Buying a car can be tricky. Most consumers only buy one car every few years, but dealerships have the experience of making deals every day. Needless to say, the deck is stacked against the buyer. We'll tell you about ten common new car buying mistakes that can cost you money—and how you can avoid them.
10 Common Car Buying Mistakes
Mistake #1: Not doing your research before you buy.
With so much information available on the internet, it's important (and easy) to do some research and establish a short list of cars before you go out shopping. Why not just go out and visit the dealerships? First of all, with dozens of models on the market, there simply isn't enough time to see (let alone test drive) every car that might suit you. Second, sales reps are trained to make a deal no matter what, and when faced with 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, 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 forth and shop.
Mistake #2: Buying the first car you test drive.
If you've been driving your old car for more than 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, as a test drive in a second or a third car will highlight issues from 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 a deal. 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 sales rep who has invested their time in selling you the car.
Mistake #3: Negotiating only on the monthly payment.
Most people think of the cost of a new car as a monthly payment, and that's fine—but don't make the mistake of negotiating a price purely on the payment. That gives the dealer the opportunity to do something sneaky that will drive up the price of the car, such as extending the term of the loan or adding money to the down payment. When you are negotiating, make sure that every offer from the dealer includes the total price you will be paying for the car.
Mistake #4: Not bringing a calculator.
Dealers do the math on car deals every day; buyers do it once every few years—so who has the upper hand? Less-than-scrupulous dealers will often throw a barrage of numbers at a prospective customer to confuse the negotiations. Be sure to bring your calculator (or, better yet, a smartphone with web access, because car loan calculators are easy to find) so you understand how your monthly payments total up and how much you will actually be paying for the car.
Mistake #5: Letting the dealer control time.
One well-worn technique is to wear down the buyer by finding reasons to make them wait—consulting with managers, calling banks, etc. 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 sales rep you need to go, and make an appointment to continue the next day. Ignore any pleas that “this deal is good for today only”—if the price is right, the dealer will honor the deal, either on that car or another (and if they won't, chances are another dealership will). Go home, get a good night's sleep, eat a hearty breakfast and return the next day, refreshed, relaxed, and ready to continue negotiating.
Mistake #6: Not knowing the value of your trade-in.
One reason dealers love trade-ins is because they are a great place to fiddle with the profit in a deal. You want payments that are $30 per month lower? No problem—a dealer can just take that money off the trade-in, and in many cases the buyer may not even notice. Know the value of your trade-in before you go, and watch that number carefully during the negotiaion process. Keep in mind that you will get less for your trade at a dealer than if you sell it privately, as the dealer needs to invest the money to clean and fix up the car and still be able to sell it as a profit. Think about the money as a “convenience fee” for not having to sell the car yourself.
Mistake #7: Buying an extended warranty.
Every car comes with a comprehensive new car warranty that covers the entire vehicle (aside from wear items), usually for three to five years. 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. When the end of the new car warranty is near, that's the time to begin shopping for an extended warranty; look at both third-party and manufacturer warranties. The one advantage to buying an extended warranty is that you can roll the costs into your payments. If that's your concern, figure the monthly cost of the warranty, then put that money into an interest-bearing account every month at the same time you make your car payment. By the time the new-car warranty expires, you'll have a nice car-repair slush fund.
Mistake #8: Buying “aftermarket” add-ons
During the last phase of negotiations, dealers often try to sell “aftermarket” accessories—alarms, rustproofing, extended warranties, etc. Our advice: Say no to everything. Dealers tend to pick products that yield the highest profits, and sell they sell them at a premium price. If you really want any of these items, buy them from a third party. Chances are you'll get higher-quality merchandise for a lower price.
Mistake #9: Not looking for alternate forms of financing.
Many buyers negotiate their monthly payments with the dealer, but did you know that 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 essentially buying their financing wholesale and adding on a percentage to make a profit. Before you go car shopping, get qualified for a loan from a third-party lending institution. There are two advantages: First, you can negotiate for your car based on the cash price rather than the payment, which puts you in a better bargaining position. Second, once the deal is made, you can offer the dealer a chance to sell you financing at a lower rate than the loan for which you are already qualified. The dealer has good incentive to give you a good rate, since they'd rather take a small profit than no profit.
Mistake #10: Not inquiring about insurance costs.
We've seen this one happen over and over: 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 (or surf to) your insurance company and get quotes for all of 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 other insurance companies.
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