Money & Career

Six ways to screw up a car purchase

Buying a car is a big-bucks decision. Not knowing the rules means you’ll likely pay more than you should
By Gail Vaz-Oxlade,
Six ways to screw up a car purchase

I went shopping with a girlfriend recently. She wanted to buy a new car. She was pretty sure of what she wanted and she could justify up the whazoo all the decisions she’d made before she walked into the dealership. She made some big mistakes.

Here are six things to avoid the next time you’re looking for a new car:

1. She fixated on the brand

She was determined to buy a Toyota. People do this all the time: they decide on the brand of the car regardless of how it’s going to affect their budget. Considering the fact that she was living on a recently reduced income, she still couldn’t let go of the prestige of a Japanese car. The other thing about getting stuck on a particular car is that you may be missing out on what may come standard on another car that you’ll have to pay extra for on your chosen model.

2. She put form before function

Considering what she and her family do with a car — they are avid naturalists and drive their car to the weirdest places, filling it with all kinds of stinky stuff — you’d think function would have come first. Nope. She wanted something cute and zippy. Think about how you’ll use your car. Don’t let the image of what you’d like in the driveway take you down the wrong road. Haul a lot of passengers? Drive a long way to get to work? Haul a boat? Make sure your car does the job so it’s a workhorse, not a decoration.

3. She hadn’t thought about all the costs

While the sticker price might be front and centre as you’re trying to decide what to buy, there are more costs you need to think about — namely gas, insurance and maintenance. And if you plan to sell the car within three to five years, resale value needs to be part of your equation.

While my friend had done her homework on the insurance front, she had not looked into maintenance costs. Very often, high-end cars come with hugely inflated maintenance costs. Another girlfriend of mine had to replace the key to her luxury vehicle and just about choked when she found out it’d be the equivalent of a week’s groceries.

4. She didn’t arrange for her financing in advance

Oops. She ended up paying more interest than she needed to because she wouldn’t take (my) good advice and walk away from the dealership financing. If you have a good credit history, talk about a vehicle loan from your regular lender. After agreeing to a price with a dealer, let the dealer try to beat your lender’s financing offer. If you don’t do it that way, you might find yourself giving back any money you saved by crafty negotiating on price to financing costs.

5. She shopped around, but she didn’t negotiate

Shop online. Shop outside your normal buying area by phone. Get some quotes and arm yourself for the negotiation. Look at slightly used cars to see if they’ll give you what you need for considerably less money. Even if you plan to buy new, knowing what’s available in the slightly-used arena (think demos) will give you a better sense of what you might be able to save. Show the dealer you’ve done your homework and always counter with a lower offer.

6. She tipped her hand on her trade-in right off the top

You shouldn’t identify that you have a trade-in until you’ve secured a firm selling price on the new vehicle. When asked if there’s a trade-in, simply respond, “I’m not sure at this point, since I have someone else who may be interested in the car.” You’re trying to avoid the sales price being inflated to cover the trade-in value.

Once upon a time dealers held the upper hand and you had to endure marathon haggling sessions to get a good deal. Not anymore. If you’re a smart shopper you’ll research vehicles carefully, discover a good target price for your chosen car and get competing dealer bids before ever visiting a dealership. Do this, and you’ll stack the deck in your favour.

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