FYI: Car buyers today boast an array of tools and resources to ensure they find the right vehicle at the right price. Despite this, common pitfalls can still lead to costly mistakes. Emotional impulses, combined with rushed decisions, frequently catch car buyers off-guard. Automotive experts share the most frequent mistakes and how to avoid them.
Trading Vehicles with Negative Equity
Negative equity, or "overdraft" and "underwater," describes owing more on a car loan than the car’s current value. According to a recent report, 25% of buyers trading in vehicles for new ones in the second quarter of 2024 faced this issue. Over the past few years, not only have such cases increased, but the debt amounts have grown as well.
For instance, if you owe $5,000 on your existing vehicle and decide to trade it, this amount will be added to your new car loan, hiking your monthly payments significantly. The best approach is to keep your current vehicle and pay down the loan. Waiting ensures that the trade-in value aligns with the outstanding loan, saving you from extra financial burden.
Rushing to Buy a Car
Sometimes urgency is unavoidable. Accidents or complete breakdowns may necessitate a quick replacement. However, many shoppers skip essential research in their haste. New car models often feature advanced technologies worth understanding. Shopping around not only familiarizes you with these features but also provides multiple quotes and (for used cars) an opportunity for a vehicle inspection.
If time is of the essence, consider temporary transportation. Renting a car might cost a few hundred dollars but is preferable to hasty decisions that could lead to an unsuitable or overpriced purchase.
Limiting Your Search to One Dealer
A common mistake is limiting the search to a single dealership, especially when pressed for time. In such situations, resist the urge to make quick decisions. Nowadays, most price comparisons can be done online. By approaching multiple dealers, you can leverage competition to your advantage. Be transparent about your intentions and share quotes, signaling that you’re an informed and serious buyer.
Dealer Pricing Confusion
Dealerships can overwhelm buyers with a myriad of figures—asking price, trade-in value, down payment, and monthly payments. Start by determining the fair market value of the car you wish to purchase. This figure will guide your negotiations. Focus on two primary numbers: the total list price (inclusive of taxes and fees) and the trade-in value.
Beware of dealer add-ons like anti-theft devices, extended warranties, fabric protection, and wheel locks. These can inflate the deal size. While some add-ons can be negotiated, it often detracts from securing the best possible price for the car itself. Ideally, aim to purchase the vehicle sans unnecessary extras.
Conclusion
Carefully considering all your car buying options and scrutinizing deal terms may take more time but could save you thousands of dollars. Make every moment and dollar count.
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Lawrence Jacobs, Editor of Automotive.fyi
