10 Common Car Buying Mistakes
Many shoppers blunder through the car-purchasing process and regret it later. Here are 10 common missteps and how to avoid them.
Walking onto a car lot can feel like a train wreck in slow motion: At every turn you get a little more derailed, until finally you're off the tracks entirely and the dealership has what it wants: your entire bank account.
Part of the problem is the sheer number of variables involved in negotiating the sale: the price, the options, the financing, the monthly payment, maybe a trade-in. You should methodically research and consider every conceivable scenario before setting foot on a dealer's lot. Otherwise, dealers will do everything they can to tilt the transaction in their favor.
"They're looking at making money off you in stages," says Jeff Bartlett, deputy online editor for autos at Consumer Reports, "so it's important for customers to keep the stages separate and not lose track of what's going on."
To help you do that, we talked with several experts about the most common mistakes that car buyers make and what you can do to avoid them.
The goal is not to pull one over on dealers — they're hard-working folks trying to earn a living, too. It's about arming yourself with as much information as possible to make the best decision on what is for many people the second-largest purchase of their lives.
Buying Unnecessary Add-Ons
Some dealers might try to sell features they add on themselves, such as rust-proofing, VIN etching or fabric protector. Avoid them; they're unnecessary, Bartlett says. If the vehicle you want already has them, negotiate their cost down as much as possible. Research features you do want online and print out the information before heading to the dealer. Bartlett recommends pricing several different variations in case the dealer doesn't have the exact model you want. This can help avoid being up-sold to pricier models or to ones with features you don't need or want.
Not Enough Cross-Shopping
Many car shoppers focus on a few popular brands or models, to their detriment. "On average, people only shop about three vehicles," says Steve Witten, executive director of U.S. automotive research at J.D. Power and Associates. "If someone's shopping a midsize car, there are probably at least 10 different vehicles that would meet their exact specifications and needs," he says. In terms of safety, reliability and features, there are very few lemons for sale anymore. So don't get stuck on one brand and put blinders on about others because of old perceptions. Cast a wide net when comparing models online. Otherwise, you might miss a good value or overlook your ideal car.
Settling for What Is on the Lot
American car buyers are impatient. Only 5 percent special-order a vehicle through a dealer and wait for it to be delivered, according to J.D. Power. The other 95 percent either find exactly what they want on the lot, or settle for something that's not quite what they wanted. There's no reason to do that when making such a large purchase. If you're set on a specific model or feature that you don't see in stock, dealers can search nationwide inventories and have vehicles shipped from several states away, Witten says. They can also custom-order exactly what you want from the factory.
Skipping the Test Drive
Consumer Reports' Bartlett hears family and friends complain about uncomfortable seats, poor visibility or a stiff suspension in vehicles they have just bought. It's because they did not perform a thorough test drive — if they did one at all. He recommends spending 30 minutes driving the car, entering and exiting the highway, taking it on roads like those you drive every day. Be sure to take competing models for a spin, too. "It will reaffirm that you made the best decision ever, or you might find that you like one of the other ones better," Bartlett says.
Focusing on the Monthly Payment
One of the first questions salespeople ask is, "So, how much were you looking to spend per month?" It's to your benefit not to focus on that number, because doing so can make the final price of the car a moving target. Adding "only $50 a month" to get leather and more power might sound tempting, but it will add thousands to the bottom line. Part of this goes back to knowing what you truly need or want. The other part involves negotiating the total price of the vehicle, not the monthly payment. Breaking up the buying process can help: Part one is choosing the car; part two is settling on a price; part three is financing. Be clear with the salesperson what you want to focus on for each step so you don't get sidetracked.
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Sold cars for 6 years, managed at a car dealership for 5, and I have friends who have been in the business for decades. Here's what you do:
1) Find a car you like, and look at it on the lot after hours. Get it's information, and research it on line: get it's book value at nada.com for both retail and wholesale. NOTE: Most dealerships quit putting stickers in their windows so people have to ask about them and face a salesperson. If you do, just get the info from the salesperson, and don't let him suck you into the showroom. If you get an eager salesperson on the phone, he will give you all the info about the car. Some places list their inventory on line too.
2) Go to your local bank: preferrably a credit union. Bring them the specs on the vehicle you are interested in and see what they will pre-approve you for. Then, you will know what your payment is, and what you can qualify for. When dealerships show you a payment in negotiation, it's just a guess EVERY TIME! Most of the time they pad their payment with extras such as credit life, gap insurance, and addendums (window etching, delivery fee, etc.). If your credit is bad, this is where the process stops for you. You will need to go to your bank with pay stubs, proof of residence, and other documentation and see what the bank will allow you to buy. This may limit your shopping options.
3) Once you have your pre-approval and terms, make sure you know what tax, title and license may cost you (estimate if you need to), and go back to the lot a second time (salespeople get excited when they see you come back a second time). Drive the car, check for imperfections, get it's maintenance and service history. Then, show the dealr your interest in buying the car. Go ahead and go into their office (the "bear cage" as we used to call it) and start negotiating. Don't tell him what payment you want, tell him what price you want to buy the car for. If you were pre-approved at the bank for $10,000 and the car is listed for $11,995, and books retail for $11,000, this will be a bit difficult, because you will want the dealer to sell you the vehicle for less than full book retail. REMEMBER...the book is just a GUIDE! (dealers will nod their heads when you say this phrase because they use it all the time when they are taking your car trade in and want to buy it for less than book). If your dealer is making money, he is definitely getting his cars for well under book to make good profits. Be firm, and tell the dealer you want to buy the car for $9300 or $9500. This is called hitting em high - shocking them with an outrageous number so they will open up their thinking to what you really want to buy it for...that way they are not so shocked. The dealer will counter offer and come down a little. Be firm, and don't buy it for more than your pre-approved amount plus fees. When you and the dealer get it to where you can buy it with your pre-approved amount (along with fees and taxes), let him know to write the negotiated amount down on a buyers order, and fax it over to your bank because you are pre-approved. DO NOT fill out a credit application! They will try to keep your financing to make more money.
4) Go home happy with your new vehicle!
Just did this yesterday. Seamless, no stress, no haggles. Went home with a 2004 Honda Element advertised for $11,995 and got it for $10,300, no money down.
re : freedom1955
Sorry to say you are way off. I worked in the automobile business for almost 20 years. I held many positions from sales to business mgr to general sales mgr. The markup that dealers work with today is about 5% on a very basic model up to 9-10% on the most expensive ones. ( american made ). On the imports it is quite often less. Now this is the amount over "invoice". The dealer does have what is called "holdback" and that is usually about 3% and is given to the dealer after he sells the car. The expense to run a store is huge and should be taken into context. Furniture markup is 2-300%. How often do you negotiate that?
This article and most like it are simple nonsense. I have not been in the auto business, but have been in the RV business for the past 15 years, both retail, finance, and now wholesale for the last 6. Most of these articles encourage the average customer to try to have a business relationship with a dealer built on a foundation of deceit.
They advise you to tell the dealer you are a "cash" buyer, even when you're not. Tell the dealer you are not trading in your car, even though you are. Never talk about what your payment "budget" range is, even though that is the most common criteria for a consumer buying or not buying a vehicle. What good does it do for a dealer to sell you a car for invoice, give you full average book wholesale for your trade, just so you can go to the F&I office and tell the business manager you can't afford the payment that this transaction equals. And, all the while, the salesperson or sales manager can't help you find the right vehicle because you keep lying to them all along as part of your strategy!!!
There is no excuse for an uninformed or even worse, an ill informed customer. The internet affords you all the research tools you need. I can tell you from 15 years experience, consumers lie to the dealership employees far more than MOST professional salespeople lie to the public. As a sales manager for a large motorhome dealership in the past, I fired a 10year + salesperson because we caught him in a lie to a customer. The days of the lying, cheating, "throw the trade keys on the roof" sales tactics for cars or RV's is long gone. Are there some dishonest salespeople out there? Of course there are, but probably less than there are working on Wall Street, in Government, or even your local union halls.
It's really very simple.
1. Find the vehicles you like, make a list, narrow it down, stay in budget.
2. Research those vehicles, not just on Consumer Reports, but Car and Driver, Auto Week, Road and Track, JD Powers, Cars.com, Edmunds, etc, etc.
3. Talk to your own local bank or credit union to obtain current car rates. A lot of them will even give you a pre approval so you have an idea of rates, terms, payments, etc.
4. Go to a local dealer for the brand you want, ask to speak to the sales manager right away. Introduce yourself politely, explain that the car buying process is a little intimidating to you, and you'd like a sales person that is patient, knowledgeable on the products, and willing to help you through the process, including a test drive that doesnt; just go around the block. (You'll generally get one of the better salespeople, and feel free to ask them how long they have been with that dealer.)
5. Tell them upfront what kind of vehicle you're after, that you are going to shop around, that you are not interested in dealer added products, what kind of trade you have, (please bring it or don't expect them to be able to give you a price), and what sort of payment "range" you're hoping to find.
6. If and when you elect to buy, allow the Business Manager to compete for your financing. That's how he gets paid and it costs you nothing. Depending on the volume of the dealer, he may very well be able to get you better terms than you can on your own as a "single" transaction. At the very least, he can verify that the local loan you checked into is a good deal.
7. Lastly, consider any dealer products on a price VS value basis, remember that MOST of these products are also negotiable, and there is no absolute right or wrong answer to buying or not buying these products. It's up to you to decide if they have more value to you than the price, whether that's an extended warranty, maintenance program, pinstripes, etc, etc.
Ok dealer people, I understand that you guys (and gals) are running a business and in order for business to be successful they need to be profitable....I get this, I really do....but buying a car is a really daunting process. Its nerve racking to walk onto this vast lot with shiny cars everywhere just to have the salesperson walk up to you and start talking numbers, and add ons and options and this that and the other thing. Then you go talk to the finance person who is just as scary as the sales person. Next thing you know you're walking out paying 50,000 for a (non-luxury) sedan!
Its not the 10 of you dealers/salespeople/finance officers that are honest and genuinely out to help someone get the best car for their interest for the lowest price...its the ONE dishonest, cheating, manipulative dirt bag out there who ruins it for everyone and makes articles like this one necessary.
For the life of me, I can't understand why everyone is always picking on car dealers, STILL, after all the changes that have come to the retail auto industry. Are there a few rotten eggs out there? I'm sure there are, however, most of the dealers have changed ownership and cleaned up their act since the 1990's. Factories (car manufacturers) no longer tolerate poor customer satisfaction with a dealer, as it reflects badly on them as well. Ford, Acura, Honda, and Toyota have all shut down dealers and revoked their franchise license over bad CSI scores.
Most of the people I know that work in dealerships are honest, hard working people just trying to survive, pay their bills, and take care of their family. Why do you have to walk into a dealership with a chip on your shoulder? Do your research FIRST. Go online, talk to the Better Business Bureau, get your research done, talk to friends, neighbors, and co-workers. That is how you find an honest dealer. If they had a good experience, most likely you will too.
I haven't seen MSN or Consumers Reports, or anyone else for that matter, do an expose on Furniture stores or Jewelry stores. You want to begrudge a salesman from making 5% markup on the car, yet you'll pay a 400% markup on furniture, and up to 1000% (that's ONE THOUSAND PERCENT) markup on jewelry. That $20000 car that cost the dealer $18980 vs. the $20000 diamond ring that cost $3000.... but let's just jump on the bandwagon and beat up car people. They're an easy target!
Times have changed, and so has the car business. If a dealer rips people off, they will eventually be driven out of business. Be informed, educate yourself, research your car choices, and when you walk into the dealership, you can actually enjoy the experience. Who knows, you might even make a new friend if you keep your mind open. An ignorant consumer is his own worst enemy. A salesperson would much rather deal with a customer that KNOWS the real facts than someone who is clueless and assumptive. When an informed customer walks in and states "I want to buy this car for this price, and get this money for my trade", it makes the job so much easier for the salesman. For all you idiots out there telling people to get your own financing.... GET A CLUE!! Most dealers can get you a significantly lower rate than your own bank or credit union.
Have a trade? Know what it is really worth before you go car shopping. Kelly Blue Book can be a good guide, but it is only a guide. They will not buy your car from you. If you really want to know the actual cash value, don't waste time on books. Just drive your trade to 4 different dealers, tell them you don't want to buy anything, you just want to sell your car. Ask them how much they will write you a check for. Throw out the lowest price and average the rest. That is what your trade is truly worth.
Best advice - know what you want, know what it costs, know what your trade is worth, be ready to make a deal if you get what you want, and keep an open mind when you talk to "the two headed monster" in the Finance Office.
No one is saying that dealerships should not be entitled to make money. But there is a lot to be said on how they go about making that money. The Auto sale industry is adversarial because the car industry made it that way. I have heard dealers complain about the low profit margin on the vehicles they sell, and make comparisons to the furniture and jewelry business, claiming they have outrageous markup. Here is a question. What is the mark-up on the $250 fabric protection? The $400 window etching? The $300 undercoating or paint sealant? How much does the dealership make on an extended warranty? Or the Additional Dealer Maintenance sticker?
The other difference between Jewelry and Furniture and the car industry is that I do not expect to have to replace my diamond ring after 7 years or my dining room table after 8 years. Neither have the maintenance costs that cars have. My cost of owner ship on a dining room table is what I paid for it plus a can of Pledge every 6 months. I dont have to take my diamond into the shop after 3000 miles, and pay $50 to change the oil or $500 for new brakes. Remember, it is the dealerships that made this article necessary.
first off, thanks for the article defending the salesman's right to earn a living. we are, after all, SALESMEN, not clerks at wal-mart. we have a right to earn a decent living, and you have a right to protect your money. we know going in it's a major purchase, and one that the buyer feels he is underprepared for. most buyers i deal with are more prepared than most of the salesmen i work with! they know the product better, have researched the competition, and many will ask a sales representative a bunch of questions just to make sure that we've done our homework! meaning, again, most salesmen are less prepared than their customers, and therefore, not worth paying a premium. some of us, though, WILL stay at ONE DEALERSHIP and provide you with a good contact if you ever need help. had 05 mistake bought his car from me, i would have been in his corner, talking to my service department, working the service manager for assistance, hell, even called ford's district manager if needed. that is the difference between a professional salesman and the guy that changes dealerships more often than he changes underwear. consumers tend to blame the salesman for issues, though we did not manufacture the car, will not ever service the car, etc. because we are the 'face' they are familiar with. when you go back and that 'face' isn't there anymore, i agree, it is frustrating, and now you have to start from the beginning explaining your issues, problems, concerns, etc. best way to ensure you get a guy that is in it for the long haul? call in advance and ask the receptionist for their most tenured sales person.
in response to a few of your comments...
b-solara- just ask to see the invoice! if they say no, go down the street. there's really not much to hide on them anyway, and any sales manager knows this.
freedom1955- i heard you were so ridiculously uninformed that the internet has threatened to take itself off your computer if you keep posting. you should be ashamed. seriously. see vermont bob's comment. go buy a couch or some jewelry, and really, seriously, stfu or do some research.
rstepesq- you can cure excessive % rates by paying your bills and taking care of your credit in general. feel free to bring your own financing, but give the car lot a chance... sometimes we can beat rates! and while we are on the su****ect of 'value...' have you considered the manufacturing cost of the crap they sell at Publix, Kroger, Safeway, etc vs the purchase price? how much do you think it REALLY costs to manufacture a television? not anywhere near the price you pay, that's for certain. not to mention any of the other million or so items that are 'bargain priced' there. and i bet you drive the posted speed limit everywhere you go as well, and that when you poop the scent of fresh cut roses fills the air. listen, bub, car guys work some very long and ridiculous hours to feed their families, and to have a person post on here that we are 'below lawyers, but above televangelists' is just a tad insulting. i'd like to know what you do for a living, not because i'm interested, but because i'd like to say something negative about it.
05mistake (pre-emptive strike here) we already know. you bought a mustang, didn't like it, had issues, and ford will not work with you. you feel that no one should buy a ford. you are wrong, but, you are entitled to your opinion, even if you haven't stated it on this particular thread as of yet. i'm guessing you may have visited the service department so many times with your 'the sky is falling' routine that they just don't wanna help any more.