Top 10 Car Buying Mistakes
Each year, many car buyers walk into a dealer and buy a new car without researching the car buying process. We have gathered the most common car buying mistakes that people (unknowingly) make when they buy a new car.
1. “Shopping” less than 5 dealerships
Of the most common car buying mistakes, this mistake is high on the list. Throughout this site, you'll find a common theme. COMPETITION = SAVINGS FOR YOU. By "shopping" 5 dealers, you increase the competitiveness of the negotiating and you will receive lower car quotes as a result. "Shopping" does not mean "visiting 5 dealers". "Shopping" means getting quotes from at least 5 dealers. This can be completed right at home on your computer by applying for FREE dealer quotes on websites like Yahoo! Autos
. You simply fill out a short form and you receive quotes from up to 4 dealers.
2. “Visiting” more than one dealership
Using the internet, you should only need to "visit" 1 dealership. (You will visit 2 dealerships if you test drive the vehicle beforehand and end up purchasing the car at another dealership.) You can receive car quotes from multiple dealerships right in your own home and save yourself hours of negotiating inside a dealership and driving from dealer to dealer.
3. Buying a car on impulse
Yes, we get it. Car buying can be fun and exciting. However, it is still likely to be the 2nd largest purchase that you make in your lifetime. If you walk into a dealership and let the salesperson educate you, you will get taken for a ride. It's just that simple. Do your homework. Research the price of the vehicle and understand the MSRP (sticker price), the invoice price, the holdback; know your credit scores/credit history, shop around for financing, insurance, an extended warranty, and most importantly have several dealers compete for your business!
4. Making an offer to a salesperson
This auto buying mistake is one of the more expensive mistakes that people make buying a car. A common way for salespeople to get negotiating started is to ask you what monthly payment you can afford. Sounds fair enough - right? Wrong. Monthly payments are loaded with several factors: vehicle price, financing, and your trade-in are just a few of those factors. If you "offer" up the payment that you can afford, you've given them your bottomline and they no longer have to work to earn your business. This car buying mistake can cost you thousands of dollars if you haven't done your homework and do not know what other buyers have paid for the same vehicle.
5. Negotiating the purchase price, trade-in, and financing
This next auto buying mistake applies to those that just want to “get it over with” and negotiate everything at once. With a monthly payment, a salesperson can structure things to appear as if you are getting a great price, financing, or trade-in - which ever appears to be your focus. NEVER negotiate the vehicle price, financing, and a trade-in all at one time. Do your research ahead of time, know what is a competitive price for the vehicle, know what your current vehicle is worth, and shop around for a low interest rate. This is the only way to know whether you are getting the best deal for all factors.
6. “Paying "sticker price" for an extended warranty
As you complete the final paperwork for a new car, the finance manager will offer up several add-ons. One of the offered add-ons is an Extended Warranty. Unknowingly, one of the mistakes the people make when buying a car is buying the Extended Warranty without realizing that they could have saved 30-50% by shopping around. The markup on these warranties is considerable. Companies, like Smart Auto Warranty, make shopping for an extended warranty easy by offering free, no obligation quotes right on their website.
7. Buying without comparing insurance quotes
Buying a new vehicle or even a used vehicle can and will likely adjust your insurance premium. Whether you have been with an insurance company for 10 years or if this is your first time to get auto insurance, you may be able to lower your annual insurance premium. Insurance is calculated on more than your driving record. Your credit scores, where you live, and features on the vehicle may lower your insurance rates. With the internet, it's easy to show around. Companies, like Esurance
and 21st Century Insurance
, offer fast online quotes and compare rates with several other companies as well.
8. Financing a vehicle without knowing their credit scores
If you are about to finance a vehicle and are considering a dealer financing offer, you need to know your credit scores and what is on your credit report. Car Buyers with "bad credit" are particularly at risk with this car buying mistake. If you do not know what is on your credit report, you will be taking the Finance Manager's word for it when they tell you if they are unable to finance your new vehicle or offer you a higher rate due to your credit score. You should not be learning what is on your credit report from the dealer's Finance Manager. Order your credit reports and scores beforehand, you can correct inaccurate information on the report and shop around for back-up financing before you visit the dealer. There are three credit bureaus (Experian, Equifax, and Transunion). They each maintain their own report on you and their own score for you. A Finance Manager typically pulls 2 of the 3 reports before offering financing. You can order free credit reports annually, but they do not include your credit scores. The best deal we found is through FreeCreditReport.com. They offer all three reports and all three scores as a package.
9. Buying without price-comparing interest rates
It's easy to see how many people make this auto buying mistake. When many car buyers see commercials and advertisements for 2.9%, 3.9%, and 4.9% financing, they think that it is the "best deal". This isn't always the case. If there is a cash back incentive offered on the same vehicle, you need to run the numbers No matter how long the rate is, you may still save money. Yes, that's right - even if you are offered 1.9% financing! Many manufacturers offer considerable cash back incentives and you may save more money by accepting the cash and financing your vehicle through another bank, like MyAutoLoan.
If you have bad credit, it is even more important for you to price compare interest rates! Since your credit score is low, you will be paying a higher interest rate. This is a gold-mine for dealerships. If you feel embarrassed about your credit and are afraid to look at your credit report, this is the time to tackle it head on. Whether you can correct blemishes on your credit report or not, you don’t have to accept a higher interest rate from a dealership. There are companies, like MyAutoLoan, that offer competitive interest rates for people just like you. Price compare - it will save you money.
10. Buying without having dealers compete for their business
Last but not least, we have the most common car buying mistake. The number one way to overpay for a new vehicle is to buy from the first dealer that comes along. We aren't suggesting that you spend countless hours driving from dealer to dealer. You can get 4+ quotes with just a couple of clicks of a button. Websites like, Yahoo! Autos
offer free online dealer quotes. Just fill out a short form and they have up to 4 local dealerships send you a quote. The more dealers you include in the competition - the more likely you are to be quoted at or below the invoice price.