Experts are predicting strong sales in the new and used car markets this year, as many consumers replace the cars they've been driving throughout the recession. If you're planning to buy a car, perhaps during President's Day weekend sales or another time of the year, you'll want to make sure you're getting the most bang for your buck. "Most people are buying cars once every five years or once every eight years, so they don't have a lot of practice," says Eric Lyman, a senior analyst at truecar.com, a car-buying website that partners with dealers and offers pricing estimates.
Below, car experts discuss the car-buying mistakes that can cost you some serious cash - as well as tips for avoiding them.
1. Failing to line up financing before you shop. If you walk into a dealership without lining up financing first, you could pay a premium for dealer financing. "They're getting a finance rate that they view as a wholesale value and adding some additional interest rate to that," Lyman says. "You can provide your own financing as the consumer. You don't have to use the dealer's finance rate." Get preapproved for a car loan from your bank or credit union first. If the dealer can match that interest rate, then great, but if not, you'll still have a lower-interest loan option.
2. Shopping based on the monthly payment. Whether you're financing or leasing a car, consider the overall cost of ownership (or of a lease) rather than fixating on the monthly payment. "A lot of times [consumers] will go for longer finance periods because that'll lower their monthly payments," says Jack R. Nerad, executive editorial director and market analyst for Kelley Blue Book. "When you add up what you're paying for that longer time, it tends to cost more in interest. Another instance is looking at a low monthly lease payment and thinking that could be analogous to a monthly payment on a car." At the end of the financing period, you still have a car to drive or trade in, but at the end of a lease, you have to return the vehicle. Also consider the costs of maintenance and insurance because these can vary depending on the car you choose.
3. Skipping the test-drive. An IBM Corp. auto retail survey found that 20 percent of new car buyers and lessees in the U.S. don't test-drive a single vehicle. Gregg Fidan, founder of realcartips.com, recommends that first-time buyers test-drive at least seven different vehicles, and those replacing a vehicle test-drive at least four. "There is no better way to determine which vehicle is right for you than by test-driving and comparing them yourself," he says. "Don't just read car reviews and assume you will agree with the author. Take the time to test-drive and see for yourself." For those buying a new car, he also suggests visiting a car show, where you "can sit inside and get a feel for the vehicles."
4. Negotiating in person. "A car salesman's No. 1 priority is to get you to come down to the dealership, where they have the advantage," Fidan says. "If you already invested the time to go there, you're less likely to leave if the price is not what you wanted." Instead, do your comparison shopping and negotiating by phone or email so you stay in the driver's seat of the transaction.
5. Not getting a used car checked out. Lauren Fix, host of Time Warner Cable's "Car Coach" and author of "Lauren Fix's Guide To Loving Your Car," says skipping this step could cost you big bucks. "It looks good, it sounds good, but there could be a transmission problem and engine problem that is covered up," she explains. "Sometimes people know how to hack into the digital odometer [and change it]. A technician would be able to spot that." Fix suggests going to a technician certified by the National Institute for Automotive Service Excellence and running a Carfax report to find out if the car was ever flooded or involved in an accident.6. Choosing a car that's ill-suited to your needs. Before you visit a dealership, consider the type of car that would fit your lifestyle and needs. Do you commute long distances and need a fuel-efficient vehicle? Do you need a large trunk for carting around sports equipment or musical instruments? "A lot of people don't talk about [buying the wrong car] very much," Nerad says, "but it's a big mistake if you buy a car that doesn't suit your lifestyle or a car where there is a logical substitute that would be a better choice." Don't let a flashy car advertisement, car-loving friends or a smooth-talking salesperson steer you away from these priorities.