Car Buying Mistakes
People make so many mistakes when buying a new car or truck and dealers have grown to depend on them. Here are some top mistakes that you should avoid making.
Not Knowing The Value Of Their Trade
Most people go to the dealer without a true understanding of what their trade in is actually worth. This leaves them at the mercy of the dealership that will rarely even give you an accurate trade in value. The price that they are willing to pay and the price that they first present you with will be drastically different in most cases.
Before going to the dealership, you should research the price of your vehicle. Websites like NADA.com, KBB.com and CARFAX.com can give you a good idea of the value. When looking up your value, be sure to be honest about the condition of the vehicle, get the wholesale price and list all of the options. Get a price on every website and then you will have a good range of what your vehicle is worth to a dealer.
When you go to the dealer, realize that they will play some games with your trade. The first is the walk-around by the salesman. The salesman will attempt to point out every defect or blemish and make a big deal about it. They are trying to devalue the vehicle in your eyes. To counter this, get your vehicle cleaned up as much as possible when bringing it in and point all of the highlights to the salesman and eventually the sales manger. Note any factory and aftermarket upgrades that would bring more value to the vehicle.
Remember, selling your vehicle to the dealer is a convenience. It allows you to avoid the hassle of selling a vehicle yourself an you will thus lose a little money on the transaction. If you want to get every dollar out of your trade and you are willing to put up with the aggravation, you can sell it yourself. This is more difficult if you owe money on the vehicle and your lender is not local. This is because you and the buyer could not go together and pay off the vehicle and get the title. Most cash buyers, unless you know them personally, would be unwilling to buy the vehicle and not receive the title the same day. If you have a title in hand, it is much easier.
Not Shopping Multiple Dealers
If you want the best price, you need to shop multiple dealers. Don’t be so desperate to get the job done in a few hours. It might be easier to just hit the one closest to you but it can pay dividends to look at multiple ones. If shopping for a new car, you can take the sense of urgency that a dealer will try to give you and throw it out the window. Do not let them tell you that they will not be able to get you this price later or that the vehicle has limited availability. There is always a nearly identical car or truck at another dealership and most order the exact same packages, nothing special.
Shop at least three dealerships both online and in person. Save time by not letting them appraise your trade until you get their best price. If they have your trade in hand, they usually stall you to keep you there. They will drive off your trade and park it on another part of the lot. All a game to get you to do the deal the same day.
Not Shopping For A Lender
You should shop for a lender before you go to a dealership, even if you are okay going through the lenders finance department. The reason is so that you know what rates you really qualify for. Realize that dealers make money on the sale of the vehicle and on the financing of the vehicle. The finance department might make you an offer for 6% financing which sounds good, but they are usually keeping a portion of that money. You might actually qualify for a 4% rate.
If, on the other hand, you secure a good rate on financing before you go to the dealer you are in a much better position. You can then give them an opportunity to beat the rate and earn your financing business.
Not Claiming All Of Your Rebates
The obvious rebates out there are the factory ones but there may be others depending on which organizations that you are a member of. You might be entitled to additional rebates through your insurance company, automobile club discount club or professional organization. USAA insurance and SAMs CLUB for example often offer their members rebates on the purchase of new vehicles. Very few dealers check on this for you so you should do your research beforehand.
Not Getting A Reasonable Loan Term
These days, loan terms can stretch 7 years or longer. People stretch out the loan to lower the payment, not thinking bout the negative future effects. Sure, vehicles are lasting longer these days but you will probably be sick of that car in three years and looking to trade it in. On a 7 year note, you will still be way behind on the car. This will cause you to have to roll over thousands of dollars of negative equity on a vehicle. The result is a future vehicle payment that will be ridiculously high because of this negative equity. You might have a good deal now but on your next car, you will have a BMW sized payment on a KIA.
In addition, that longer term will come with much higher interest. You can usually add 1% to 2% to the interest rate every extra year that you extend the loan. This will cost you thousands of dollars in the long run.
Not Checking Your Credit First
You should continually be monitoring your credit rate and it is easier these days than ever with companies like Credit Karma. If you go into the dealer without pre-arranged financing and without knowing your credit score, you are asking for trouble.
Check your credit report at least two months before you plan to make a big financial decision, three months is better. If you find that you actually have bad credit and need a loan, this will give you the time to dispute and negative information and let it fall of off your report. If you decide that you need to pay down some other balances in order to boost your score, it will also give you time to do so and for the creditors to report the new information.
Not Fighting Dealer Add Ons
Dealers love to advertise one price and then when the negotiations begin, they like to hit you with the dealer add ons. Often you can get them to remove them or heavily discount them. They are banking on the fact that you will just let it go.
Some common add ons are things like tint and anti theft etching. A tint would cost the dealer less than a hundred dollars since they do it in bulk and they are happy to charge you $400 for it. You could get it on your own for about two hundred dollars from a private tint shop.
Likewise etching costs virtually nothing and is a big add on cost. It is something that is of almost no value to you, so get it removed.
Be prepared to walk if a dealer will not remove or greatly reduce the cost of add ons. There is always a vehicle at another lot without these add ons.
Not Getting GAP Insurance
If you are not making a down payment, you will be upside down on the vehicle when you leave the dealership. If your vehicle were to be totaled in the first couple of years, you would have to pay out of pocket to settle the loan.
GAP insurance would pay the difference between what your insurance company gives you and what is due on the loan. It is worth every penny and can save you thousands of dollars.
Like everything else sold at a dealership though, the dealer is looking to make a cut on GAP insurance. You can negotiate the cost down while in finance. If they offer it to you for a cost of $700, for example, offer them $400. Every few hundred dollars counts.
Not Walking Away
You have to always be prepared to walk away from a deal if it is not what you like. There is always another dealer who will make the deal that you like. Chances are also good that when you get up and walk away, you will be stopped before you get out with a much better deal. Be ready to get up and go, politely, if negotiations stall.
When you do leave, being polite is key. If you want a better offer you do not want them to hate you. If they find that you are just rude and disrespectful, they might decided that it is just not worth working with you.