Many people have found themselves in that exact situation. How do you avoid overpaying for a vehicle, though? US News & World Report came up with scenarios that buyers found themselves in, and they list ways you can avoid those same traps.
Skipping the research process before you go to the dealership
The easiest way to overspend on your purchase is to go into the dealership with no prior research. The vehicle you’re looking to buy might be cheaper somewhere else, or they may offer a much lower price for your trade-in than what Kelley Blue Book says your vehicle is worth.
If the car is new, know what add-ons it comes with and decide if you need them or not before you get there. If it’s a used car, check the dealer’s website to see what it comes with exactly and compare it to similar models at other dealerships.
Failing to read through the documents before you sign
Some car dealerships are notorious for hiding fees in the sales documents. They bank on you being so tired after negotiating that you’ll sign anything to get out of there and into your new vehicle.
By reading through it first, you can find the problem areas and have them fixed before you sign. For example, you might see a phrase like “prepayment penalty.” This means you will have to pay a penalty for paying the loan off early.
Buying a vehicle when you really need one
Let’s say your current car is getting old, and the mileage is pretty high. You know that expensive repair could be right around the corner. Don’t wait until the car breaks down before you start looking for a new one. This puts you in a challenging position to buy something now, which will cost you more money in the long run.
This means you will get a lower trade-in price than what you would’ve gotten if the vehicle was still in decent shape. You’ll also be desperate to buy something, so your guard will be down.
Buy new when a used model could save you money
We know that cars depreciate during the first few years of ownership. If you find a used model in great condition, you can save thousands of dollars off the purchase price and your loan interest.
Look at how much a brand-new vehicle costs just for the base price alone. Then look at how much each add-on package would run you. Now tally up those costs. You’re better off finding the same model, with close to the same add-ons for much less money.
Not considering lease deals when they come up at dealerships
If you want a new vehicle, consider leasing instead of buying one. When you lease a vehicle, you’re making monthly payments for a shorter amount of time, which is typically three years instead of the five you would normally pay with a purchase loan.
Pay attention to any lease deals dealerships offer. This could save around $700 when the lease comes up. You can then lease another one or buy something else.
Going with a dealership’s financing when you get your own lender
We know going with the dealership’s financing company makes the deal quick and easy, but it doesn’t necessarily make it a good one. It will usually cost you more money. Check with local lenders and get a pre-approved amount before you go to the dealership. That way, the salesman can’t increase the amount by hiding it in the financing paperwork.
Buying a vehicle is an investment for you and your family, so you don’t want to rush into making a deal too quickly. Take your time, research what’s available, and know exactly what you’re getting into before you end up paying tons more money than you should.