How to Avoid Car-buying Mistakes
How much money do you think educated car buyers can save over uneducated buyers when buying the same car? Would $5,000 get your attention?
Today’s market is not a buyer’s market. There’s limited supply due to shortages, high demand, and little room for negotiation. So, how can you know you’re making a good purchase under the conditions?
Knowing what to expect from the dealership and maneuvering around sales personnel tactics can help you make better buying decisions. But there’s another place you can save big on your purchase.
According to Auto Advisors, when you’re in control of your financing, you control how much the dealership profits, which means you’re in control of how much of your money you keep. Here are a few crucial tips to help you navigate a successful car buying process from beginning to end.
The moment you step onto a car lot, you step into a selling process where eager sales personnel are well-trained to make the sale. Even if you have researched online, car sales personnel make sales every day, whereas you may only involve yourself in this process once every five years. They know the selling process from stem to stern and what customer behaviors to use to their advantage. If you act excited, the sellers know they have a unique product you want. Your negotiating power diminishes immediately. Keep your enthusiasm at bay until you've driven home. Until then, you are making a business deal, and your actions should say just that.
Buying without researching
Because of the market shortages globally, there is a shortage of available vehicles. This creates an environment where buyers need to make decisions quickly. Due to the shortage, the cost of cars has jumped several thousand dollars above MSRP (Manufacturer’s Suggested Retail Price), and dealers are banking on buyers making quick decisions regardless of the inflated price. If you buy on your first visit to a dealership with little to no research, you don't have time to compare. In today’s market, where a specific vehicle you want can be hard to come by, it’s imperative to know about the vehicle ahead of time. It’s also a good idea to have a couple of vehicle options in mind should an available vehicle not meet your most important standards. This will help you avoid settling for less on a big purchase.
Giving deposits before the dealer approves your offer on a vehicle
Feel free to give assurance by a deposit if you really want a vehicle. But don't give it until the dealer has said yes. Some dealerships use deposits to keep you there while they try to convince you to pay more. The longer you are there, the more invested in the purchase you become. You can't leave if they have your deposit - money, a credit card, a driver's license, or your kids.
Switching to leasing without doing your homework
Because dealerships make a much larger profit if they lease rather than sell, even the best dealership may try to convert you to leasing. They'll try to convince you leasing is cheaper than buying. In most instances, it isn't.
Trading in your old car without knowing its value in advance
A dealership has the right to give you the least you will take for your old car. But you have a right to get the most your car is worth. To know that value, compare it against the current market through research, or get a quote from other dealerships. The highest amount offered is your car's value right now.
Financing automatically at the dealership
The dealership may not be your best option for financing. However, when financing is in place before you step onto the lot, you stay in control of what you’re willing to pay and how much the dealership profits off of you.
For example, suppose you’re pre-approved through your financial institution. In that case, your approval amount will be the amount the vehicle is worth (the MSRP) and possibly 10 to 20 percent more, depending on your credit score and how much your financial institution will finance. The extra financing helps cover costs like being upside down on your trade, GAP insurance, and extended warranty. This is what it means when you see your bank offer financing up to 120%. On the other hand, if you allow your dealership to control the financing, they may find a lender to give you up to 150% financing, for example, and now the dealer has room to up-sale you on extras you don’t need.
Opting in for extra coverages during the business transaction
According to Auto Advisors, with the current price inflations, the dealership profits on the price of the vehicle. However, a significant portion of the profit, between 50 – 90%, is made during your visit to the business office where you choose financing, make decisions about extra offers, and conclude the sale. Just remember, you can get coverage like GAP insurance and an extended warranty at your local credit union for a fraction of the cost offered by dealers. If you’ve already decided on pre-approval and additional coverages with your financial institution, you can feel confident in declining the dealer’s inflated offers, keeping more of your money.
These simple mistakes can mean big bucks out the window. First Florida Credit Union likes to help you preserve your money – it’s what credit unions do. That’s why we also offer Auto Advisors to members, a free auto buying service. They’re the experts in the auto buying process. They’ll even help you negotiate the best deal and get you connected with your credit union for financing.