Unless you're a high roller with a lot of money to burn, the decision to buy a car won't be a spontaneous one. It requires a lot of research and financial planning to find the right ride for your tastes and budget.

Buying a Car the Right Way

Unfortunately, despite the impact that buying a car has on a man's wallet, many guys neglect to properly educate themselves on the process. They end up getting swindled at the dealership, driving an inferior automobile or needlessly paying for extras.

If you're thinking about trading in your old car for a new one, read the following common car-buying mistakes before you start shopping. Armed with this advice, you'll be properly prepared to buy the right car at the right place.

1- Not doing the proper research

This first mistake is perhaps the most widespread among buyers, since it takes a fair amount of work to find the right car and payment plan.

The best way to get to the nitty-gritty of car buying is by consulting well-established magazines like Car and Driver and Road & Track. You can also read up on the latest car reviews by browsing the Web as there is literally a wealth of pertinent information available online.

The ideal resource is probably Consumer Report's auto section, where you'll find reviews, ratings and recommendations on old and new cars. Visit them at ConsumerReports.org.

Foremost on the list of items to look for is the invoice price, found at Edmunds.com or KBB.com (Kelley Blue Book). This is the price the manufacturer paid the dealer; the price you'll see is the Manufacturer's Suggested Retail Price (MSRP), more commonly known as the sticker price. Negotiations with the salesperson should begin from the invoice price, not the MSRP.

Finally, research the resale price of the car you're interested in. Honda's fleet usually boasts the highest resale values, and most Japanese cars will give you more bang for your buck than American cars. The price varies from car to car, so be sure to check out your particular case with one of the aforementioned sources.

2- Not buying the car you need

You have to determine what kind of car fits your lifestyle. For instance, you may want a sweet-looking roadster, but if the wife is expecting, this isn't the best idea. Check out sedans, coupes, SUVs, and station wagons (notice the absence of minivans -- don't go there, my friend) and compare the advantages and functionality of each.

There's nothing worse than getting captivated by an impractical car, driving it home and then, two months later, discovering its shortcomings. If you take a lot of road trips, check if there's adequate trunk space for your suitcase (or golf bag). Fuel economy is also a key factor and if this is important to you, forget about buying an SUV.

3- Buying too soon

You'd think that people wait too long to buy their car, right? Think of all the rusty lemons you see spewing black smoke out of their exhaust pipes during rush hour. The fact is, though, it's more common for people to buy a car too early rather than too late.

What often happens is that, despite having loads of payments left on their financed or leased vehicle, car owners see something they like and jump at the chance to get it.

Dealers, seeing an easy sale, often convince buyers that they can transfer their old payments to the new car. This trend in car purchasing, known as "upside-down" buying, can be very bad. The term simply means that, when inclined to trade in, you owe more on a car than it's actually worth. The low interest rates that seem so attractive on new cars actually have a negative on old ones; dealers, faced with dropping sticker prices, value trade-ins much less so than they did in the past.

In turn, owners end up having to pay the difference between the trade-in price and the payment balance. On average, owners end up owing $2,200 on their trade-in when they take part in upside-down buying. As unbelievable as it sounds, statistics show that someone who trades in their 1998 Honda Civic for $8,000 may still have over $10,000 left in payments.

An alternative for those that fall under this category is to buy a relatively new used car. That way, you're buying a car that has already depreciated significantly (a car's value drops rapidly after the first couple of years, including an average fall of 30 percent after the first 12 months) and is thus priced at a fair price ... hopefully.

Essentially, you'll be getting a car in good shape for much less and will be in a better position to make the last payments on your trade-in.

4- Only visiting the dealership closest to you

If you have the patience to shop around for a nice dress shirt, you should have the wherewithal to visit several dealers, whether they're blocks away or an hour outside of town.

Believe it or not, not every dealership is the same. For one, each boasts a Customer Service Index (CSI) that measures how much the dealership pleases its customers in terms of price and service. The CSI is published by J.D. Power & Associates.

Also, you'll find that prices will vary slightly between dealerships for the same manufacturer. This is because an MSRP is determined on the basis of several factors, including demographics and location.

So if you live in an upscale neighborhood, consider driving to other areas in the city to compare prices. You may be pleasantly surprised, especially if you actually approach different salesmen and haggle with them.

5- Not going for a test drive

Do you buy nice clothes without trying them on? Of course not ... then why would you ever buy a car without giving it a spin?

There are some things you'll discover during a test drive that you just can't see when a car is sitting in the lot. Aside from the obvious things like handling and braking, you'll also see how much you enjoy driving it.

If comfort behind the wheel is important, than a test drive is a must. Take note of such things as safety features, the control panel setup and driving noise as well, to see if they are up to your standards.

6- Negotiating all pricing aspects jointly

Remember what was said about the invoice price and the sticker price? Always negotiate from the former and don't take "no" for an answer. Salesmen make a living off refusing to give up, so it's only right to give them a taste of their own medicine.

For optimal savings, it's best to talk with the salesman about the sticker price, trade-in value of your old car and such things as financing separately. If you make every aspect of buying a car distinct, there's better chance of reducing your expenses.

It may look simple on paper, but this involves a lot of haggling. That's why it's a "common mistake"; most people don't want to make the extra effort. If you do go the extra mile, there's a strong chance you'll come away spending less money than a lazy buyer will.

Be wary, however, of not letting your emotions get the best of you. Whether the salesman rubs you the wrong way or you have already fallen in love with a certain car, don't let the other guy know. He'll jump at the weakness you've shown and exploit it, especially if you have a soft spot for one of the pricier models in the lot.

Car buyers are also tempted to mention that they'll be selling their car back to the dealer early on in the bargaining process. No matter how smart it seems, do not do this. Hold off on mentioning your trade-in until after you have settled on a sticker price for your new car.

The reason? Because the value of your trade-in is linked to the price of your new car. In general, the more expensive the car you buy, the higher the dealer is willing to pay for your trade-in. If you tie in these two prices, however, you're inevitably getting less than the ideal value of your old car.

The dealer is likely to round off values when equating one lump sum, and may skimp on details since both car prices are taken together -- the customer will have a hard time finding errors. Negotiating the cost of the cars separately once again optimizes your expenses and return.

7- Not shopping for the best financing rate

Don't be mistaken; the dealership is not the only stop to make when buying a new car. Financing rates of 0 percent may look appealing at first, but they often last for no more than a few months, after which the interest rate skyrockets.

Instead of settling for the dealership's rate, visit various credit unions and banks. You may discover that getting a loan will cost less than financing directly. If you do find a loan that you like, it's recommended that you get approved for it before buying the car. This will speed up the whole car-buying process.

8- Not asking about hidden/extra costs

No transaction is as rife with tricks as buying a car. Dealerships have been known to tack on a "dealer protection package," which will incorporate undercoating, rustproofing, advertising costs, document processing fees, and many more hidden expenses without you knowing about it.

Be sure to ask about these costs, often found in the small print of your invoice. In some cases, you can remove some unnecessary fees, or at least reduce them.

9- Thinking in terms of payment, instead of price

Finally, many customers have fallen into the same trap: They're lured into buying a car because it offers low monthly payments, but consequently miss the big picture. That is, they neglect to see that the creative deals offered by the dealership often require large down payments or drawn-out payments.

Always think in the long term. Let's say you're comparing a payment plan of $250 a month to one of $450, both offering an interest rate of 5 percent. The principal is $15,000. The first plan may seem attractive, but it'll take 6 years to pay for the car and will accumulate $2,393 more in interest. The $450 plan takes 3 years to pay off and collects $1,184 in interest. That $1,209 difference in interest is significant. In this case, you'll be paying less for longer, meaning interest rates have more time to pile up.

10- Not considering the cost of insurance

Car salesmen may throw a reasonable figure your way, but don't forget to include insurance when calculating the cost of your car. Insurance payments can be a significant part of your yearly car budget, especially if you purchase a car that's a common target of thieves, like a Toyota Camry.

Other models, like sports cars, simply have high insurance premiums because they're more likely to be involved in accidents. Since the insurance is tied into the type of car you purchase, be sure to get a quote from your insurer before you buy a new car.

Arm Yourself With Knowledge

With these tips, you can confidently walk into a car dealership, ready to be confronted by eager salesmen. Be sure to show them who's in control by following my advice. This way, you'll drive away with the right car at the right price.

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