Categories: Vehicle & Buying Research
Buying a New Car? 7 Sales Traps to Avoid
Buying a new ride is an exciting experience, and car finance can make getting your dream car even more affordable.
Buying a new ride is an exciting experience, and car finance can make getting your dream car even more affordable. However, whether it's your first time buying a car or it's time to trade your old vehicle for a new ride, there are a few things to watch out for. A dealer might trick you into paying more than you need to or sign up for features you were never after in the first place. Here are seven sales traps to avoid when you hunt for a new car.
Not shopping for financing before you shop for a car
Most individuals start shopping for a car with just two things in mind: a few car models they like and a monthly payment they believe they can afford. However, a monthly payment does not purchase a car but results in a round sum of money. How much money depends on the number of months you finance and the loan's interest rate.
The money you need to spend on a car depends on the amount of loan cash and any other money you have, including the sale value of your trade-in or any down payment you make. Knowing the available cash can help you choose a car that fits your budget.
Visiting a car showroom with just an idea of monthly payment makes you a target for insistent and high-pressure sales techniques. You are likely to spend more than you have or pay a much higher interest rate than you qualify for an extended term.
Avoid this sales trap by shopping your financing first. Get pre-approved for an auto loan from an online lender, bank or credit union. With a pre-approved loan, you can shop for a car that fits your budget and compare financing with other loan offers.
Accepting zero finance or discounted dealer rates
Zero percent financing may seemingly sound like a great idea, especially when you are in the market for a new car. 0% financing means you won't have to pay interest on your purchase for at least a short time. That is how dealerships allure you with garish promises of a nice car without all the extra strings attached.
However, the truth is it is still debt. You have to make monthly payments on the car even though you don't have to pay interest first. Moreover, you could easily get stuck with high-interest charges if you don't pay off the balance before the introductory period is over. Whether it's 45 or 60 months, it might not be worth taking on that kind of debt for a car that's rapidly losing its value.
Failing to negotiate up from the dealer's cost
Dealerships usually encourage buyers to negotiate down from the manufacturer's suggested retail price (MSRP) or the sticker price. That may feel like you are getting a great deal when you get a vehicle below MSRP.
However, there might still be a huge difference between that price and the dealership's actual cost, meaning you could be overpaying. A vehicle's MSRP isn't the lowest price a dealer can accept; you can use it as a starting point for negotiations.
Do research to determine the car's value and look into other factors like incentives you might qualify for, estimated local sales tax, and any dealer fees. This will give you a better sense of your overall bargaining power. You can determine the car value using sites like Edmunds, Kelley Blue Book, or NADAguides.
Buying on your first visit to a dealership
Every car dealer will want the customer to drive away with a new car on their first visit since it prevents comparison shopping. However, you are likely to end up paying more if you don't compare all the various deals available from other dealerships. These comparisons should include not just the price of the car but the cost of financing and the value of your trade-in.
It's easy to be caught up in the moment and excited about the anticipation of driving off immediately in your new car. Nevertheless, it's essential that you understand exactly what you are signing before you agree to any finance deals. While dealers might pressure you to sign a finance agreement and purchase on your first visit, stand your ground and compare all available options.
Not being aware of potential losses
When you opt to buy a vehicle on finance, there are several potential losses that you should be aware of before you sign on the dotted line. One of the primary areas of possible loss is when you are involved in a road accident, or your car is stolen. In case of an accident or theft, your car insurance company will only pay for what the car is worth, but not what the car cost you to buy.
If you have a finance agreement, the payout is likely to be considerably lower than the loan you are still required to pay. You might end up in a situation where you have to repay a loan for a car you no longer have. The best way to resolve this issue is to take gap insurance. This insurance covers the difference between the amount paid by auto insurance and the amount left on your loan.
Failing to review the final sale paperwork
Negotiation is just one part of the hurdles you will have to hop through at a dealership. Once you have finished negotiating, the sales rep will take you to the finance officer. Be ready to be pitched add-ons like wheel protection, extended warranty, interior protection and more.
Dealers usually make as much money in this room as in the sales lot or car showroom. Dealership add-ons, insurance, additional fees, and interest rate changes tend to creep up once you sign the agreement.
While products on their own might seem relatively inexpensive, these add-ons can considerably increase the price of the car. And if you choose to finance these with your loan, you will be paying extra interest for products you might never use.
Paperwork can seem overwhelming, but don't let this intimidate you. Take your time to read through the documents carefully and ensure everything is correct. If you have any questions or want to change something about the terms of the sale or specifics about the vehicle, this is the time to do so.
Not test-driving the car
The compliance plate hardly shows you when the car was approved for sale. Therefore, before you sign the agreement, ensure you take your potential purchase for a test drive. Drive it on various roads, not just around the dealership lot. You will learn different things about the car when you drive it on the streets and the highway.
Be careful if the dealer allows you to take the car home for the night. This might help you get a better feel of the car, but you are also most likely to get obsessed with it. It's bound to be better than your old vehicle.
Buying a new car from a dealership can be tough, but you can get the best deal if you avoid these common sales traps. Doing your research and having a solid idea of what you want before you visit the dealership is the key to success when buying a new car. Good luck!