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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It never ceases to amaze me that with out the auto industry you fellas would not have a job. Most new car franchise dealers have very little markup in a new car, yet according to all you "experts" the big bad dealer has many ways of making money on you. I do see advertisement on this blog why don't you let the advertisers know how much you are making off of them? This is however a free market and you are free to say what you want, just remember WITH OUT US YOU WOULD NOT HAVE YOUR CURRENT JOB!
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.
Why should Customer 1 pay more for the same exact car as Customer 2? The MSRP is never paid and the dealer invoice is also a bogus. The whole industry stinks. Is it the consumer's fault that a Sales Person only gets paid $100 on the sale of the car? That is something that has to be worked out with the Sales Person and the Dealership. I tried Sales for 3 months and I was very productive, but I could not live with myself knowing that the whole transaction to the customer and to me was absolutely toilet paper.
I read the first paragraph of this article and it makes me sick. I’ve been in the car business for 20 years now and I’m here to tell you the mark-up in a mid-sized sedan “for example” is ridiculously low. Your Sales Consultant that is trying to help you with your purchase gets paid a whopping hundred dollars to help you out. (Sometimes they get a spiff or extra money from the manufacturer). Depending on the miles you drive and how long you keep your Auto buy a Service Contract. If you’re not putting much money down buy GAP insurance. Find a good Sales Consultant they will be glad to help you make the right decisions. Mr. Matthew de Paula is an idiot. He needs to manage a few Dealerships and read a few Financial Statements so he can educate himself on the information he is writing about.
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.