Car Buying Mistakes
Ultimately, when you’re shopping for a car, it’s important that you take the entire process into consideration. While you don’t have to be perfect, there are some common mistakes that buyers make and should avoid while looking for a new car. Stay away from them or they may really end up costing you.
#1: Not Researching
With any major purchase, you should always take time to do some research. There are many reliable websites online that can offer helpful information that make it easy to create a list of vehicles that will work best for your needs and budget.
#2: Focusing on the monthly payment
Many people go into the dealership with a set monthly payment in mind. Never disclose that to a salesperson during negotiation as they can manipulate numbers to create that payment (most likely with an extra year or two of payments). You need to consider both the interest rate and the length of the loan and check these things before agreeing on a final purchase price. A longer loan means paying more interest, so choose wisely.
#3: Only shopping at one dealership
It pays to shop around when it comes to new car buying. You don’t have to do this in person. You can call the dealership and ask them their lowest price and then can use these quotes to negotiate the best deal for your budget.
#4: Not appraising your trade-in
If you plan on trading in your vehicle, be sure to research the value of the vehicle before visiting the dealership. Print out the details and have them to show to the salesperson.
#5: Not test driving
Oftentimes many complaints that buyers have about their new car could have been avoided if they took the right time to test drive. If you’re going to be using this car regularly, you should know how it handles before committing to a big sticker price.
#6: Not calling your insurance company beforehand.
It’s important to consider the cost of your insurance before purchasing a car. Call and get a quote beforehand so you know what you can afford. By having these things in place, you also will expedite the overall car-buying process too if you do decide to purchase a car when visiting the dealership.
#7: Not considering outside financing
Call around and see what rates you can get outside of the dealership’s financing. While sometimes the deal is better there, it’s smart to shop around. A pre-approval for a car loan is also advisable as they will be more likely to work with you on a final sales price.
#8: Buying under pressure
Don’t buy unless you’re comfortable with all facets of the sale. If you’re hesitant, it’s best to walk away and take more time before making this big purchase.
Trade In Your Vehicle Versus Selling it Privately
When you’re considering buying a new car, you have two options when it comes to your old vehicle. 1. You can trade it into the dealer using it as a nice down payment (or just paying off the loan) or 2. You can sell it yourself. When it comes to selling your car, which is the best option? Let’s break down each option and help you decide.
The biggest benefit to this option is that it is easy. You take your vehicle to the dealer, they make you an offer and you put it toward your new car or your existing loan (or both). You don’t have to handle any paperwork like you would a private sale. Also, it can help keep the cost of taxes down. For instance, if you buy a $15,000 car and your trade-in is $10,000, you’re only paying taxes on $5,000 (a 1/3 of the cost), so you end up saving money there despite the biggest con.
The major disadvantage to this option is money. The dealer needs to make money on your car, so you won’t get retail value for it. While you don’t have to deal with the hassle, you can lose money. However, as mentioned above, it helps lower your overall taxable price.
You will likely get more money for your vehicle with this option. This is because the next owner won’t mark it up like that of a dealer. Selling a car isn’t easy and can take time. You also must schedule time to meet with people, allow them to test drive and dealing with banks. Selling your car will take more legwork, but if you have the time and means, it will result in a better return.
Ultimately while selling your own car can be hard, we believe that the hassle is worth it. The difference between a trade-in offer from a dealership and a private selling price can be extreme. Our advice is to try selling the car for a period of time before deciding to trade it in. This gives you adequate time to research vehicles you’re interested in, get financing research and/or pre-approval done and test drives scheduled too.
What You Should Know About Auto Loans
For the most successful car-buying experience, there are several things you should consider. They include: getting the best price, choosing the right car for your needs and budget, and funding the purchase in the smartest way. If you’re going to borrow for this big purchase, it is important to understand the car loan process.
An auto loan helps you to buy a vehicle that costs more than you can afford to pay with cash. If you borrow wisely, you will see two major benefits:
- You have the flexibility to change vehicles and fund other goals you have in the loan period (up to 6 years.
- You spend less on your vehicle (sometimes even thousands).
Start planning for your loan the moment you begin researching vehicles you’re interested in. This allows you to be prepared and have the best chance to get a loan that works best for you (length and interest rate). Best of all, once you’re ready to make the purchase, you will BE prepared.
Credit Considerations for financing a used car
Credit and your income will determine if a lender will approve you for an auto loan. Your credit is a history of borrowing from other lenders. If you have a good credit score, you will get a lower interest rate then others meaning that you will pay less for your vehicle (both interest rate and lower monthly payments).
Check your credit report. By law, you are entitled to one free credit report each fiscal year. Read the report carefully and fix any errors that can lower your score.
Understand how much you can truly spend in terms of a down payment and monthly payment. This allows you to limit your search from the beginning. A big down payment will help keep your monthly payment low. Monthly payments will depend on the interest rate you have for your auto loan and the length of the loan.
It’s important that you understand how loans work. This allows you the best resources to make the smartest decision when it comes to a car loan. Two of the biggest mistakes you can make are focusing on the monthly payment (and not the overall price or the cost with interest) and tunnel vision meaning they need a certain car with certain features despite the cost.
It’s important that you shop around as you may find a better deal where you least expect it. At least take the necessary time to research rates before going to a dealership to compare them with the financing options that the dealership offers you.
All of these things will help you have a great new car-buying experience. They keep you prepared and ensure that you get the best price that you can afford. Not only will you drive the vehicle of your dreams, but won’t break the bank or your budget while doing so. Good luck on your new car-buying journey!
Is Leasing For You?
When you’re considering a new vehicle, you have two options: buying or leasing. While most people choose to purchase (finance) a new car, many choose leasing. When does leasing make more sense for a driver? To help you decide this exactly, we will present the pros and cons of leasing and you can decide for yourself.
Benefits of Leasing a New Car
Perhaps the biggest advantage to this option is that you usually get more car for your money. A lease uses depreciation on the car rather than on the purchase. This means you are paying for that value over the lease period and not on the entire price of the car. Leasing also benefits those who don’t have the money available for a down payment. Many lease deals don’t require a down payment or a relatively low one. You also get a new vehicle every few years. If you sign a five-year loan to buy a car, you will make payments that long. If you’re leasing, your obligation is done sooner and you can get into a newer model and quick.
Cons to Leasing
The biggest drawback to this is that you aren’t building any equity. You also have a mileage restriction. To get the best leasing deals, you must commit to a relatively low yearly mileage count (10,000-12,000). If you can’t do that, your lease rate goes up or you pay extra mileage penalties at the end of the lease (that they will say they can roll into a new lease). You also should take great car of your vehicle. They require you keep the car in very good condition and will charge you for excess wear and tear.
Do you think leasing is for you? That answer depends. We suggest leasing for drivers who like driving new cars, who don’t drive much or often and who maintain their cars regularly. We also suggest leasing to those that don’t have a down payment saved up. If you don’t want a car every few years and drive a lot, a lease is most likely not for you.
Car Dealer Terminology Explained
To make the car-buying experience more enjoyable, it’s important to understand the car dealer terminology. This allows you to be aware and educated so you get the best deal. Here are some of the most popular terms used by dealerships.
Doc Fees: Documentation fees are those that a car dealer charges for processing paperwork for purchases or leases.
Dealer Prep Charge: This is a fee accessed when a new vehicle arrives at the dealership from the factory. The dealership has personnel preparing the vehicle for sale and sometimes charge the buyer.
Extended Warranty: This is additional protection after the original factory one expires. You have up to a year to decide if you want this warranty or not, so don’t rush into it if you aren’t sure.
F&I: Stands for finance and insurance. When you buy a new car, consumers are sent to this office to finalize the details of your deal. Additional products or services may be offered to you. At the end of this process, the contract is finalized and signed before you drive your new vehicle and home.
Gap Insurance: This is insurance that covers the difference of the cost of the vehicle recovered from insurance and the cost of paying off a loan (if totaled). Depreciation occurs the minute someone drives the car off a lot.
Incentive: This is money that is paid to the dealer from the automaker after a sale is made. The car dealer can pass on a portion or all of the savings to the customer to inspire a sale.
Invoice Price: This is the amount of money that the dealership pays the automaker for the car. The invoice price is higher than what the factory actually pays for the vehicle.
MSRP: Manufacturer’s Suggested Retail Price is known as the sticker price. Subtract the invoice price from this and that is the bottom line that a dealer can sell a vehicle for.
Trade-In Value: This is the amount that the dealer will pay for a trade-in vehicle. The amount is typically less than the retail value as the dealership still needs to make money off of the dealership and make any necessary repairs and/or paint.