buying their first car with a loan? Thank you.

0:01:05.6 LJJ: Well, Emily’s got some great questions, Heather. Let’s listen in from Bobby, our Coach, first, and then we’re going to talk a little bit with Heather. I will tell you this, Emily, make sure you get Consumers Credit Union to help.

0:01:18.2 Coach Bobby: Got your eye on a big purchase? A nice new set of clubs? A new boat for the lake? Let’s make sure your budget is ready to take on that new expense. First, do your homework. Don’t just look at the sticker price. Add in taxes, maintenance and the cost for gas when your brother-in-law wants to go tubing. Next, set a target date, and make a plan to get there. For instance, if you want $1,000 within a year, you’ll need to save $20 a week. How? Cut costs wherever you can. You could even save yourself some cash by shopping on big sale days, finding end-of-season deals or checking out the clearance rack. It just takes a little planning, and a lot of patience, to reach your big purchase goals. Want to learn more? Let us know. Consumers, we’re your team to count on.

0:02:07.8 LJJ: Wow. Coach Bobby told us a little bit about savings for that big item. And now, let’s answer some of those questions that Emily had. The first thing that I think was interesting, is she already knows her make and model, but she just doesn’t know what to do then.

0:02:21.3 Coach Heather: Sure. And there’s a lot of options when it comes to purchasing a vehicle. Shopping online is a great option. It gives you that information, where to locate the vehicle, and then it also can give you some options as far as what your budget is. We have many dealers that we partner with, probably about 300 of them. If you would like to apply for a loan online, go to consumerscu.org, fill out the credit application. They will, then, give you the information as far as how much you qualify for. Then, they will go a step further and let you know the participating dealerships that we work with.

0:02:59.5 Coach Heather: You take the letter to the participating dealership. You purchase your vehicle. And you’re on your road to success, driving that new Toyota.

0:03:09.1 LJJ: One of the questions she’s talking about is rate, and wondering, Okay, if I walk into a Consumers Credit Union office, do I get a better rate, than going, let’s say, to the dealership? How does that work?

0:03:18.2 Coach Heather: Actually, it works very seamlessly. You can apply online, consumerscu.org. Or you can stop into any of our participating dealers. The rate is the same. It doesn’t matter if you apply online, or if you walk into a dealership.

0:03:32.4 LJJ: And what about walking into an office? Same thing?

0:03:34.5 Coach Heather: Same thing.

0:03:35.6 LJJ: Because what’s happening, really, is, you’re getting a loan from Consumers Credit Union.

0:03:40.2 Coach Heather: Correct.

0:03:40.8 LJJ: I think, sometimes, people might think, “Oh, I walk into the dealer, and the dealer’s giving me the loan.” But it’s the partnership.

0:03:46.9 Coach Heather: It is the partnership. That’s right. They are facilitating the loan.

0:03:50.5 LJJ: From Consumers Credit Union.

0:03:52.2 Coach Heather: Correct.

0:03:53.0 LJJ: Now Heather, what is interesting, you have a relationship with all of our dealers across the state. And that relationship is helping us be able to give really great rates for our members. But also, then, helping the dealers know, “Look, we can trust this organization to make some great decisions for their members on how to get them into a new car.” What if someone wants to … Emily, let’s say, she knows exactly where she wants to get that car, and she hasn’t gone online yet. Can she ask the dealers for specific … What her needs are, and that she banks with us?

0:04:29.4 Coach Heather: Absolutely. If she stops into a participating dealer, all she needs to say is, “I’m a Consumers Credit Union member. And I would like to do my financing with them,” and the dealership will secure that loan with us. And you’ll be on your way.

0:04:43.1 LJJ: And it’s kind of funny, right? Because I know, getting my first car, I can remember walking in the dealership, and you’re nervous. It is a big purchase, and it’s something that you’re like, “Oh, I’m so excited to get it, and drive it off the lot.” But you don’t really know about those financial decisions that you can make, that you really can be in the driver’s seat.

0:05:06.5 Coach Heather: Absolutely, absolutely. And asking the questions … No question is a bad question. You are purchasing something that is going to cost you a monthly fee. You’re going to have to insure that car. You’re going to have to maintain that vehicle. So, no question is a bad question, when you’re purchasing a vehicle.

0:05:27.2 LJJ: Bobby mentioned a good point about savings. And some of the interesting components of once you have the car, and how, then, you can make sure that you are making the payments on time. Some people, I have heard, actually split their payments so it goes into a savings account. And then automatically, away it goes, so you’re not hitting that big lump. Have you heard that?

0:05:49.4 Coach Heather: Absolutely. Yes, yes. There’s many options to set up your payment plan. And it’s not a one-size-fits-all. So, take care of your budget, know your budget and that will make your buying experience that much more pleasurable.

0:06:06.5 LJJ: With the car dealers, and the industry today … Especially right now, everybody’s talking about the gas prices that are happening. There’s so many different options of hybrid, too. How are people taking into effect, and are loans different with those cars? Or really, is it just about pricing?

0:06:26.5 Coach Heather: Really, there is no difference, whether you’re purchasing a hybrid, an EV or a gasoline vehicle. Where you’re going to drive those interest rates, are going to be your down payment. The more down payment you have, the better position you are in your car loan. And also, your terms, and the model year, that sometimes plays a factor as well. So down payment, terms, will definitely drive that rate for you.

0:06:52.9 LJJ: Now, terms, that’s an interesting point. Because terms used to be a pretty short length of time, as far as months are concerned. What’s an average term right now? And what’s the longest you can go, that you know of?

0:07:05.1 Coach Heather: Average term right now, I would have to say, is probably about 72 months. You can, depending on model year, amount financed, credit score, you can go 96 months if you need to. Vehicles are so expensive these days, it’s almost like buying a house. You can purchase a car for $150,000. Heck, you can purchase a car for $300,000, if you wanted to. So some people need that 96-month term to be able to fit it in their budget.

0:07:36.1 LJJ: And that’s the whole point, right? A longer term, means the payment that you have is lower, but you are paying it longer.

0:07:42.2 Coach Heather: Correct.

0:07:42.9 LJJ: Credit score, you mentioned it. So let’s bring that up. You fear that if your credit score is lower, or mid, or high, that’s going to make your rate determination.

0:07:53.3 Coach Heather: Absolutely. Mm-hmm.

0:07:54.3 LJJ: And have you seen where members, once they really understand that, and they boost their credit score up a little bit, does it make a difference?

0:08:02.7 Coach Heather: It absolutely makes a difference. It can make a difference in … Well, it will make a difference in your monthly payment. You take someone that has a tier 1, say, versus a tier 3, you’re probably going to save …

0:08:15.8 LJJ: Is tier 1 low, or is tier 1 high?

0:08:17.4 Coach Heather: Yeah. So tier 1, would be a high credit score. A tier 3, would be a little lower credit score. You’re going to see a big difference in payment, from a tier 1 to a tier 3. Probably, savings, depending again, on your amount financed, at least a minimum of $30 a month.

0:08:34.5 LJJ: And you know what’s interesting? What we don’t want anybody to feel, is that if their credit score is lower, that they shouldn’t also, though, be asking, “Hey, what can I do?”

0:08:44.5 Coach Heather: Certainly.

0:08:45.7 LJJ: And if it fits your budget, that’s okay.

0:08:47.7 Coach Heather: Correct.

0:08:48.0 LJJ: How is it that you just hit the road every day, Heather?

0:08:51.0 Coach Heather: Well, the relationships that I have with our automobile dealer partners, drives it, literally, every day. I mean, it is really great to have had these people in my life for 20 years. I know their family, they know my family. We talk about our kids. We just talk about the industry. It’s just a lot of fun. It’s a lot of fun. And everybody needs a car, so it’s really great to have those connections.

0:09:23.9 LJJ: And I’m not joking when I say that if I walked into any dealer that we are partners with, Heather, it is so much fun to watch. Because she really does know everybody, and it’s just a joy. It’s a joy. It brings our Consumers’ family right to the family of the car dealerships.

0:09:42.4 Coach Heather: And the dealers love us just as much as we love them. And it’s a great partnership. We don’t ever have to worry about our members walking into those dealerships, and being sent to another lending institution. They trust us, we trust them. Which makes a great car buying experience for our members.

0:10:00.1 LJJ: All right. So we have heard such great content about how to get that car. It’s Your Money Playbook. I love to give three tips at the end, Heather. What are your three tips so Emily can be in the driver’s seat?

0:10:13.0 Coach Heather: First tip, would be, know your budget. Understand what you can afford for your monthly payment. Second of all, shop online. Look for the car that you want. Make the appointment at the dealership. Third, ask for Consumers Credit Union to process your loan.

0:10:29.7 LJJ: It’s that simple. Emily, thank you so much for calling. And Heather, thank you so much for your amazing coaching tips. If you have a question that you would like answered, we’ve got the coaches for you. 269-213-3360. It’s Your Money Playbook. Have a great week.

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