Lots of people buy a new car, and then regret their purchase soon thereafter. If you don’t take a lot of precautions, you will be a car buying victim instead of a smart buyer. So, here are the top ten mistakes that buyers make when shopping for a new car. These mistakes are not listed in order of importance…but don’t miss the message in every mistake.
1. Impulse buying
An impulse is an emotion. The worst reason to buy a car is emotion. Car sales people are taught that they must try everything they can to sell you a car during your first visit. Statistically, they know that if they don’t, they won’t get a second chance. If you pull into a dealer lot to just “kick a few tires,” but you have not sworn to yourself that you will not buy on that visit, you’re doomed. Don’t say things like “I love this car” or “I’ve got to have this car.” Don’t get your emotions involved in this buying decision. If you’re talking too much, the car salesman will read that as buying signals. And salesmen are much better at clubbing you with your own buying signals than you are at resisting them.
Tons of people make impulse car purchases. You cannot do your research and wise shopping if you make an impulse buy.
2. Lack of research
Goes hand in hand with an impulse buy. You need to go online and research about cars, including:
c. resale value
d. maintenance and repairs
e. range of car prices for the make and model you want
Research will give you the information you need to make an informed decision.
3. Unrealistic about your car needs – new vs. used.
Many car shoppers grossly overestimate their needs. Instead of buying a car that reflects their actual driving experience, they buy a vehicle that feeds their future plans or perceived future needs. For instance, a buyer who plans to own a boat and trailer may buy an SUV or heavy pickup. But he does not own the boat YET. Overall, it’s best to buy a vehicle for your present needs, not your future desires.
4. Not calculating the true cost of a hybrid
Hybrid vehicles, like the Prius, are priced far above a regular gas or diesel. When you subtract the cost of the regular vehicle from the hybrid price, you’ll see the premium you pay for the hybrid. Now, will the fuel savings pay for themselves over the number of months you own the vehicle? Hardly ever! Most times you’ll pay more overall for a hybrid vehicle. Gas and diesel vehicles are becoming more and more efficient. Remember, over 50% of the vehicles in all of Europe have diesel engines, and it’s been that way for 50 years. Must be a reason, eh?
5. Not shopping for car insurance before the car purchase
Here’s a big no-no. How many times have you called your insurance agent and gotten a quote on the car you WANT to buy? If you’re upgrading from an average car to a different kind of car…like going from a Toyota Altima to a Corvette…the increase in insurance premiums could make the new car purchase unaffordable. Unfortunately, most people find this out AFTER they buy that shiny new car. But just going from an older car to a new car could drastically increase your insurance costs. What if your old car didn’t have collision coverage, but your new car will? That could mean hundreds of dollars in added premiums.
6. Talking trade-in during negotiations for the new car purchase
Don’t include trade-in for your old car in the new car deal. It’s too easy for the car dealer to structure your deal to look like you’re getting much more for your trade-in. Make your car deal apart from any trade-in consideration. Then, get the trade-in offer and deduct it from the total. Also give serious consideration to selling your old car yourself. You’ll get much more money for your old car.
7. Dealer financing
This is a mine field, and the dealers have set the mines in your path. The most dangerous place in a dealership is the Finance and Insurance (F&I) office. The F&I office accounts for a big percentage of the total profits of a dealership. You must be wary of every offer here…financing, warranty, insurances like life insurance that pays off your loan balance. I recommend that you decline everything offered from an F&I office except a low interest rate on a loan of no more than 36 months.
8. Not buying at the end of the month and end of the year.
At the end of the month…any month…the salesmen and dealership are trying to maximize their bonuses and incomes. You’ll get your best deals if you buy in the last couple days of the month. The same goes for end-of-year purchases. Dealerships are desperately trying to get rid of last year’s models, and finish the year strongly. So, when’s the absolute best time to buy a car? The last couple of days in December of any year. You can hardly lose if you’re a smart buyer.
9. Leasing a car
Do you know why you see so many auto ads on TV that feature low lease payments? Because the car companies and dealers make a TON of money on a lease…far more then when they just sell a car. The lease agreement you sign is written totally in favor of the lease company. You never own the car, you only rent it for a number of months. You are responsible for maintenance and insuring the car. Plus, your lease limits you to a certain maximum number of miles driven. If you exceed the limits, the mileage penalties are staggering. I’ve looked at leases every time I’ve bought a car since the early 80s, and I’ve never once found a scenario in which I could come out ahead with a lease.
10. New vs. Used.
Most people do not need a brand new car. When you buy a new car, you get hammered on depreciation in the first year. Sometimes the value of your car drops as much as 20% the moment you drive your new ride off the dealer lot. The car lots are jammed with excellent used cars. You can save a bunch of money by buying a used car. But you won’t know that for sure unless you do some research. Compare the TOTAL cost of a new car versus the used car, including finance costs, maintenance and insurance. Most times, the used car will win…even when dealers offer zero percent car loans.
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Buying cars are some of the largest, most expensive purchases you’ll ever make. You might only buy one house in your lifetime, but you’ll likely buy many cars. Become a smart buyer and you’ll keep tens of thousands of dollars in your pocket.
© Copyright 2010, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.