Buying a car for the first time can be both emotional and exciting. It's also likely one of the largest financial commitments you will ever make - second only to buying a home - so it's important to be armed with the appropriate information. If you prepare for the car-buying process before you head to the dealership you can avoid some of these common mistakes first-time car buyers often make.
Failing to research cars
It can be hard to know exactly what you want without knowing what's available, especially when it comes to cars, new or used; the range of options that are available to you as a buyer can be overwhelming. If you step onto a car lot without knowing what you can get, you're more likely to end up with something the dealer wants to sell you rather than finding something you want to buy. With a simple internet search you can learn all about makes and models, current local pricing trends and available features in your area. You can also read first-hand reviews - such as those available on Autoblog - written by experts.
Not being prepared to negotiate
Although places like CarMax are trying to change the model, for the most part car prices are not fixed. The manufacturer's suggested retail price (MSRP), also known as the sticker price, is rarely the price at which a car is sold. Typically, you can buy a car closer to the invoice price than the sticker price — but you've got to be able to negotiate. While the invoice price is ostensibly the amount the dealer actually paid for the car, a number of dealer holdbacks from the manufacturer can lower the dealer cost dramatically. The more you can find out about what the dealer actually paid, the better position you will be in to negotiate.
Focusing on monthly payment
A common car buyer mistake is to walk onto a lot with a monthly payment in mind. A skillful dealer can get you into almost any car at a given monthly payment by tinkering with the terms of the deal. For example, you tell a dealer you want to pay $300 a month for a car. A creative dealer could push you into an seven-year car loan at a high interest rate to get you that $300 monthly payment. In the end, the total cost of purchasing your car will be much higher than if you took a shorter-term, lower-interest loan and paid $450 per month.
Buying dealer extras
Vehicle options and accessories are a rich source of dealer profit. Even after you agree to a deal on your car, you're likely to face enticing offers to buy all kinds of nice-sounding extras like fabric protection, paint protection, wheel and rim insurance, extended warranties, pre-paid maintenance or car accessories. Often these are either unnecessary vanity items or priced much more expensively than you could get on your own.
Not shopping for financing
Unless you're paying cash for your car you'll have to finance it. The auto loan market is just as competitive as the new car market, so shop around before you go to the dealer lot. Local banks and credit unions often have competitive rates for car buyers. Trying to finance at the dealership gives the dealer yet another opportunity to make money off you. At the very least, by shopping around you'll have an idea of what type of loan you can get, and you can use that as the starting point for a negotiation with the dealer.