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Seven Common Car Buying Mistakes

May 18, 2008
Buying a new car can be exciting. But it's also a complex process through which you can end up overpaying by hundreds or thousands of dollars or with a vehicle that you won't be happy with down the road.

The costs of automobile usage, which may include the cost of: acquiring the vehicle, repairs, maintenance, fuel, depreciation, parking fees, tire replacement, taxes and insurance, are weighed against the cost of the alternatives, and the value of the benefits perceived and real of vehicle usage. The benefits may include on demand transportation, mobility, independence and convenience.

Similarly the costs to society of encompassing automobile use, which may include those of maintaining roads, land use, pollution, public health, health care, and of disposing of the vehicle at the end of its life, can be balanced against the value of the benefits to society that automobile use generates.

The societal benefits may include: economy benefits, such as job and wealth creation, of automobile production and maintenance, transportation provision, society wellbeing derived from leisure and travel opportunities, and revenue generation from the tax opportunities. The ability for humans to move flexibly from place to place has far reaching implications for the nature of societies.

1. Falling in love with a model.
When spending tens of thousands of dollars on a car, emotion shouldn't rule the day. Becoming infatuated with a single model can blind you to alternative vehicles that may be better for your needs or make you skimp on thoroughly researching a vehicle's ratings, reviews, reliability, or safety and pricing information.

To determine which vehicle is best for you, you should set emotion aside and focus on doing your homework, comparing different models, and assessing your real wants and needs. There will be plenty of time for emotion after you've bought the vehicle.

2. Skipping the test drive.
The test drive is one of the most important parts of the car buying process. A lot of vehicles look good on paper especially in glossy brochure photos but the test drive is your best chance to see how a vehicle measures up to expectations and how well it fits you and your family.

3. Negotiating down from the sticker price.
Don't use the sticker price as your gauge when negotiating a deal. A salesperson may offer you a deal thats, say, $500 below the sticker price, and many consumers will conclude, often mistakenly, that they're getting a good deal.

Unless the vehicle is in big demand and short supply, you can often get an even lower price by negotiating up from what the dealer paid for the vehicle. When you know the dealer's true cost, you'll know how much profit margin it has to work with and can determine a reasonable target price with which to begin your negotiations.

You can calculate the dealer's cost by subtracting any behind-the-scenes sales incentives, such as dealer rebates and holdbacks, from the dealer invoice price. Consumer Reports New Car Price Reports does this for you with the CR Bottom Line Price.

4. Focusing only on the monthly payment when negotiating.
Salespeople like to focus on a monthly-payment figure while negotiating a deal. Indeed, How much were you thinking of paying each month? might be one of the first questions to greet you when you meet a salesperson. Don't take the bait.

It's the first step down a slippery slope of being manipulated with numbers and overpaying for your vehicle. Using the monthly payment as the focus, the salesperson can lump the new-vehicle price, trade-in value, and financing or leasing terms together, giving him or her too much latitude to give you a good price in one area while making up for it in another. Instead, insist on negotiating one thing at a time.

Settle on the vehicle's price first, then discuss a trade-in, financing, or leasing separately, as necessary. A leasing tip: Don't bring up your desire to lease until after you've agreed on the vehicle's price.

5. Buying the deal instead of the vehicle.
Automakers have been offering a variety of attractive sales incentives in recent years, from 0% financing and hefty cash rebates to employee-discount pricing programs. These can save you money, but it's important to remember that any deal is only as good as the car thats attached to it.

Just because you can get a good discount doesn't mean you should buy the vehicle. After all, you'll be living with the vehicle for years, so make sure it's the right one for you. You may find you can get a much better vehicle for not much more money. Also check the reliability of the model.

Despite an attractive discount, a vehicle with subpar reliability--and the possibility of hefty depreciation--might not be much of a bargain in the long run. A related tip: Dont let a special incentive keep you from negotiating. Rebates and special financing are subsidized by the automaker, not the dealership. You should still negotiate the vehicle's price as if there were no incentive. There's no reason you shouldn't get the best price and the incentive, too.

6. Waiting until you're in the dealership to think about financing.
You might be a whiz at negotiating a good deal, but if you don't choose your financing just as carefully, you could lose everything you saved on the vehicles purchase price, and more. A car shopper who hasn't researched financing terms is especially vulnerable to being manipulated by the dealership.

Not only do you only have the dealerships terms from which to choose, which are often higher than elsewhere, but dealers also often mark up the interest rate of a loan over what you actually qualify for--a tactic called interest-rate bumping. It can cost you hundreds or even thousands of dollars more over the term of the loan.

Thats why it's critical to comparison shop for financing terms at different financial institutions and get prequalified for an auto loan before you go to the dealership to buy the vehicle. Check interest rates at banks, credit unions, or online financial sites to see which offers you the best rate. If the dealer can offer you terms that are better than what you got elsewhere, you can always choose that deal instead.

7. Underestimating the value of modern safety features.
Today's vehicles offer an array of advanced safety features. But many buyers dont know which are most important or what to look for when comparing vehicles. Antilock brake systems (ABS), electronic stability control (ESC), and head-protecting side air bags, for instance, are effective and well worth the money.

Studies have shown that ESC can significantly reduce accidents and fatalities. The feature is especially important for SUVs, because it can help prevent rollovers. Side-crash tests show that head-protecting side air bags are critical in preventing fatalities in side impacts. Unfortunately, you can't always depend on a dealership's salespeople to give you accurate information or reliable guidance about these features.

That's why you should thoroughly research the benefit of all available safety features and look for vehicles that have the ones that will best protect you and your family.
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