The Eight Mistakes Car Buyers Make

MarketWatch.com

NEW YORK (MarketWatch) -- Befuddled about buying a new car? You're not alone. But don't let the prospect of a shiny new vehicle trip you into spending more than you need to or falling for dealer tricks.

Consumer Reports outlines the eight biggest mistakes buyers make when shopping for a new car:

1. Being pressured to act. It's OK to move at your own pace -- don't let yourself get bullied into buying before you're ready. When you do put down a deposit, use a credit card instead of writing a check. You'll have more protection if there is something fishy with the dealer.

2. Taking dealers at their word. Are you offered free oil changes or other perks? Get them in writing. Don't settle on just a verbal agreement -- have it written into the contract.

3. Financing for longer than 48 months. If you settle for a long-term loan, you're likely going to pay a higher interest rate. And if the car is stolen, wrecked or you just want to trade it in early, you'll probably owe more than it's worth.

4. Buying unnecessary extras. You'll be offered all sorts of "important" extras such as VIN glass etching, fabric protection or extended service. They can get expensive and you probably won't even need or use them.

5. Opting for dealer financing without shopping around. Don't just go for the dealer's rate. Do some research on the current loan rates and look for good offers from banks, online sources or credit unions.

6. Not negotiating a lease price. You can bargain for a lease price just as you would if you were buying the car.

7. Leasing because you can't afford to buy. It's true that you'll have a lower monthly payment, but you'll probably pay a much higher finance charge. At the end of the lease period, you won't even own the car. If you are strapped for cash, consider buying a used car instead.

8. Talking about trade-ins early in the process. Wait to mention your old car trade-in until after you've completed your negotiations on the new one.

Marshall Loeb, former editor of Fortune, Money, and The Columbia Journalism Review, writes "Your Dollars" exclusively for MarketWatch.

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Buying a new car is a lot like buying an engagement ring for your wife to be. You know you need to do it, and the woman will most likely really enjoy what you get her, but if you’re not careful, you could make a lot of mistakes and end up getting had. You might think you’re getting a good deal, but in the end you find yourself with a diamond that has all sorts of imperfections and does not shine light very well. The same is true for an automobile, if you aren’t very careful, you can make four or five figure mistakes. Here are some major mistakes that people make when they buy cars, trucks, vans and other automobiles.

1. Only Worrying About the Monthly Payment – A lot of people are under the mindset that they will always have a car payment, so they only worry about the price of their monthly payment. Don’t fall for the myth that you will always have a car payment. Save up, pay cash, and upgrade when you have the money.

2. Trading In Your Existing Car To The Dealer – A lot of people trade in their car to the dealer because it’s a lot easier selling their current car separately. However you will take a major hit because the dealer will only pay you a wholesale price, and chances are you can sell it for 20% or 30% more than what the dealer is willing to offer you.

3. What Test Drive? – Every now and then a person generally knows what kind of car they want, they find one for a good price and have already driven a similar car, so they don’t think they need a test drive. You never know what kind of quirks a car might have, so you should always test-drive it for at least 15 minutes or better yet more.

4. Finance at the Dealership – If you’re going to finance your vehicle, don’t finance it with the dealership. Shop around at a number of different banks to see which can get you the lowest rate. If you don’t, it’s up to the care salesman to decide what kind of loan you’re going to get. This way you can also focus solely the price of the vehicle, and not just the terms of the loan.

5. Not Having the Car Checked Out – Always have your car checked out by an independent auto-mechanic to make sure everything is on the up and up when you buy it. Don’t end up buying a car that appears to work just fine, but has some several mechanical problems that aren’t apparent when driving the vehicle. This happens a lot more than you think, so be sure to have an independent auto mechanic check out your vehicle before buying it!

Of course these are just a few of the many mistakes that people make when they buy their next vehicle. If you know of any more, be sure to let us know by commenting below!

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The MMI Online Articles are designed to inform, assist, educate and alert consumers.

The Consumer Literacy Consortium released its list of the top consumer purchase mistakes as part of its ongoing campaign to reduce wasteful consumer spending.

"Consumers lose billions of dollars each year because of hasty, uninformed purchases - not just on big ticket items, but on everyday purchases as well," said Consumer Federation of American Executive Director Steve Brobeck.

The common, repeated mistakes that needlessly cost consumers include:


1. Leasing rather than buying a car in the belief that leasing costs less.

2. Not searching carefully for a competent, honest, auto mechanic.

3. Assuming their insurance agent will "shop the market" to get the best auto and homeowner policy.

4. Not holding a cash-value life insurance policy for at least 15 years.

5. Not maintaining the minimum balance required to avoid checking fees.

6. Holding many credit cards.

7. Taking out a 30-year mortgage loan rather than a 15-year loan, just because the monthly payments are lower.

8. Paying in full for home improvements before the work has been completed satisfactorily.

9. Purchasing new appliances that are not energy efficient.

10. Not comparing unit prices on supermarket shelves.

This list and the tips contained in the free consumer guide "66 Ways to Save Money" are part of a campaign to reduce the more that $100 billion a year of wasted consumer expenditure.

The brochure is free by sending a SASE to "66 Ways to Save Money" PO Box 12099, Washington DC 2005-0999 or online at 66ways.org. For a copy of the 10 Mistakes: CFA, 1424 16th Street, NW, Suite 604, Washington DC 20036.

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