8 Mistakes People Make When Buying a Car
Purchasing a car can be stressful. Pressuring sales people, financing, transferring titles, and the potential of buyers remorse all linger in your head throughout the process. When we have this many things to be worried about, mistakes are prone to happen. We’ve gathered some of the top mistakes people make when buying a car and how you can avoid doing the same.
Mistake #1: Deciding you need the newest car
We’ve harped on this before. One of the biggest financial mistakes you can make is purchasing a brand new car. Even worse, financing the car will only add to the cost, leaving you upside down on your car payment. We would highly recommend against purchasing a new vehicle. Instead, opt for a car that is a few years old to minimize the cost of depreciation.
What does “upside down” mean in terms of financing?
Upside down refers to the amount of how much you owe verse what the property is worth. For example, if you owe $25,000 on your car but you could only sell it for $15,000 you would be upside down on your loan. The proceeds you gain from the sale are not enough to pay off what you currently own. This is extremely common among new cars. Because they depreciate as much as 20% as soon as you drive it off the lot, it will take time to gain enough equity in your vehicle and get “right side up”.
Mistake #2: Not haggling the price
Dealerships like CarMax have been surging recently on their no haggle pricing. The price listed is the price you pay. While that may seem convenient and time saving, it’s one way to guarantee you won’t get the best deal. The more effort you put in when haggling the price of a car, the cheaper the cost will become. Just as you would like to settle on the price of your car, so would the salesperson so that he or she can move on to their next potential customer. The longer you are able to negotiate with the seller, the more favorable it is for you. After all, you are the one with the power. You are the one purchasing the car. Many times, salespeople will coerce you into thinking that they have the power and that you NEED this car. But that isn’t the case. Use your power, negotiate the price, and get a good deal.
Not sure if the vehicle you’re purchasing is a good price? You can look at sites like Kelley Blue Book to determine the average price of the car given its make, model, milage, and condition. We recommend understanding the value of the car you are looking at before you step on the lot.
Mistake #3: Getting a gas guzzler
Okay so it’s not 2008 anymore and gas prices aren’t rising above $5 per gallon, yet anyways. But the cost of gasoline for your vehicle can add up quickly. According to AAA, the average cost of fuel for a medium sized SUV runs around $9,451 per year. The average cost of a small sedan runs around $6,354 per year.That’s a 30% savings on your fuel costs per year!
Mistake #4: Buying a non reliable car
When you’re in the market for a new car, many times the reason is due to the reliability of your previous vehicle. This isn’t the time to swap out your clunker for another clunker. Research vehicle reliability ratings before you start looking at cars. Traditionally, foreign cars like Toyota or Honda offer some of the best reliability compared to others. Cars like Audis or BMWs offer much lower reliability ratings.
Mistake #5: Not researching enough
Whenever you decide to buy a new car, you should always do your research first. Define the most important features to you. Whether it’s safety, gas milage, or the number of seats, defining the features that are most important to you is a vital step in the process. This will help you to narrow your search and decrease the chances of having buyers remorse.
Mistake #6: Needing luxurious features
Depending on your financial situation, needing luxurious features can be unreasonable and costly. After all, having a large touch screen media center is not going to provide value for you. Cut costs of luxury and use that money to invest, save for retirement, or beef up your emergency fund.
Mistake #7: Needing a car now
Many times people purchase a new vehicle out of impulse. This only leads to terrible decision making. When deciding to purchase a new car, it’s best to wait a few weeks to evaluate the cost and reevaluate your needs. After a few weeks, if you’ve determined that it is a wise decision, then you should begin the researching phase of your purchase and move along in the sales cycle.
Mistake #8: Going over budget
Probably the first question you’ll ask yourself when buying a car is “how much am I going to spend on it?”. When we set that budget, it’s wise to stay under it. Not over. Salespeople will commonly ask “is there a certain monthly payment you’d like to stay under?”. Stay away from this question. What they’re really saying is “We can extend the life of the loan so you can pay for a car you cannot afford.” A good answer to this question is “No, I’m specifically worried about the price of the car.”
Purchasing a new car is not a fun process for anyone involved. By learning from these mistakes, we hope that you will make a smarter car purchase leaving more money in your pocket. Remember to do your research, stay under your budget, and always negotiate the price of your car to get the best deal possible.