You need more than a driver's license and a checkbook to snag a great deal. These classic blunders are a minefield at every dealership.
By Laura Shanahan, Bankrate.com
Craving a new car? Jonesing for a jalopy? Mooning for a minivan?
Yep, getting a new set of wheels is one of those wonderful sources of high-octane excitement -- but don't get too revved up. The myriad decisions regarding car buying are ones you want to make with a clear head.
"Car-buying is, or should be, a calculated decision," says John Mondin, an auto travel counselor with AAA. "It's a major purchase."
So, before you go cuckoo for that coupe or raving for that roadster, consider these top 10 mistakes car buyers make.
How to lose the showroom showdown
Ignore your needs. To paraphrase the immortal words of Mick Jagger, you can't always get what you want, but at least in the realm of cars, you're much better off with what you need. Sure, SUVs are all the rage, but do you need one to drive the mile and a half to bingo every Sunday? Is that racy red sports car really the best choice for your family-of-five-kids-and-growing?
"Don't let a midlife crisis guide your decision," cautions Mondin.
"Getting a spiffy new sports or status car may give the buyer an immediate lift," adds Miriam Biddelman, a private-practice psychotherapist. "But while the lift may not last, the bills surely do. This is not a good path to go down."
Show your hand. "This is a business transaction," points out Paul Calisi, president of the AAA of New York's Auto Buying Program. "If you fall in love with a car, be sure not to overreact and get too anxious. Give yourself some time to sit back and make sure it's the car for you."
In short, don't let your heart rule your head -- it can lead to aching in both body parts. Also, keep a grasp on reality. If you can afford $20,000 and the object of your affection lists for $30,000, you might be able to negotiate it down to, say, $27,000; but there's no way you're going to be able to buy it for $20,000 unless there's a $7,000 rebate.
Do bad research -- or no research. Buying a car is not rocket science, but you could compare it to a high school term paper. To do it right, you've got some homework ahead of you.
The good news is that with the advent of the Internet, a world of information -- never available to our parents and grandparents -- is just a click away. And usually for free. Resources such as MSN Autos, Cars.com, Kelley Blue Book, Edmunds.com and Autobytel.com provide tons of information on pricing, rebates, holdback incentives, options, packages, interest rates, negotiating techniques, reviews, forums and much more.
Walking onto a dealer's lot with no information is like walking into the lion's den. And relying on a dealer for information is just slightly better.
Pick the most convenient dealership. No, they're not all the same -- not even for the same exact makes and models. Ask around -- learn from friends' experiences. Also, determine your seller's C.S.I. (Customer Service Index), which is a ranking generally maintained by automakers for the dealerships that sell their vehicles. The C.S.I. is a reflection of how well an individual dealer satisfies its customers both in terms of sales and service. "You can also check dealerships with the Better Business Bureau" points out Mondin.
Go by payment, rather than price. This is an easy mistake to make, since most of us budget, and therefore think, in terms of monthly figures rather than going by grand totals -- and gee, paying only $400 per month sure sounds better than, say, $500, even if the car payments do drag on a bit longer with the former.
But you've done yourself no favor in getting the dealer to agree to the lower figure. Why? Because the dragged-out loan means more interest charges for you -- and more profit for the seller. In short, keep an eye on the long-term total, not just the monthly payouts.
Prematurely talk trade-in. This is another easy trap to fall into because dealers love to play the trade-in game. Don't let them muddy the waters.
Negotiate a satisfactory price for the car -- and then bring up your trade-in. Another thought: If you bring in your old car all cruddy and dirty, the appraiser will rightly assume you don't put much value on it yourself.
Don't shop interest rates. Too many car buyers ignore the importance of shopping interest rates, apparently thinking that if the payment fits into their monthly budget okay, it must be all right. But unless you have excellent credit, you're most likely better off getting your financing elsewhere.
The little differences in the numbers can be huge. Consider this: $20,000 financed over five years at 3.9 percent costs $2,045.80 in interest. The same deal at 7.9 percent costs $4,272.20 -- a difference of more than $2,226.
One-stop shopping. The big advantage to doing so is convenience -- but in terms of financing, if you shop around via local banks, credit unions and other lenders, you may well get yourself a better deal.
Other things you should shop around for: various add-ons and accessories. Don't buy more than you need, and for what you do want, consider other sources. But before you get too bare bones about it, remember that some safety options -- such as anti-lock brakes and side-impact airbags -- can reduce insurance costs, a major consideration.
Go it alone when you shouldn't. If hassles give you headaches and negotiations make you nauseated, turn it over to an expert. For example, the AAA Endorsed Auto Buying Program nets members special pricing through authorized dealers. To learn more, log onto aaa.com; or become a member by calling 1-800-JOIN-AAA.
Think it's over before it's over. In the case of car buying, it ain't over 'til the business manager sings.
You may think you bought your car once the sales manager shakes your hand and tells you what a great deal you got. But beware the business office, often called the finance and insurance office. Dealers often make as much money in this room as they do on the showroom floor. Insurance, dealer add-ons, extra fees and interest rate changes are among the common ploys you could get clobbered with on your way out the door.
So, what should you do?
"About half of all dealers use a scam or several scams to make you pay more than you should," says consumer advocate Jeff Ostroff, who operates carbuyingtips.com.
"They have hundreds of tricks, wiles and ploys in their arsenal. But if you recognize their tricks, you can beat them at their own game and save thousands of dollars."
Three simple rules can assure success: Do your homework, don't become a hostage and be prepared to walk away.
Get smart. Don't wait until your old banger is dying. It takes six to 10 weeks to kick the tires, choose a car, check your credit score, set up financing, haggle and finalize a deal, so don't be forced into hasty decisions. You should:- Know your credit score. For $29.95, Equifax provides your credit history from all three major credit reporting agencies. It will be vital information for you to have when the dealer's men "reluctantly" tell you your interest rate will be higher than advertised because your credit rating is low.
- Put together a folder of information on the cars you like and their prices. Take it with you to the dealer and make sure they see it. If your spouse is with you, agree beforehand: No impulse buys and no discussion of exactly what you are prepared to pay, even if you're alone in a sales office -- it might be bugged.
Don't be a prisoner. "Sales people will go to great lengths to tie up your day so that you're tired and ready to surrender. Plus, it stops you from going to a rival dealer," Ostroff explains.
When the salesman asks you for your driver's license before a test drive, that "Ka-ching" you hear is the sound of a cash register, and the sound of a scam.
Refuse. Instead, hand him a photocopy. If they have your license, you can't leave. Don't be held hostage. When you hand over the copy, write on its face, "No credit checks authorized." This will prevent the dealer from checking your financial standing, and automatically lowering your credit score about five points. Remind them that the Federal Trade Commission levies a $2,500 fine for an unauthorized check. When you leave the dealership, get the copy back.
Do not skip the test drive -- but make the most of it. Don't just cruise around a few blocks and play the radio. Check things like sight lines and how easy it is to reach important controls. Test acceleration onto highways and whether you feel entirely comfortable at the wheel.
When the conversation turns to financing, you may hear that "Ka-ching" sound again. And for good reason. Tell the salesman you'll be arranging your own financing to avoid the dealership's higher APR but are willing to hear a competing offer.
Finally, bite the bullet and sell your old car privately, get someone else to assume the lease or stay with the thing until it's paid off. Sometimes, you simply should not be buying a new car, especially if you are already deep in debt. All the old wheels are is leverage for the dealer.
Head for the door. Once actual negotiations begin over the price of the new car, the salesman will usually give you some ridiculous figure he needs "to put you into this car today." Counter with your lowest possible offer, based on your homework and knowledge of what the dealership paid. When he gets up to discuss it with his manager, stop him right there. Let him know there's a limit on how long you'll wait, say about 10 minutes. Aren't you glad you didn't hand over your driver's license? They can't chain you to their showroom, so you're taking control of the negotiation.
Very important: Be prepared to walk away. There are plenty of dealers, plenty of cars. You know within a few hundred dollars what you should be paying, and every minute spent discussing a figure significantly higher than that is wasted. And don't feel you have to wait around to say goodbye. The salesman got your phone number in the first few minutes. If he wants to make a deal, he'll find you.
Two more valuable tips: First, never leave a cash deposit. You can always dispute a credit card transaction, but once you hand over cash, matters get tough.
Secondly, if you must finance through a dealer, do not take delivery until the loan has been approved in writing. That's when you know the lender has accepted your loan, and the deal's a real one. A common dealer ploy, explains Ostroff, is to call you back a week or two after you've made your deal to tell you either that the financing fell through or that they have a better financing deal for you. Stay away.
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