Before setting out on your next car-buying adventure, make sure you learn about these common mistakes. Otherwise, you’ll look like just the kind of newb that car dealerships love to manipulate into spending more money than necessary.
Mistake #1: You Focus on Monthly Payments Instead of Overall Price
Dealerships can make just about any car fit your monthly budget by extending your loan’s term. Let’s say you want to buy a car that costs about $30,000, but you want to spend less than $600 per month on the vehicle. A savvy salesperson will show you that you can afford that $30,000 car by extending your loan to five years.
With an eight percent interest rate and a $2,000 down payment, you can get the car for about $567 per month. That only sounds like a great deal to newbs who don’t think about the long-term effects of borrowing money. By the time you finish repaying the loan, you’ve spent over $36,000 on your new car. That’s $6,000 more than the original price.
If you take a three-year loan with the same interest rate and down payment, you’ll spend about $877 a month, but your total repayment will fall to about $33,500.
If you really can’t afford the shorter loan term, then you should look at less-expensive vehicles. Who says you need a $30,000 car?
Mistake #2: You Don’t Haggle Over the Details
Even newbs know that they should haggle instead of paying sticker price. Few of them, however, know how to negotiate properly.
Don’t haggle over the total cost of the vehicle (including the price, your trade-in value, and financing). Instead, talk about each of these aspects individually. When done properly you could get:
- a lower price on your new car
- a higher price for your trade-in
- a lower interest rate on your loan
If you try to haggle all of those aspects as one overall price, the salesperson will always have the upper hand. continue reading…