Published June 26, 2012
If you're coveting the glossy vehicle at your local dealership or craving that new car smell, take a look at the following list and sidestep these all-too-typical auto purchasing mistakes.
1. Settling too high an interest rate
According to AutoTrader.com's automotive expert Brian Moody, "Getting pre-approved for a loan from your bank or credit union will let you know how much interest you're likely to pay." If you wait till you go to the dealer you may get an interest rate that's not as favorable, he warns. You won't know if you could have done better if you don't know your credit score.
Pro-tip: Cars lose up to 30 percent of their value when you drive them off the lot. Financing the whole car forces you underwater 25 to 30 percent right from the start.
2. Monthly payment shopping. "Resist the trap of only looking at the monthly payment," says Jack Nerad of Kelley Blue Book's kbb.com. Dealerships can extend the length of the auto loan to get you a lower monthly payment. Yes, you'll pay less per month, but you will undoubtedly pay more overall.
3. Choosing impractically. While Moody admits that it may be tempting to buy a fully loaded luxury SUV, he warns against falling in love with a car outside your budget. Assess your needs before you visit the dealer - do you need features like heated seats, four-wheel drive or a towing package? Try to keep emotion out of the process and buy based on needs not wants, he advises.
Moody also suggests doing online research. "Without the pressure of a sales person or the emotion of that new car smell, it's easier to make a more logical decision," he says.
4. Impulsiveness. People get caught up in the euphoria of buying a new car and fail to look at it analytically, says Nerad. He reminds buyers that each part of the transaction is worthy of attention and not to just dive into the pool head-first.
Pro-tip: Moody encourages buyers to test drive everything that's similar to the car they want. It's free and the more you drive, the more confidence you'll have in your final decision. Further, opt for a longer test drive when you narrow in on a specific vehicle. "A six-minute trip around the block isn't enough time behind the wheel to make a $30,000 decision," he cautions.
5. Not doing a background check. Both Moody and Speight agree that when buying a used car (or even a new car), not doing a background check nor having a mechanic inspect it first could be a costly mistake. An AutoCheck or CarFax report can let you know if the car you want has survived an accident or flood, or has a salvaged title. All you need is the VIN number to search.
6. Discounting the value of your current car. "Many consumers will battle tooth-and-nail for $100 off the price of the new car they are buying and then virtually give away their current car as a trade-in for much less than it is worth," says Nerad.
Pro-tip: The color of a car can make or break its value. If a person buys a blue car and goes to trade it in, the dealership will not give as much money on the car as if it were black, says Speight.