Buying a car is a significant financial decision. Whether you buy a used minivan or splurge on a fancy sports car, knowing what to expect is important before you open your wallet and spend all that money. While the process can be exciting, it is fraught with potential pitfalls that can lead to costly mistakes. Here are the 15 most expensive mistakes people make when buying a car.
1. Not Doing Enough Research
One of the costliest mistakes when buying a car is not doing your research before stepping into a dealership. Before you buy, you should compare models, prices, and features.
By doing the legwork ahead of time, you’ll understand what you need and what the best deal is for your budget. A lack of research can lead to overpaying for a car or purchasing a model that doesn’t best fit your needs.
2. Skipping the Test Drive
You have a driver’s license, so put it to good use! Take the car you want to buy on a test drive, ideally with the salesperson in the vehicle with you.
A car might look perfect on paper but may not suit your driving style or comfort preferences. Skipping the test drive can result in owning a car that you find uncomfortable or difficult to drive.
3. Ignoring Financing Options
Many buyers accept the first financing option offered to them at the dealership. However, the only way to ensure you’re getting the best deal is by shopping around for better interest rates from banks or credit unions.
When you go with the first option, you may end up paying significantly more in interest over the life of the loan. Come to the dealership with pre-approved financing to gain leverage in your negotiations and ensure competitive rates.
4. Focusing Solely on Monthly Payments
Never lose sight of the big picture. You’re not only paying for the low cost of the monthly payments. When buying a car, you’re responsible for the total cost of the vehicle, including interest rates throughout the loan.
Keep in mind that dealers can extend loan terms to lower monthly payments. Ultimately, you end up paying that monthly cost for an extended time, keeping you in debt for longer.
5. Overlooking Total Cost of Ownership
Beyond the purchase price, there are many other costs to consider when buying a car. Insurance, maintenance, fuel efficiency, and depreciation contribute to the vehicle’s total cost of ownership. There’s also the potential cost of transporting your car.
Failing to account for these costs can lead to unexpected financial strain. Buyers should estimate how much it costs to maintain the vehicle ahead of time.
6. Buying New Instead of Used
New cars depreciate rapidly, often losing about 20% of their value in the first year. Purchasing a slightly used car can save buyers a significant amount of money, while still acquiring a reliable vehicle.
The allure of a brand-new car can be tempting, but it’s often not the most financially savvy choice. Luckily, you can find many used cars that look brand new with low mileage and for a lower cost.
7. Purchasing Unnecessary Add-Ons
Dealerships often push add-ons like extended warranties, fabric protection, and paint sealants. These features may be nice, but they’re not always necessary.
e wary since these add-ons will significantly inflate the cost of the car. Buyers should critically assess the usefulness of each add-on and decline those that are not necessary.
8. Falling for the ‘Yo-Yo Financing’ Trap
Yo-yo financing occurs when a dealer allows a buyer to drive away with a vehicle before the financing is fully approved, then calls them back saying the original financing fell through. This scam usually results in a higher interest rate.
Luckily, there are new rules in place to protect consumers against this deceiving trap. This can be avoided by securing financing independently before making a purchase.
9. Trading in a Car That’s Worth Less Than What’s Owed
Rolling over negative equity from an old car loan into a new car purchase can start a cycle of debt that is hard to break. Buyers should aim to pay off their current vehicle before trading it in.
At the very least, they should understand the financial implications of transferring negative equity to a new loan. This could come back to haunt you later on in the future.
10. Not Checking the Vehicle History
For used cars, not checking the vehicle history report for past accidents, service points, and previous ownership can lead to costly problems down the road (literally). A vehicle with a problematic history can result in higher maintenance and repair costs.
Look at the CARFAX report before committing to the purchase. If you’re buying privately and the owner doesn’t have those details, then it’s best to steer clear of the transaction.
11. Not Negotiating the Price
Don’t be shy about asking for a better deal. Accepting the sticker price without negotiating can mean spending more than necessary. Almost every dealer marks up the price expecting negotiation. Not bargaining could lead to missing out on hundreds or even thousands of dollars in savings.
12. Choosing Inappropriate Insurance Coverage
Over-insuring or under-insuring a car can be costly. Buyers should compare insurance offers and accurately determine the level of coverage needed based on the vehicle type, their driving habits, and other personal factors.
Keep in mind that some dealerships require full coverage before you can purchase a vehicle. Get the information ahead of time so you’re better prepared.
13. Ignoring Seasonal Offers and Timing
Timing can significantly impact the cost of a new car. Buying at the end of the month, quarter, or year, when dealerships are trying to meet sales goals, can result in better deals.
Be strategic about when you’re shopping to get the best possible price. If you can live with your current car for a little longer, it could end up saving you a bunch of money.
14. Getting Impressed by Fancy Features
High-end technology or luxury features are definitely nice, but they’re not always a necessary part of your purchase. Built-in GPS, leather interior, remote starts, and other bells and whistles can inflate the price of your vehicle.
Instead, focus on the bare-bones essentials like safety features and good gas mileage. Try to stay focused on your actual needs rather than getting carried away with the latest gadgets.
15. Not Considering Future Resale Value
Some cars depreciate faster than others. Ignoring a vehicle’s resale value when making a purchase can result in a lower return when it’s time to sell or trade in.
Before you head to the dealership, research cars that hold their value, even if it’s decades down the line. Forward-thinking results in better financial decisions, especially when buying a car.
Hit the Road
By being informed, prepared, and vigilant, you can avoid costly mistakes when buying a car. Think of the long-term rather than the initial purchase of your vehicle. Be sure to also do the research ahead of time on what models, prices, and features are best for you and your lifestyle.
Whether it’s choosing the right time to buy, opting for a used car, or skipping out on fancy features, each step will help you avoid financial pitfalls. You’ll be happily driving in your newly purchased vehicle for years!
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Alyssa Serio has been a writer and editor since graduating from Aurora University in 2014. In her free time, she loves reading, playing volleyball, and watching any horror movie (even the bad ones) with her husband.