Arizona Tribune - OneMain Financial: Do's and Don'ts of Buying a Car

What to do when buying a car

Potential car buyers can shop online, go to an auto dealership, or browse classified ads that list new and used vehicles. In every case, the following steps should be taken once a borrower finds a car they love.

• Look up the book value: The sticker price on the car is not the book value of the vehicle. That can be found by researching vehicle valuation websites. Another number to look for is the fair market value, which may vary slightly from the book value. Either number can be the starting place for price negotiations.

• Add up the cost of ownership: The cost of ownership comes after the car's initial purchase. It includes loan payments, interest, insurance, gas, maintenance, and other miscellaneous expenses. Affordability is determined by this cost, not whether the buyer can come up with a down payment on the purchase date.

• Get pre-approved before going to the dealership: Pre-approval from a bank or online lender gives the buyer a better understanding of their budget and prevents them from falling in love with a car that is out of their price range. It can also give the buyer negotiating power at the dealership. With a set interest rate and loan amount, the buyer can negotiate a better price for the vehicle.

• Always test-drive the vehicle: A potential car buyer should never purchase a vehicle without test-driving it first. It's best to bring a mechanic along to evaluate the car on the spot. If that's not possible, the buyer should use their best instincts and take the vehicle in for a full mechanical checkup within a few days after purchasing.

• Be prepared to walk away: Auto dealerships are notorious for hiring high-pressure salespeople to close deals. A buyer should be prepared to walk away if the deal doesn't seem right or doesn't fall in line with their budget.

What not to do when buying a car

The "don'ts" of car buying occur primarily in the negotiation stage. The following actions should be avoided if the buyer wants the best price on a new or used vehicle.

• Don't buy based on price alone: There's an old saying about getting what you pay for. Paying a little more for a better-quality vehicle is better than getting stuck with a lemon because the "price was right."

• Don't give up your leverage during negotiations: A buyer should never tell a car salesperson what's in their budget or how much they want their monthly payment to be. That's giving up leverage during the negotiation process.

• Don't agree to buy before all questions have been answered: It's best not to leave anything unsaid during the negotiation phase. Ask every relevant question, and don't sign the purchase agreement until all of them have been answered.

• Don't go over budget: Buyers should never stretch their budget too far when buying a car. Not being able to afford the monthly car payments will create financial challenges in other areas. It's best to stick with what they can reasonably afford.

• Don't rely only on dealer financing: Several financing options exist for buying a car. Dealer financing is only one of them. A loan from a lender other than the dealership might have better terms and a lower interest rate. So, shopping around before making the final decision is more beneficial.

The Bottom Line

Always know the value of the vehicle being bought and how much it will cost to own. Test drive the vehicle before buying it and be prepared to walk away if the deal doesn't feel right. Don't buy based on price. Don't give up leverage in negotiations. Don't agree to buy a car when there are unanswered questions.

Sources:

https://www.gobankingrates.com/saving-money/car/biggest-dos-donts-when-buying-first-car/

https://cars.usnews.com/cars-trucks/advice/dos-and-donts-of-car-buying

https://www.consumerreports.org/buying-a-car/dos-and-donts-when-buying-a-car-from-a-dealer-a5825423505/

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