Car buyers must avoid 7 sins to get deal

Be prepared, look at used vehicles to save

Published On: Dec 14 2011 04:27:18 PM PST   Updated On: Apr 03 2012 07:18:24 AM PDT
car salesman handing woman key to new car

One the great episodes of "The Cosby Show" was when Dr. Cliff Huxtable (Bill Cosby) took his son along when he was buying a new car in order to teach him how to haggle down the price.
In hopes of knocking some of the price off the sticker, Cosby dressed in sweat pants and a ball cap and tried to avoid any talk of what he did for a living, thinking if the car salesman knew he was wealthy he wouldn't get a good price.
But when a loudmouthed patient of his, played by Gilbert Gofffried, spotted him and yelled out "Dr. Huxtable!" the jig was up.
That episode aired over 20 years ago and much has changed in the world of negotiating a good price. Thanks to the Internet, most of the cards are on the table when it comes to prices and options.
Car buying can also become a more emotional experience than rational, according to Dr. Charles Kenny, a psychologist who has worked with many of the major auto companies to help them understand consumer psychology. The reason is that many people feel they are what they drive.
"(Car buying) is more emotional than buying most things, more emotional than buying perfume, a new house, $5,000 stereo equipment and so on," said Kenny.
So, in order to try and help the rational part of your brain sort through the stressful experience of buying a car, here are some common mistakes people make when buying a new or used car from a dealership.

Being unprepared
The Internet is a wealth of information, and any informed shopper should spend some time clicking away before setting foot on a showroom floor.
"The first piece of advice is the Boy Scout motto, 'be prepared,'" said Melanie Webber, of "And there's no reason why you can't be prepared, because everything you need to know you can find on the Internet."
Before speaking with a salesperson, you can know the average price of the model you want, what options it comes with and what financing options are available to you.
"You know what you can afford. You know what you think your payments should be. You know what your financing options are. You know the car you want," said Webber. "So, you're in a pretty strong, confident position when you go in there. And the dealer will know that you have that information."

Forgetting about leasing
Depending on how many miles you drive, leasing a car may be an option to explore.
"It depends on what your lifestyle is," said Webber. "The payments on a lease tend to be lower, but you don't own the car. But if you are the type of person that always wants to be driving a brand-new vehicle, and perhaps even a higher-end vehicle, and you want lower payments, leasing is an option for you."
But on the flip side, if you go over the allowed miles on your lease agreement, it can be expensive.
"Usually the mileage is limited to 12,000 to 15,000 a year and then you have to pay over that," said Webber. "And there are some vehicles that you can't lease. And it is also dependent on depreciation. If it is prone to depreciation, the payments cover the cost of depreciation."

Missing value of used autos
Cars are a status symbol to a lot of people, and driving that brand new model can elevate it. However, cars that are even just a few years old can knock down the price you are going to pay.
"You may be looking at a new Honda Accord, but you have a hankering for a BMW or an Audi, and you might want to go onto a website and see how much a 2006 BMW goes for, and that may end up being a better deal for you than a new vehicle," said Webber.

Not knowing your financial status
Before going to the dealership, you should know what your credit score is and how that will affect your loan.
Typically, a score of more than 680 can secure you a lower interest rate, but dropping below that will send the rate higher, or make you unqualified for certain loans. Applying for a loan online can also help you avoid the discomfort of discussing your financial status face-to-face with a salesperson.
"It's a much more pleasant and efficient process to submit a request for a certain kind of vehicle, have that dealer call you back or e-mail you or offer a price, or you can ask the dealer for more information," said Webber. "You can say yes or no, and then you can walk into the dealership and do the paperwork."

Getting enticed by low monthly payments
You might be more concerned with the monthly payment than the overall cost. But the low monthly payment can be a Venus fly trap, enticing you into a long contract that will add up over time due to the interest.
"The shorter the period of the loan, the less interest you are going to pay," said Webber. "You can also see some manufacturers that offer zero-percent interest for vehicles that they are anxious to move. But you have to be very careful to understand what the fees are and what you are putting up front."

Buying at wrong time
Because of the annual cycle of new models that are rolled out each year, buying at the wrong time can cost you. Webber said the best time to buy is either in December or from July to October.
"The dealer really wants to make room for those newer vehicles that are going to be coming onto his lots, so he has more of an incentive to move the older models off his lots, and that puts him in a better position to make a good deal," said Webber.

Trading in when you can sell it yourself
Most dealerships also sell used cars and will allow you to trade your car in for a discount on the price of your new car.
However, if you sell the car yourself, you can probably get a better price. It takes a little extra time and energy, but can equal several hundred dollars or more in value.
If you do decide to save yourself the trouble and just trade the car in to the dealer, it is important to know its value.
"If you know that the trade-in value of your vehicle is, you are armed with that knowledge before you walk into the dealership, then you are in a powerful position," said Webber."

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