1. Stay calm, take nothing personally. Buying a car is a time of high emotions. You don’t absolutely have to have that one car now, keep your options open. On the other side of the coin don’t get mad if you don’t get offered the deal you think you should be getting. It’s not personal.
2. A new car will not fix all your problems. When people get the urge to buy a new car, they often talk themselves into thinking it will fix all their problems, it will not. A new car is nice to have, but at the end of the day it won’t change your life.
3. Discounts alone do not make a car worth buying. If you are planning to buy new car you want to pick something you will have for at least 4 years for the cost to make sense. Picking a car that does not meet all of your legitimate needs may cause you to trade the car in early, making the in cost of ownership much higher. Once you know what type vehicle you need, go looking for deals not the other way around.
4. Payment is not everything. While an affordable payment is important if you are financing, it does not mean you can necessarily afford the car. Most advertised payments you see are amortized over 84 months or 7 years. While this might make the payment low, the cost of borrowing can be high. The other challenge is that the car depreciates faster than the loan is being paid off, leaving the owner in a negative equity position.
5. Look at interest rates in context. Many people have a tendency to get fixated on interest rates when buying a new car. While the rate is a major factor in calculating the value of a deal being offered, it is not everything. Many of the best deals offered on new vehicles over the last few years have had huge cash rebates at the expense of low interest rates. If you are getting $3000 to $10,000 off the price if a car the increase in rate is does not amount to more then the money you are already saving. With bank rates as low as they are these days, it is possible to get and auto loan for under 5% with most major banks. Don’t ignore heavily discounted models with less attractive rates.
6. Keep your options open. When you start thinking about your next vehicle consider a wide range of options. While your last car may have been a compact, this time a crossover might well be a better choice for you. Often people buy too much or to little in a car out of habit. Avoid this mistake and price out a range of vehicles.
7. Your trade is probably worth less then you think. Dealers buy vehicles at wholesale, not retail. Autotrader and Craigslist are not an accurate measure of what used cars are worth as trades. Kelley Blue Book and Canadian Black book are good measures of what cars might be worth on trade. It never hurts to have a few numbers from different dealers to be sure your trade value is fair.
8. Shop for a dealer and sales person, not just a car. Who you are buying from can sometimes be just as important as what you are buying. A good relationship with a dealer and salesperson can pay off down the road when your car needs service or when it’s time to trade in.
9. Don’t be overly brand conscious. 20 years ago there were some truly terrible cars, most of which were built by the Koreans or Americans. Nowadays, it is difficult to find a bad car. The Koreans and Americans have many models that have similar or higher ratings than their Japanese or European counterparts.
10. Be aware of hidden costs of ownership. Many premium brands like Volvo and BMW cost many thousands of dollars more to maintain over a 5 year period than the more pedestrian equivalents like Chevrolet or Nissan. Some cars also cost more to insure, while European cars often require premium fuel. Before purchasing a car make sure you are aware of all the hidden costs of ownership.