Car buying mistakes and what you can do to avoid them.
1. Failing to evaluate your personal and finances
Before you even walk into a yard, you should examine your budget with a fine-toothed comb. Find out exactly how much you can afford to spend on a vehicle payment, warranties and extras, insurance (including gap insurance), and your max budget for the total price of the vehicle. The worst thing you can do is base your vehicle’s price and payment amount on the advice of the dealership, and what they will approve you for.
If you intend on trading in a vehicle, know your car’s appraisal value prior to visiting the dealership and also, know the exact amounts (if any) that you owe on your previous vehicle loan. There are a variety of websites that will provide you with an estimated appraisal amount in a matter of a few moments. “Be sure to print out the details and bring them with you to the dealership. If you don’t think you’re getting a fair deal, you might be better off selling the car on your own, either to a private party or to the used-car superstore CarMax,” suggests Edmunds.com.
2. Inadequate Research
Data published by Dealer Refresh indicate that 83% of people conduct online research prior to buying a car. Sites like KBB.com, Truecar.com, and CarFax.com provide essential information you need to know about a vehicle before you buy, like its blue book value, its history, and reviews from other consumers.
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Although the vast majority of people use these resources to their advantage, there is still a portion of car-buyers — 17% — who do not use these resources. The National Automobile Dealers Association reports that in September, there were around 1.2 million light vehicle sales. If the purchasers of these vehicles followed the same patterns — over 200,000 of them failed to perform this online research.
Lastly, take some time to review the online inventory at several dealerships. It’ll increase your knowledge of competitor pricing and also narrow your search significantly.
3. Being overeager – impulse buying
When you see that beautiful SUV, with the back-up camera, upgraded sound system, and leather interior, it’s really hard not to fall in love. But, it’s better to take your time to find the right car than rush into an impulse buy. A car is a serious purchase, and second to a home, it’s often the largest purchase people make.
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With such a large purchase, it’s essential that you make a decision with a level head. If you feel overly eager to get out your checkbook and drive away in the floor model, it’s probably best to leave the dealership and come back another day. Ideally, you should shop around at several dealerships before you make a purchasing decision anyway.
4. Failing to consider other options
The people who walk into the dealership, pick a car, sign the papers, and let the dealership staff lead the transaction often end up spending more than they wanted to. Enter each dealership prepared. If possible, obtain pre-approval from a bank or credit union so that the dealership has to compete with those rates if they want to finance you for a vehicle. If they can’t compete, obtain the loan from your credit union or bank. Having that option provides you with the upper hand.
Also, contact your insurance company, as well as some other insurance companies, prior to shopping. Try and find out the estimated cost to insure your top picks so you can factor insurance costs into your decision making process. It’s also prudent to find out if your insurance company provides gap insurance coverage and if so, how much it costs. This way, when the finance office offers you gap coverage, you can make an informed decision.
Finally, give yourself some wiggle room. Save enough of a down payment to be able to decide how much you want to put down, instead of being in a situation where you barely have enough to cover a down payment.