Automotive • Finances & Money

10 Car Shopping Mistakes And How To Avoid Them

As you know, I love cars, yet I’m trying to force myself not to get a new one (I’m slowly losing the battle though). As part of my love for cars, I subscribe to a number of car mags and numerous car blogs. Every so often, I’ll also peruse books and other publications for information. Back in 2005, Consumer Reports published a book called Smart Buyer’s Guide to Buying or Leasing a Car. They compiled a list of common car shopping mistakes and a few ways to avoid them. Since I have fallen for a few of these, I’d like to share them with you and comment on them from my own experience:

Falling in love with a model

No, I’m not talking about Heidi Klum; I’m talking about becoming so focused on a single brand or model that you become biased for that model or against any other model. Buying the car of your dreams is nice, but make sure that reality lives up to your dreams. Quite often, they don’t match up. For example, my wife loves MINI Coopers and has stated she never wants another type of car again. That’s great that she LOVES her car, but the reality is MINI is on the bottom of the reliability list, and if we didn’t have the extended warranty or maintenance plan, we’d have spent a couple grand right out of the gate with our most recent MINI (bought used in 2010).

Another example is a friend of mine who wanted me to help him find a 3-row crossover/SUV. I went to the DC Auto Show twice (the 2nd time with him) to walk him through the offerings and point out the pros and cons of each model. We almost settled on a Volvo XC90 because of the price, features, longer maintenance and warranty plan than, say, BMW, and their offer to send you to Sweden, all expense paid, to tour the factory and pick up your car (and ship it home for free). But he had one problem: He later told me that he “always dreamed of having 2 BMWs in his garage). He already has an older BMW M3, so he was completely biased towards the BMW X5, regardless of price, amenities, etc. We did do some test drives together (e.g. Audi Q7), but he would always find something wrong with the competitor and nothing wrong with BMW. He ended up with the BMW in the end (used), but he could have had a better fit vehicle if he hadn’t fallen in love with the BMW brand.

Skipping the test drive

Oh man, I can’t stress enough how important a GOOD test drive is. If you buy a car on appearance and specs alone, you might be in for a shock. Even if you’ve ridden in the car, this is one you’ll be driving and owning, so you MUST get behind the wheel. Also, during the test drive, don’t just stick to the salesperson’s route. Get it on the highway, local roads. Stop and go traffic, parking decks and grocery store lots and any other situation you often find yourself. I can have an entire article (and I might) on how to conduct a good test drive, but let’s get back to the basics.

You might think you want a bigger vehicle (or a smaller one), or more (or less) power, etc., and you may have even picked out a specific model and you’re ready to buy. But if you don’t get your butt in that seat and drive it, you could be in for a rude awakening when you drive off the lot.

Granted, there are many big and small things you’ll find to love or loathe in your vehicle that you may never have found during a test drive, but would you spend thousands or tens of thousands of dollars on something you never tried out? Would you buy a house without stepping foot into it and doing an inspection? (The answer should be NO). But people quite often put more effort into selecting the right lawn fertilizer than they do in buying a car. You can regrow grass, but it’s almost impossible to return a car or even sell it right off the dealer lot without losing thousands of dollars. GET YOUR BUTT IN THAT SEAT AND DRIVE!!!

Negotiating down from the sticker price

Let me clarify this one. Negotiating isn’t a mistake; rather it’s either NOT negotiating or not negotiating ENOUGH. I’ve never paid MSRP for a vehicle, and I never will. If the dealer won’t take money off, and neither will any other dealer, the car isn’t worth having. That means they’re banking on others that MUST have the newest, biggest, fastest, etc. to pay full price (and sometimes much more!), but you shouldn’t be one of those buyers. Wait a few months or even a year, and you’ll be able to negotiate. The only time you won’t is when something is very limited edition, and unless you’re a collector willing to garage and maintain it (and never drive it) and sit on it for 20-30 years, it’s not worth your money.

To quote from the book:

A salesperson may offer you a deal that’s, 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.

I go to Edmunds.com and look at the invoice price and that becomes the maximum price I will pay. There’s also something called “dealer holdback” that they can dig into (but that really does take out of the salesman’s pocket a bit too far), as well as manufacturer and dealer rebates and incentives.

For example, I was looking at a Ford F-150 Platinum Edition. Price is about $53,000 sticker, fully-loaded. It’s basically a luxury truck. But right off the bat, I’m looking for a $6000 discount to get to invoice price, and the dealer offers that. But that’s not enough for me. They wouldn’t come up on my trade, so no deal (plus it’s a friggin $50k truck!), but that’s a different story.

Focusing only on the monthly payment when negotiating

Oh wow, soooooo many people fall into this one, big time. When I was negotiating on that truck, I didn’t care about the monthly payment because I knew I had enough in the bank to pay off the balance. And even if I didn’t want to pay from savings, I have enough disposable income to pay the truck off in just a couple months, so payments are a non-issue for me.

But the salesperson didn’t get it. I even told her I care about how much I’m paying for this truck total, not each month. But she kept talking about “this will only increase your payment by $10 a month”. I was getting angry, but I knew I had the power in this deal because ultimately it’s a buyer’s market all the time with cars and if she wanted my business, she would have to speak on my terms. She didn’t, and she lost the deal.

But even in my family, I’ve found that when they ask me for advice on buying a car, they talk about payments. They want more car than they can afford, so they try tactics, like I used to, of lengthening the loan term or banking on a lower interest rate or some even crazier schemes that I still don’t understand. In the end, buy a car you NEED first, and if you can afford the WANTS in your budget, then go for it, but focus on the total cost, not the payments. Think “should I be spending $50k on a pickup truck” rather than “ooh, I think I can fit $600/month into my budget for this truck” (the payment wouldn’t be that low without a lot of money down).

Buying the “deal” instead of the vehicle

So, you got a ton of money off, and it fits into your budget. You should buy, right? No. Piece together what I’ve told you to this point:

• It should be affordable
• It should be a car you like, but not a biased decision
• You should have driven it AT LEAST once and in many scenarios
• It shouldn’t be based on the payment

Waiting until you’re in the dealership to think about financing

First, I’ll say you should try to only buy when you’ve saved up enough to pay cash, but few can or will do this. Moving on, most of you will opt for financing, but few actually walk into the dealer ready with a pre-qualified auto loan from a bank with an excellent interest rate. You’ll probably just let the dealer tell you what options you have, normally steering you towards the options where they get the most kickback (usually from the manufacturer).

Even if the dealer can get financing through the same credit union you would have gone through, you should check whether you can get a better rate directly from the credit union (or bank) than through the dealer.

Underestimating the value of modern safety features

Ok, some new safety features may be standard in 10-15 years, but they just seem a bit unnecessary to me. For example, blind spot warning systems. Nice, but you can buy a blind spot mirror to attach to your side mirror for a couple bucks versus the hundreds for the electronic system. Not as nice looking, but does the job. Cars shouldn’t be considered as lounges where you don’t need to pay attention; you should always be aware of your surroundings, the flow of traffic, your speed, your alertness, etc.

But today’s cars MUST have a few features we thought were frivolous decades ago such as antilock brake systems (ABS), electronic stability control (ESC), and as many air-bags as you can fit. This one is simple, if every other car on the market has it, then the car you buy should have it (and that especially goes for used cars). While most of us can’t imagine buying a car without an airbag, some people are looking anywhere they can to save money and will do without such a safety feature that saved me a major headache when I totaled my mom’s Honda Civic back in 1995.

Buying unnecessary extras

There are needs and there are wants. I need a vehicle that gets me around safely (ignoring that I can often use public transport here in DC), but I want a vehicle with cooled seats, navigation, satellite radio, USB port, and sharks with laser beams mounted on their heads swimming around in a pool in the back. But honestly the extras are bundled up and sold as packages for wayyyy more than you would spend outfitting them yourself. For example, a nav system normally runs $1000-2000 easy. Sure, it integrates with the car and gives you a nice big screen for your radio and other features, but how much is an awesome Garmin? About $400 at Costco INCLUDING a lifetime update deal. You’ll still have to pay about $100 a year for DVDs or hard-drive updates for your in-car nav system.

And then there’s extras like VIN etching (stupid), rustproofing (unnecessary as most new cars have excellent paint coatings already) and fabric protection (you can buy a bottle of this stuff from Walmart yourself for a couple bucks).

But I’m not immune to the tom-foolery that dealers play in your head. For both my truck and our MINI, I bought the extra wheel and tire warranty for about $400. For the MINI, they used the scare tactic that the tires alone are $250 each, and for the truck, the wheels are $500 or more to replace. In the end, I realized I spent hundreds of dollars on foolish warranties. Granted, when I got new tires from NTB or Merchants, I paid the few extra bucks for the tire warranty, and it’s paid off twice on my truck, but that’s a few dollars versus hundreds. Oh, and I’ve fallen for the paint and fabric protection on our 2005 Malibu and I think on another car, but I can’t remember which.

Not researching the value of your current car

When you’re not in any rush to get a new vehicle, which most people aren’t if you really consider it, you can take the time to try to sell it on your own. Sure, there are risks, scheduling and effort involved, and that’s why most people will just take the trade-in price for their car rather than sell on their own, but I’ve sold 3 cars so far for thousands more than I would have gotten on trade (I got them appraised by dealers and Carmax first).

Ultimately, know the value of your car. Know that unless it’s brand new or has been garaged and maintained perfectly for a couple years, it’s not in “excellent” condition. Know that in the market, you can expect Fair or Good value, and when you try to trade it, they’ll lowball the heck out of you. For example, the Ford dealer offered $9500 for my truck, when KBB, Edmunds and others on the market were all quoted around $14-15k. Sure, they need to make a profit, but I’m not letting them make $5-6k off of me. I don’t let them BS me with “we have to spend a grand getting it to the quality of sale blah blah blah”. No, they fix what is glaringly wrong, give it a wash, buff, vacuum and polish and hope for the best. They have in-house mechanics and they aren’t paying them what you would pay per hour, and they’ll get discounts on parts. Don’t let them fool you into giving you a lowball offer on your car.

Not having a used car checked by an independent mechanic

Again, another one I could write an entire article on, but basically, unless you’re a qualified mechanic, you should take a used car (that you’re on the verge of purchasing) to a mechanic for inspection. Most of us aren’t trained on how to spot accident repairs, water damage, electrical problems or powertain issues. We just listen to see if it sounds right and the cosmetics look nice.

Don’t expect to get this done for free though. That’s why I say you should be serious about buying the car, so this should be in the final stages of negotiation because you should expect to pay about $100 or so to a mechanic to give it an inspection. It will be well worth it. Even if they find something, it might not be a deal-breaker, but you’ll know what is wrong when you buy it and how long you have till you should fix it.

What other mistakes have you made (or seen others make)? What are your “horror stories”?