09/04/2012 12:31 pm ET Updated Nov 04, 2012

What Consumers Ought to Know When Purchasing A Car

When I was growing up in Texas, I learned the importance of basic maintenance working on my grandfather's car. Back then, that's what we did. You bought a car, and you kept it ten years, maybe longer. I made it all the way past my 1982 college graduation in a 1970 Olds '88. It wasn't great for gas mileage, but it got me where I needed to go.

When my kids were growing up, the story was different. Leasing had come into vogue. And even those purchasing autos frequently upgraded to bigger, more expensive models.

The financial crisis, of course, changed that. Since then, many of us have gone back to repairing what are now our older cars. I've often noticed late 90s models on the road, and it's not unusual to see cars in need of a paint job with dings and dents.

To look at the issue more methodically, our senior economist examined this trend, and here's what he found, and the answer is what you might expect: The older models you're seeing on the road these days are highly reflective of the economy. In 2007, a total of 16.5 million new cars were sold in this country, but sales sunk to 10.6 million in 2009, as the financial crisis froze credit markets and consumer confidence plummeted.

And now, the trend is changing again: Sales have been increasing since 2009 and have averaged 14.6 million (annualized) in the first six months of 2012. This year may turn out to be the strongest year for new auto sales since the start of the recession.

Labor market improvements - while painfully slow -- are helping to boost demand for cars. And, there appears to be a good deal of pent up demand in the system, because our cars are older. According to a study conducted by Polk Automotive that was released earlier this year, the average age of U.S. cars was 10.8 years in 2011 - a record high that compares to just 8.4 years in 1995.

As a veteran credit union guy, I view all this with a sense of cautious optimism. It's great that families will be purchasing new vehicles again, but I wonder how well informed they'll be when making their purchases. After all, it's been a while. So just to be safe, a few tips from a CEO who has tracked auto lending for decades. I do come at this from a credit union perspective. But credit unions are member-owned cooperatives. Their job is not just to lend; it's to provide their members with sound financial advice, so here is mine:

• In this uncertain economic environment, it's especially important to maintain good financial habits and to shop around when looking for financial products and services. Besides purchasing a home, buying and financing a new car is one of the biggest financial decisions you'll ever make. Cautious and informed purchasing can save consumers thousands.

• September is a good time to negotiate. Dealers want to get their 2012 models off the lot to make room for the 2013 new vehicles.

• Think beyond the ads. A dealer's zero percent (or low-rate) interest financing option usually seems like a great deal. For some, it may be. But for many it's too good to be true. Low-rate dealer financing usually is only available to the most creditworthy buyers - the top 10% or so of all purchasers.

• Yes, it's still true; read the fine print and do the calculations. Even if you do qualify for the low-interest rate option, you'll likely pay more than you otherwise would for the car. Dealers are less likely to negotiate on the car's price when they know the purchaser is opting for low-rate financing.

• Loan terms often are different (often shorter) for low-rate dealer financing. As a purchaser, you may find you can't afford the monthly payments on a 3-year or 4-year loan even with a low interest rate (compared to, say, a 5-year loan with a slightly higher rate).

• On many low-rate financing deals you may also have to forego any rebates or cash-back options - low rate financing and cash-back are typically either/or propositions. When comparing financing options it's important to consider the effects of using any cash-back options to lower the purchase price (i.e., financed amount) of a new car when using conventional financing.

• For the majority of consumers who don't qualify for the best financing deals at the dealership, conventional financing from a financial institution is very often the best option.

• Additionally, and yes because I am a credit union advocate, I'd note that when using today's average interest rates, consumers can save well over $1,000 just by financing their new car purchase at a credit union rather than at a bank. That's because, on average, new car loan rates are substantially lower at the nation's credit unions compared to the banks.

Finally, a tip not from a CEO, but from a fellow consumer. Learn to repair a car, too. You can at least save on basic maintenance, and you'll have some fun along the way. And you never know how talented a mechanic you'll be. That 1970 Olds lasted a long time.