10 Common Car Buying Mistakes

Buying a new car can be a great experience. A car is one of the most expensive, most exciting, and most alluring consumer products you can buy. Obtaining a new car can be fun, exhilarating, and fulfilling. But to many consumers, it is a task filled with potential potholes, an experience not to be enjoyed but to be, at best, tolerated. Most consumers only buy a car every few years, but dealerships have the experience of making deals every day. Needless to say, this fact alone can make it intimidating. But there is no reason it should be. You as a qualified car buyer have everything in your favor. You are a rare commodity to every dealer in the country — a customer who is ready to buy. The key to confidence is knowing what not to do. Here are 10 common new car buying mistakes that can cost you money.

The information available on the internet makes it easy to do some shopping research and establish a short list of cars before you go to a dealer. You might be inclined to “just stop by” a dealership to see what you see, but that could be a mistake. First of all, with dozens of models on the market, there simply isn't enough time to see every car that might suit you. Second, salespeople are trained to make a deal right now, and when presented with what could seem to be a good deal, you might be tempted to buy before you've had a chance to see what the competition has to offer. Take your time, do your research online, and read the professional reviews here at Autobytel.com to help you build a short list of vehicles that are best for you—then go out and shop.

Dealers love trade-ins because they are a great place to gain extra profit in a deal. You want payments that are $30 per month lower than what was first presented? No problem—a dealer can just alter what he’ll allow for the trade-in, and in many cases, the buyer may not even notice. Know the value of your trade-in vehicle before you go, and watch that number carefully during the negotiation process. Keep in mind that you will get less for your trade at a dealer than if you sell the car yourself because the dealer needs to spend on putting the car into salable condition. Think about that money as a “convenience fee” for not having to sell the car yourself.

Many buyers get their auto loan through the dealer, but there are other ways to finance a new car. Banks and credit unions offer new car financing and often at better rates than dealerships. Dealerships are middlemen in the auto financing process, taking a percentage of the deal in exchange for connecting the borrower to the lender. Before you go car shopping, get qualified for a loan from a lender. There are two advantages: First, you can negotiate for your car as if you are going to buy with cash, which may put you in a better bargaining position. Second, once the deal is made, you can ask the dealer to get you financed at a lower rate than the loan for which you are already qualified.

Getting the best deal requires some level of negotiation. You don’t have to be an all-time deal-maker, but you do have to be prepared to wheel-and-deal a bit. Be rested and ready, knowing that you have the ultimate power — you can walk out. A great deal will be out there at the next dealership. One important aspect of negotiation is being prepared to deal with numbers. Dealers know the math on car deals like the backs of their hands, so don’t be rushed. Take your time to crunch the numbers yourself. Be sure to bring your calculator (or, better yet, a smartphone with web access, because car loan calculators are easy to find.) You want to understand how your monthly payments total up and how much you will actually be paying for the car.

One often-used negotiating technique dealers employ is to wear down the buyer by finding reasons to make them wait—consulting with managers, calling banks, etc. You don’t need to play that game. Before you begin your negotiations, set a reasonable time limit. Twenty minutes before you hit that time limit, tell the sales rep you need to leave in fifteen minutes. When time is up, follow through and tell the salesperson you need to go. You can make an appointment to continue another day and time if you’d like. Ignore any pleas that “this deal is good for today only.” They are only designed to motivate you to buy right there. You are the customer and you should control the process. In no way be abusive to the salesperson, but be firm about what you want. If you don’t like the way you are being treated, politely walk out the door. The world is full of great car deals.

If you've been driving your current car for a few years, any new car is going to feel great. Don't fall in love too fast. It's best to drive several cars before making a decision; a test drive in a second or a third car will highlight any issues in the first. Keep in mind that the dealers won't make this easy. A good sales rep is going to do their darnedest not to let you walk out the door without making a deal right then and there. Be polite but firm, and be sure to take the rep's card when you leave. When the time comes to buy, do business with the salesperson who invested their time in selling you the car.

Most people think of the cost of a new car in terms of a monthly payment. That is shortsighted and will probably end up costing them big money. If you negotiate only on the amount of the monthly payment, you are giving the dealer a lot of levers to pull to extract money from you. It isn’t hard to lower the monthly payment by extending the term of the loan or requiring you to add money to the down payment. But those changes will cost you money either right away or down the road. When you are negotiating, make sure that every offer you consider from the dealer includes the total price you will be paying for the car.

Many buyers will find that after they believe the deal is negotiated and all they have to do is sign the paperwork they will be offered (confronted with?) opportunities to buy additional items and services related to their new car. As another way to make some money, dealers often try to sell “aftermarket” accessories—alarms, rustproofing, extended warranties, and other things to their customers before the deal is completed. After you’ve gone through the negotiation on the car, the negotiation on your trade-in, and the negotiation on the financing, you are probably in no position to negotiate on each of these items too. So you might be very wise to say no to all of them. The products and services are high-profit for the dealer and might have minimal value to you. If you really want any of these items, buy them from a third-party retailer. Chances are you'll get higher-quality merchandise for a lower price.

Every new car comes with a comprehensive warranty that covers the entire vehicle (aside from wear items) for at least three years or 36,000 miles. Some warranties are even longer. Because of that, there's no reason to buy an extended warranty when the car is new. Contrary to what dealers would like you to believe, you can buy an extended warranty any time you like. Buying what amounts to an insurance policy to protect you against the contingency of something bad that might happen no sooner than three years from now is a bad bet to begin with. You might never need extended warranty coverage. Instead, it is often more cost-effective to “insure yourself” by putting aside some money to cover car-related expenses over time. If you seek you want an extended warranty, when the end of the new car warranty is near, start shopping for an extended warranty.

It happens again and again. Someone buys a new car, only to be stunned by insurance payments that are nearly as high as their loan payments. You might be surprised at the factors that make a car expensive to insure, so once you've whittled your car choices down to a short list, call your insurance company or do some online research to get quotes for the cars you are seriously considering. You'll eliminate any nasty surprises, and you can factor the cost of insurance into your monthly car budget. While you're at it, this is a great time to comparison shop and get quotes from a number of insurance companies.