Financial Literacy

VLFCU is thrilled to introduce a new digital financial education initiative through our partnership with MoneyEDU. The program provides our community with an engaging learning experience around critical personal finance topics such as building emergency savings, managing debt, mortgage education, and retirement planning.

Highlights of the program include:

  • A series of interactive courses on key financial topics.
  • Includes several financial tools and calculators.
  • Mobile and tablet enabled so you can learn anytime, anywhere.
  • It’s FREE for everyone!

Your financial well-being is important to us and we are committed to providing you with resources to manage your money. Click here to get started and become financially empowered!

For additional educational and consumer resources, we recommend that you visit the website for the National Credit Union Association. There you will find curriculum guides for teachers, finance & budgeting games for youth and teens, consumer protection updates, and government resources specific to veterans, service members and their families.

Need help consolidating debt, improving your credit score, or saving for the future? Stop by any of our branches or call us today at 1-800-691-9299. It’s always our pleasure to serve you!



Buying a Car

A car purchase is a high-stakes deal for just about anyone. This week, we'll cover strategies for finding the best car and successfully negotiating the best overall price.


Return to Top


Buying a Car

A car purchase is a high-stakes deal for just about anyone. This week, we'll cover strategies for finding the best car and successfully negotiating the best overall price.

A “Slow” Approach to Car Buying

Turn the tables in your favor by taking a deliberate approach to car buying.
Red convertible at parked at beach facing sunset.

Considering the average cost of a new car, which is now approaching $50,000, it's crucial to recognize that buying a car is a significant financial commitment for most individuals. In fact, after a home or a college education, a car is one of the most substantial purchases we're likely to make.

But unlike a home or an education, a car is an asset that always loses value. So the question when buying a car is not whether or not you'll lose money – it's how much you'll lose.

Some people need a pickup truck for their jobs, and some families need a car with three rows because they have several kids. But once we're past the type of vehicle you need, many options affect the total cost – new versus used, brand A versus brand B, thrifty versus luxury. There are so many choices out there that it can be hard to pick the best one. And since cars are a personal choice, there's no authority out there that can tell you precisely what to do.

A Contrarian Approach

This week, we're advocating for a deliberate, slow approach to car buying. This method allows you to bypass the stress and confusion often associated with negotiating a car purchase. By making decisions at a comfortable pace, you're more likely to choose a car that aligns with your values and financial priorities, reducing the risk of post-purchase regret.

The slow approach is the opposite of what most car dealers would prefer. Their job is to sell you a car. Now. Of course, there's nothing wrong with that, and not all salespeople make high-pressure sales pitches. But if there's one decision that shouldn't be made impulsively, it's spending tens of thousands of dollars for a car (plus sales taxes, fees, excise taxes, and insurance, to name a few inevitable expenses).

The big idea behind slow car buying is that you probably don't need a car today. Your vehicle may be older than you'd like, or your lease may expire soon, but unless a tree just fell on your vehicle, there's likely no rush. And when you're not in a hurry, when you can take the time to research all of your options – from financing to test-driving – you gain complete control of the process.

So, if you don't need a car right now, you have plenty of time to make a plan before you visit a dealer. You'll want to understand all of the car choices you have and what the total cost of ownership is likely to be. Next, if you need to finance your purchase, you'll want to explore financing options. Many dealers offer competitive financing options, but it's best to know what rates you'll get from your bank or credit union as well.

And when you finally start to visit dealers and test drive cars, the slow approach means that you'll know in advance that 1) you won't be buying a car that day and 2) you'll explore multiple car and dealer options before making a final decision. Once you choose a car, you'll also have a plan to avoid unplanned expenses and add-ons that can make a seemingly good deal less attractive.

Let's get started!

Return to Top

Researching Your Options

Information is king when making car-buying decisions.
A young man taking on his cell phone and taking notes.

If you could earn $1,000 or more for a few hours of work, chances are you'd do it. When you spend some time researching your car options, you can easily save that much or more on your next purchase. Key topics to research include reliability, safety, pricing, and depreciation.

The first step is to check the reliability of the vehicles you're considering. The best option for car research is Consumer Reports. They may not share your taste in cars. Still, they offer a great deal of unbiased data gathered from thousands of sources on car reliability. No one wants to spend money on repairs or hours at the repair shop, so some research here is well worth it. And if you haven't shopped for a car in a while, you may be surprised at what you'll find – who would have known that Consumer Reports considers Buick more dependable than Honda?

Next, you'll want to investigate safety. Your car's job is not only to get you to your destination but also to protect you on the way. The Insurance Institute for Highway Safety crashes dozens of cars per year. It offers detailed assessments of each car's performance in various crash scenarios.

Pricing is another critical topic to explore since the prices people actually pay may differ from the sticker price for a new car or the asking price for a used car. Internet searches are the best way to find the average cost paid for each model and whether the manufacturer offers dealer incentives to lower your costs.

When buying used, many factors can influence price, but the best resource is the official National Automobile Dealer Association (NADA) Guide. Most libraries have a subscription to this service, and it offers retail, loan, and trade-in values that both dealers and banks use. If you're in a hurry (which is very un-slow car buying, by the way), Edmunds.com offers a True Market Value (TMV) calculator with accurate pricing based on recent purchases in your location.

When narrowing down your choices, another essential factor to consider is the total cost of ownership. When shopping for a car, most people think only about the sticker price. But the cost of owning a car includes many other expenses - from fuel to depreciation - in addition to the sticker price. The total of all of these expenses goes into the cost of ownership, and the figure can be a big surprise.

Take depreciation – according to US News and World Reports, the difference between the fastest and slowest depreciating cars is staggering. For example, the owner of a 2012 Chevrolet Impala lost over 63% of the sticker price over five years. On the other hand, the owner of a Nissan Frontier lost just 22.5% over five years. In other words, the Impala owner lost $4,000 per year on a $33,000 purchase, whereas the Frontier owner lost just $1,200 per year on a $27,500 purchase.

Let's calculate the total cost of ownership on a hypothetical $20,000 new car (of which $15,000 is financed for 60 months at 15% interest) over five years.

  • Cost of car: $20,000
  • Sales tax: $1,400
  • Excise Tax: $1,200
  • Financing Cost: $6,411
  • Registration/Yearly Inspections: $250
  • Maintenance and Repairs: $3,500 (could vary dramatically depending on the car)
  • Car Insurance: $4,000
  • Gas: $14,400 (one $60 tank per week)
  • Total Expenses: $51,161

Value of 5-year-old car: $9,500 (purchase price minus $10,500 in depreciation)

Total Cost of Ownership: $41,661 ($51,161 in expenses minus $9,500 remaining car value)

Needless to say, researching all of your options is the best way to avoid financial surprises both before and after making your purchase.

Return to Top

Financing a Car Purchase

Just because you can afford a high monthly payment doesn’t mean it's the right move.
A financial services worker explains options to a customer.

Once you've determined the car or truck that will meet your needs, financing is the final factor to consider. Ideally, you can purchase the vehicle with cash, eliminating financing costs. But if that's not an option, you'll want to consider both the interest rate of your loan and the term of your financing.

About Interest Rates

Lower interest rate loans are less expensive than higher interest rates loans, but what interest rate should you pay? Various factors, including your credit rating and choice of lender, determine your interest rate. While many car dealerships offer car financing, and some may offer competitive rates, obtaining financing approval from a bank or credit union before shopping for your car is best. That way, you'll have a reality check to compare against any dealer options.

When shopping for a loan, get a few competing quotes on a car loan - interest rates can vary considerably between financial institutions. However, be aware that several credit inquiries may affect your credit score, especially if you have multiple inquiries within a short period. You can also check websites such as Bankrate.com to see what auto loan averages are.

If you have little credit history or a history of credit problems, you may receive a lower interest rate if you have a cosigner on the loan. A cosigner with established credit would be responsible for making the car payment if you did not.

The Loan Term

The loan's term (or length) is an often-overlooked factor when financing a car. Car loans are generally between three and five years in length - the shorter the term of financing, the lower the overall financing cost. For example, if you are financing $15,000 of a car purchase at 15% interest over three years, your total interest expense would be $3,719 over the life of the loan. Financing the same purchase at the same interest rate over six years would yield an interest expense of $7,836 - more than twice the three-year loan.

So why would anyone ever choose the more expensive option? The monthly payment of the three-year loan is $520, and the monthly payment of the longer-term loan is $317. So, to save that $4,117 in financing charges, you would have to pay an additional $203 per month. Even though the costs are ultimately higher, financing for a longer period lets you "afford" a more expensive car.

Most experts suggest limiting the car loan term to 60 months or less. Otherwise, chances are good that the loan could become an "underwater" loan, meaning you owe more on the car than it's worth.

Loan Affordability

Let's look at the purchase from another perspective, the perspective most people consider when making a significant purchase - what you can buy for a maximum monthly payment. In the example above, the payment under the shorter-term loan was over $500 per month. But what if you could only afford the $317 payment?

In that case, you have a couple of options - you could pay more in interest and finance over a longer term, or you could finance less over a shorter term. A three-year loan with a $317 monthly payment limit would cover a debt of $9,000 with a total interest expense of $2,231. Whether you could find a suitable vehicle for $9,000 is a decision only you can make. However, financing the lower amount over a shorter term would save over $5,500 in interest charges compared with the higher price financed over a longer term - but with the same monthly payment. You would also save in sales taxes and depreciation, though your repair costs may be higher.

As you can see, the total financing cost can significantly change with the loan term. A common rule is that your total car expense (payment plus other expenses) should be no more than 15-20% of your monthly take-home pay - the lower, the better.

Return to Top

Negotiating Your Purchase

Learn the steps needed to effectively negotiate the purchase of your car.
New cars in a showroom.

Too many consumers unquestioningly accept the pricing they are given when buying a car, never call other dealerships for competing quotes, and pay hundreds of dollars for dealer add-ons and fees - and still feel like they got a "good deal."

Setting a Target Price

Once you have determined the exact make and model of the car you want, you will need to set a target price for your purchase. Your target price offers a measurable goal to help you stick to your financial plan. Before shopping, don't forget to decide on your car's "trim" level. Some trim levels will be basic, while others may add nicer tire rims, a sunroof, or leather seats. You'll need to know the trim level to set a target price.

If you're buying a new car, try a Google search for the "dealer invoice" price on your exact vehicle. Also, search for current "dealer incentives" that the car's manufacturer may offer. Many websites publish this information free of charge. Your price target should be the dealer invoice and less if incentives are offered. If you can avoid expensive add-ons, paying close to the dealer invoice is considered a good deal.

Determining a target price can be a bit more difficult if you are buying a used car. Used cars vary in condition, mileage, and accident history - all of which should affect the car's fair value. The official NADA Guide and Edmund's True Market Value (TMV) are a couple of good sources of information to help guide your search.

The NADA guide should be available at your local library (the free online version includes less information), and it lists three prices for each car - dealer retail, trade-in, and bank loan. After adjusting for mileage and condition, a reasonable target price is between trade-in and retail. Edmund's TMV estimate is available free of charge at Edmunds.com. It offers a region-specific estimate of what cars like the one you want are selling for. That TMV estimate is a reasonable guide to follow.

When buying a used car, we also suggest ordering a CarFax check when you've found a car you are seriously considering. The CarFax service aggregates public records on vehicles, including reports filed when a car is in an accident.

Negotiating Price

Negotiating the price of your car doesn't have to be uncomfortable. After all, you are trying to give the dealer thousands of dollars!

Once you have determined the target price for the car you want and found a vehicle you like, it's time to start the negotiation process. The best way to ensure you get the best price is to avoid making on-the-spot decisions under pressure and to call multiple dealers to compare "best prices" on comparable cars.

When talking with a salesperson, keep in mind that they are gathering information on you and your attitudes about purchasing the car at the same time. For example, they may ask if you need financing or if you plan to pay cash. If they think you are financing, they may ask what your target monthly payment would be - information they can use to eventually sell you the car (along with an expensive financing package) at a higher price than you would typically pay. Focusing on the total price (including fees and financing costs) and comparing shopping works to ensure you're paying an appropriate price.

Some people want to be agreeable and have a hard time saying no. Others don't want to hurt a salesperson's feelings and feel responsible to the salesperson if they don't buy the car. Many people are uncomfortable with the negotiation process. Don't let a salesperson talk you into making a decision that is uncomfortable to you.

Armed with your target price, you have more knowledge than many consumers. When you agree to a deal, you are giving up on the possibility of finding a better deal elsewhere, so make sure you are sure before signing a contract. Don't be afraid of disappointing the salesperson by asking for the details in writing for you to review at home or with a friend. Plus, if a salesperson is unwilling to provide the deal in writing, you should probably look elsewhere anyway.

Once you agree on a price, remember that you may need to make more decisions that will affect your price. You may be offered extended warranties, pre-paid service agreements, and other options when signing the paperwork. Make sure you only buy what you truly want.

The Takeaway

Car shoppers didn't invent the way cars are sold. Your task in negotiating is to pay the lowest price. If you're uncomfortable negotiating, services in your area may assist you, or you could shop with a trusted friend or family member to help you navigate the process.

Return to Top

How to Avoid Hidden Fees

Learn how to minimize potentially unwanted extras that may increase the price of your purchase.
A woman is surprised by a bill.

Buying a car is a significant investment, and the last thing you want is to be caught off guard by hidden fees and unwanted add-ons that can quickly drive up the cost. To ensure you get the best deal possible and avoid any unpleasant surprises, it's crucial to be informed, engaged, and resolute throughout the car-buying process. By knowing what to look for and being prepared to negotiate, you can walk away with the car you want at a price you can afford.

Getting the Total Cost in Advance

To avoid surprises when picking up your car, ask that the contract be emailed or faxed to you in advance. That way, you can review it at your own pace at home. You may also want to consider negotiating your purchase through a dealer's "internet department," if available. Those salespeople make lower commissions but sell more cars. They may have less to lose by allowing you to negotiate away fees and add-ons. Since the process is all completed via email, everything will be in writing before you visit the dealership for the final purchase.

Scrutinizing Extras and Fees

When you've settled on the car you want, ask the dealer for an itemized breakdown of all fees and add-ons before finalizing the purchase. To avoid overpaying for your vehicle, it's essential to scrutinize each item and question anything that seems unusual or overpriced.

Equipment add-ons could include a non-factory alarm system, pin striping, paint protection, undercoating, floor mats, and other extras. If items you do not want are added to your car or are priced out of line with what you would expect, ask that they be removed. If they can't be removed, you can walk out or require a substantial discount (50%, for example) as a condition of the sale.

Most dealers charge a documentation fee with every car sold. Still, any fee over a few hundred dollars may be excessive. It's helpful to ask what the fee is in advance and compare it among local dealers. Also, be aware of other costs not on the car's factory invoice, including handling, advertising, or car preparation fees.

Navigating Extended Warranties

Dealers often offer extended warranties when completing the final paperwork but proceed cautiously. These warranties are significant money-makers for dealers and may duplicate coverage provided by the factory warranty.

Extended warranties also vary significantly in cost, services offered, mileage limits, deductibles, and payment structure (some warranties will pay when the repair is completed; others require that you pay and contact them for reimbursement).

Extended warranties can be negotiated like everything else in the car-buying process. They can also be purchased from sources other than the dealer selling the car, so shop around if you think an extended warranty may be right for you.

Knowing When to Walk Away

If a dealer tries to push add-ons and excessive fees, don't be afraid to walk away from the deal. In many cases, a dealer will become more negotiable when they see you're serious about leaving. Remember, there are plenty of other dealerships and opportunities to find the car you want at a fair price.

Finally, before signing any paperwork, carefully read and understand all contracts, including the fine print. Don't hesitate to ask questions or seek clarification on any points you don't understand. By being an informed and resolute consumer, you can confidently navigate the car-buying process and avoid being hit with any unpleasant surprises when it's time to sign on the dotted line.

Return to Top

Avoiding Common Mistakes When Buying a Car

Learn from the mistakes of others so they don't happen to you.
A person shopping for a new car with a salesperson.

Buying a car is a significant financial decision that requires careful consideration and research. To help you avoid financial strain and dissatisfaction with a vehicle purchase, let's explore common mistakes people make when buying a car.

First, remember that just because you can "afford" a specific vehicle doesn't mean it's ultimately the best use of your money. Every dollar spent on a car is money that can't be used for other things. It may seem obvious, but since cars are one of the most expensive things we buy, understanding the "opportunity cost" is important. For example, suppose someone buys a new car every few years. In that case, they continually pay for new car depreciation - the most expensive part of car ownership. Over a lifetime, that cost adds up to tens or even hundreds of thousands of dollars that could have been invested for retirement or spent elsewhere.

That said, here are some common mistakes people make when buying a new vehicle:

  • Spending more than necessary. Remember, just because you can "afford" a specific price doesn't mean it's ultimately the best use of your money.
  • Avoiding negotiation. Sure, negotiation is uncomfortable for some people, but it's a crucial part of getting a fair price. If you don't want to negotiate, seek a friend's help or consider a car-buying service.
  • Focusing only on the monthly payment. Many buyers focus solely on the monthly payment, which can lead to longer loan terms and higher interest costs.
  • Forgetting about the total cost of ownership. A seemingly affordable monthly car payment doesn't include additional costs such as insurance, gas, maintenance, financing, and depreciation.
  • Not considering all financing options. Dealer financing isn't always the best deal. Shopping around for financing from banks, credit unions, or online lenders can potentially save you money.
  • Not researching your purchase. There's no reason to shop for a car without a target price, buy a known clunker, or be surprised by fuel, insurance, or depreciation costs after the purchase.
  • For used cars, skipping an inspection and vehicle history report. A mechanical inspection from an independent mechanic can give you more information about potential expenses you may incur sooner rather than later (new brakes, for example). A vehicle history report from a company like CarFax can also let you know if the vehicle has been involved in an accident, something that should definitely influence the price you pay.
  • Impulse buying. Being pressured to purchase a car on the spot is a great way to pay too much for it. At the very least, take a night to consider your purchase and an hour or two to call around to other dealerships to get prices for similar cars.
  • Trading in your car rather than selling it yourself. You may sometimes realize more value from your existing vehicle by selling it yourself. If you choose to trade in, make sure the price of the new car is negotiated separately from the price of your trade-in. That way, you'll know exactly what you're getting for your vehicle.
  • Making emotional decisions. You may love one particular car, but is it the best financial decision for you? Even if you find a car you love, take a night to sleep it over before making your decision - chances are it will still be there tomorrow.
  • Not comparison shopping. The simple act of telling a dealer you are shopping around will often yield lower prices.
  • Getting an insurance quote after buying the car. Insurance rates can vary considerably between vehicles. High rates may also cause you to skimp on coverage that you would need in the event of an accident. Get insurance quotes before shopping.
  • Buying unnecessary extras. Dealerships often push extras like extended warranties, paint protection, or rust-proofing. These are often overpriced and not always necessary.
  • Not considering resale value. Some cars depreciate faster than others. Researching resale values can help you make a more informed decision and potentially save money in the long run.
  • Overlooking fuel efficiency. Failing to consider a vehicle's fuel efficiency can lead to higher than expected operating costs over time.
  • Skipping the fine print. Not reading the contract carefully before signing can result in agreeing to unfavorable terms or hidden costs.
  • Not test driving the car sufficiently. Make sure to drive the car on various roads and at different speeds to ensure it meets your expectations in terms of comfort, handling, and performance.
  • Underestimating the value of safety features. While safety features might add to the upfront cost, they can potentially save lives and reduce insurance costs in the long run.

Buying a car is a complex process that requires due diligence and careful consideration. By avoiding these common mistakes, you can ensure that you make a sound financial decision and purchase a vehicle that meets your needs and budget.

Remember to take your time, do your research, and never let emotions cloud your judgment. With the right approach, you can drive away in a vehicle you love, knowing you made a wise investment in your transportation needs.

Return to Top

Preparing for Ownership Expenses

From maintenance and repairs to tags, insurance, and even tickets, driving comes at a cost. Be prepared and plan for these extra costs.
A mechanic working on a car.

While a monthly car payment is predictable, other costs associated with car ownership can fluctuate wildly. By understanding these potential expenses and taking proactive steps to mitigate them, you can enjoy the benefits of having a vehicle without risking your financial well-being.

Some of the most common unexpected vehicle expenses include:

Repairs and Maintenance 

These costs are inevitable even if you purchase a reliable vehicle. Some common issues include tire replacements, brake pad replacements, oil changes, battery replacements, and timing belt replacements. Although today's vehicles are more durable than ever, with the average car on the road now being over 12 years old, they also contain more delicate electronics that can be expensive to repair or replace. 

Your vehicle's most significant mechanical components, such as the engine and transmission, can cost thousands of dollars to repair or replace. Unless you're in the market for a new or used car with an existing warranty, the potential for a significant repair bill is something to keep in mind. This situation is where research into the predicted reliability of used cars comes in handy.

Fuel Costs 

Another expense that can be difficult to plan for is the price of gasoline. If your vehicle isn't particularly fuel-efficient, incremental increases of just a few cents per gallon can add up over time. 

Vehicles that require premium fuel can also add nearly a dollar per gallon to an already expensive commodity. To budget for unexpected fuel cost increases, monitor gas price trends and adjust your budget accordingly. 

Consider a fuel-efficient vehicle to minimize the impact of price fluctuations, and combine errands to reduce overall fuel consumption. To save money on gas, consider getting a credit card that offers fuel rewards, which can provide up to 5 percent cash back on money spent at gas stations.

Insurance Premiums 

Auto insurance costs can be challenging to control. The average price of car insurance has increased substantially in recent years, with an average annual cost of around $2,300 for full coverage (though rates can vary significantly by state, too). 

Insurance premiums can vary based on your car, driving record, age, and location. However, premiums may increase unexpectedly due to traffic violations, accidents, changes in your credit score, or moving to a new area with higher insurance rates. 

To minimize the impact of unexpected premium hikes, shop around for insurance quotes annually and maintain a clean driving record. Consider raising your deductible to lower your monthly premiums, but ensure you have enough savings to cover the deductible if needed. Bundling your auto insurance with other policies, such as homeowners or renters, may qualify you for multi-policy discounts.

Registration, Taxes, and Fees 

Annual vehicle registration, taxes, and fees can vary by state and vehicle type. These costs may increase unexpectedly due to changes in local or state legislation, increases in vehicle value (for tax purposes), or additional fees for hybrid or electric vehicles. Research your local laws and regulations to anticipate these costs and set aside money each month to cover these annual expenses.

Planning for Vehicle Expenses

While unexpected expenses can strike even the most prepared driver, there are a few things you can do to lessen the impact these expenses have on your monthly cash flow.

Predicting and planning for unscheduled repairs can be the biggest challenge. You may want to familiarize yourself with some of the most common issues or complaints about your specific vehicle. For example, some makes and models tend to develop transmission problems at around the 150,000-mile mark. By knowing what to expect, you'll be better prepared to weather these expenses when they come up.

If you've financed your vehicle, a smart financial move could be to redirect the money you spent on the monthly payment into a dedicated emergency fund after you pay it off. This fund can provide a lump sum to defray unexpected repair costs and minimize the chances of unplanned credit card debt.

When it comes to saving on gas, a fuel rewards credit card can be a game-changer. Many national credit cards, as well as those from regional or chain gas stations, offer up to 5 percent cash back on all purchases, including gas. This means you get an instant rebate on every gallon of gas you buy, potentially saving you a significant amount over time.

Finally, insurance premiums can vary significantly between insurers, so shop around for the best insurance rates. Consider setting a reminder in your calendar a month or two before your policy renews to ensure you get the best deal possible.

The Takeaway

A little planning and preparation can go a long way toward ensuring that you're ready to handle whatever challenges come your way as a vehicle owner. By understanding and preparing for unexpected vehicle expenses, you can better manage your finances, minimize the stress of car ownership, and enjoy your vehicle without breaking the bank.

Return to Top