5 Most Common Car Buying Mistakes
Many people focus too much on quality when searching for a car and not enough on terms of financing. Save a ton of time and energy to prevent these mistakes.
Focusing Too Much On Price
The price we pay for a vehicle is just one aspect of buying a new car, and perhaps the highest. We tell ourselves if we buy a car: Did I get a good deal? For the make and model I purchased for the same year? In other words, we want to know why we pay for that particular car more or less than the average person. It is possible to find this out between identically fitted new cars, and indeed seek places like Edmunds. Of note, no two used vehicles are the same due to mileage and performance considerations, so this is a much harder game.
More important than cost is if you get the right car for your needs and don’t buy more car than you can afford. (If you have to buy the car, are you supposed to go for the leather?) Or are you supposed to consider a new used car rather than a brand new model? It will probably save you far more than a new car sticker price could haggle. If you’ve got a new car “to have,” I’ll get it — go for it. But note, if you’re on the fence: everybody’s driving a used car!
Ignoring Financing Terms
This doesn’t make sense: Fighting the tooth and nail for three hours with a car salesman to get an extra $500 off the price and then buying the car for four years at a value of over $2,000 with no money down at 6%.
Yet we do this all the time because the $500 that we saved on the sticker price is real to our eyes, while the $2,000 that we spend to buy the vehicle is not tangible. There was another common thread as I asked my focus group about any concerns they have about their last car buying encounter.
False loans can pay more quickly than discounts that you’re going to negotiate on value. Looking at the price of Edmunds.com on a 2016 Honda Civic LX Sedan, the gap between MSRP ($20,275) and Factory Invoice ($18,907) is $1,368. Nothing to laugh at, and a clever customer will try to haggle the seller off the MSRP and down from the invoice.
But if the investor then purchases the vehicle at 6 percent for 48 months, over the four years he will charge $2,580 in total interest. I assume that there are more customers negotiating interest rates, but if that buyer could get a 4 percent mortgage instead of 6 percent interest, he would save $881. And if, in three years instead of four, he would pay off the vehicle at 4 percent, he would save another $424. Adding a down payment of $1,500 would reduce the total interest to $1,180—a $1,400 save off the initial funding limit.
We Don’t Value Our Time
The average American spends 10 hours shopping for a car, compared to shopping for a home loan for only five hours. Some shoppers get so obsessed with getting the “best deal” they’re willing to spend weeks shopping for cars. But at what cost?
While everyone views time differently, let’s presume a free hour is worth $15 to you (if you earn a lot, it could probably be a lot more). Spend 10 hours buying a new car and you’ve invested $150 worth of your time. Spend twice more, and $300 has been spent
Underestimating Total Cost Of Ownership
Your emotional side of the brain is already sold when you decide to buy a new car— it can be pictured behind the wheel and it loves it! But, your practical side is like: “Whoa, not so fast! Is that a great deal? Is it reliable? What is the mileage? What is the cost of the resale?”And then, to explain the cost, you try to calculate those points. For starters, you can say to yourself that you are going to keep the car for 10 years to avoid the loss.
However this estimate (and other estimates of the possible value of the car) can be overly optimistic due to what psychologists call the optimism bias. Everyone who marries assumes they will remain married forever but sociologists expect that between 40 and 50% of marriages will end in divorce.
And according to the 2009 USDOT National Highway Travel Report, the average car ownership period is 59 months— just five years shy. You can also overestimate the fuel that you are spending and underestimate ongoing costs such as repairs, insurance and excise taxes. Consumer Reports are trying to put the numbers on the actual cost of owning a car. At least you can see how different models interact, correct or not.
Expectations Are Too High
Barry Schwartz, a psychiatrist, reveals that the wealth of options we have in a wealthy society is destroying our happiness We face constant pressure to choose correctly with so many options, leaving us anxious about the choice and depressed when we choose poorly.
If we do not live up to our standards with the service we chose, we are disappointed We are rarely surprised if ever, pleasantly Schwartz jokes that our expectations are reduced by the secret of happiness It’s not just a joke.
Given the high price tags for vehicles, the infrequency with which we purchase them, and the hostile aspect of the purchasing process, we stress the need to get the perfect car at the right price. So, no matter how well we do, with the residual feeling that we’ve been fooled, we drive off the lot.
You can get a good car at a good price if you do your homework, open your eyes to the real cost of owning a vehicle, and avoid making costly mistakes (like violating the terms of financing). And that’s the objective.
It’s not a miserable experience to buy a car. Spend most of your time choosing a car you can afford and you’ll be happy to drive. Sure, get online offers from a site like Edmunds for rates and competing dealers but don’t kill yourself fighting the dealership because you like that kind of thing So smartly borrow: get the best interest rate you can and put money down. And remember: once you’ve got the car, compare insurance quotes from different companies to make sure you pay as little as possible over the long run.