So you want to buy a car.

Aside from a house, a car is probably the most expensive purchases you'll make in your life, so there's a lot to consider, including how to pay for it.

At Glacier Hills Credit Union, you'll work with a Loan Officer who will help get information about you, provide financing options, and give advice on the car buying process. Basically, a Loan Officer is here FOR YOU!

First things first, let's go over a few questions you may have. Terms that may be unfamiliar are highlighted in red.

1. What do I need to get a loan?
   Loan officers look at a number of factors to determine how much you can borrow and at what interest rate. Some of these factors include:
   • Credit Score: A credit score is typically between 500 and 800. The higher the score, the better your credit. A variety of factors go into your score, including if you pay your bills late, how many loans you have paid off, how long your loans have been open, etc. A good rule of thumb for building credit is to just make sure you pay on time!

   • Collateral: This is just a fancy word used to describe what property you are offering your financial institution to secure the loan with in case you don't pay back the money your borrow. In this case, it will be a car.

   • Debt Ratio: Most lenders evaluate your ability to pay back a loan by calculating your debt ratio. DEBT RATIO = MONTHLY LOAN PAYMENTS / MONTHLY INCOME. As a general rule, most lenders consider a debt-to-income ratio of about 36% or less to be good. Many other factors, such as credit history, unsecured debt and loan-to-value (AMT BORROWED / VEHICLE VALUE) also play a factor in determining whether we can make the loan.

2. How do I know what my credit history looks like?
   Before you think about taking out a loan, you should be proactive about monitoring your credit report at least once a year. Your credit report is basically a summary of financial information about your credit history and personal information collected from various sources, such as public records and your creditors. You can view your report FREE one time a year at www.annualcreditreport.com.

   You can view your report from each of the three credit reporting agencies - Equifax, Experion and Trans Union. You get one free a year from each agency. While the report is free, you have the option of purchasing your credit score. Save your money and skip the credit score. The score the credit bureau provides may vary from the score the loan officer sees, so it may not even mean much to have a score.

3. How much will a loan cost?
   In addition to paying back the amount you finance (principle), you will also owe interest on the loan.
   • Interest is the cost you pay to borrow money. The lower the interest rate, the less you pay back. Interest rates are determined by several factors, including the government, economy, the financial institution giving the loan, and your credit score.

   • Finance Charge is how much you end up paying in interest and fees over the life of the loan. A car might be priced at $10,000, but if you pay 7% for 60 months and a $100 loan fee, the total amount you will have paid back will be $11,288. Your finance charge would be $11,288 - $10,000 = $1,288.

4. How long do I have to pay it back?
   Your Loan Term is how long it will be before your loan is paid off. A good range for car loans is anywhere from 36-60 months (the majority are 60 months). Some auto loans can go up to 72 months, but we do not recommend this for first time buyers.

5. What if I miss a payment?
   When you take out an auto loan, Glacier Hills Credit Union becomes the Leinholder. This means that Glacier Hills Credit Union owns the car until the loan is completely paid off. If you miss a payment, you may incur fees, and the late payment will be reported to your credit score, which can have a huge impact on future loans. For example, you may not qualify for a future loan, or you may pay a higher interest rate. If you consistently do make your payments, we will come and take your car (also called reposession).

6. What about Auto Insurance?
   We require that you have full coverage insurance on your car when you take out a loan. For the first auto loan program, we will ask for insurance papers before closing the loan.

7. What are some tips on how to get a good deal on a new vehicle?
   • Know your prices. Start negotiations on a new car at invoice minus any incentives. Remember to keep the incentives out of the negotiations. You can find the dealer's cost or invoice at kbb.com, edmonds.com or come by and see Glacier Hills Credit Union. Shoot for paying no more than 2% over invoice, but remember that each vehicle can be different.

   • Know when to Buy. The best time to buy is when it's right for you. You can sometimes get a better deal if you buy a model late in the year or when a body style change is imminent.

   • Negotiate. The best thing you can do when buying a car is to bring along a friend or family member to help you keep a level head and not buy on impulse. Have a price in mind before you get to the dealer and don't be afraid to walk away. Take food and drink along since the process takes time and being hungry and dehydrated affects the brain power needed to negotiate. You may also want to consider negotiating on-line or via email. Using email places you in a better position since you are not in their environment.

8. Where can I go for more information?
   Check out our Auto Loan Headquarters for additional resources and tools. You can also call us at any time - 262-338-1888. Please also stop in and ask for your free auto buyers kit, packed with a ton of auto industry secrets!

Take the Quiz Now