Buying a car can sometimes be an unpleasant and painful experience, especially if you go into the process wet behind the ears and completely unprepared. I'm more than a decade out of college now, and I've amassed a considerably keener sense of consumerism. In other words, I can spot a quality deal now and understand the ins and outs of the car-buying experience a lot better having just three months ago purchased the car of my dreams.
However, this knowledge didn't come without some painful first-hand lessons learned by yours truly. Back in college, I made practically every car-buying mistake that was possible in a single transaction. I had done very little online research while looking for a car, and instead of focusing on the car's final price I told the dealer what I wanted my monthly payment to be. Also, rather than look elsewhere for financing, I allowed the dealer to arrange my financing (double d'oh!). And of course, you know I bought just about every add-on that was available. In short, it wasn't my best moment as a consumer, and I'm blaming it on my naivety.
The interesting thing is that I'm not alone. There are countless Americans who regret their car-buying purchases each and every year – at least that would be the implication of a study conducted by Ipsos Public Affairs on behalf of used car retailer CarMax in 2009.
Ipsos' study polled 1,000 people online, 886 of whom had purchased a vehicle, and asked them what their greatest car-buying regret was. The results, needless to say, were a bit shocking to me. Let's have a look at each regret individually and point out a way or two you as the consumer can turn the tables on the dealer and become a super consumer.
No. 5: Didn't get the extended service plan (11%)
Just like any "insurance" product, extended warranties are an extra profit center for car dealerships because the vast majority of plans will cost more than actually servicing the car for the dealership. This doesn't mean that all extended warranties are bad news, because they do serve a purpose, but you have to understand your repair history, budget, and the pricing of this plan before you make your decision on whether or not purchasing an extended warranty makes sense.
In certain instances, extended warranties can be a smart buy. If you absolutely loathe surprise car repairs, don't have an emergency fund set aside to handle the high cost of select repairs (like a pricy brake job or a faulty transmission), or simply want the peace of mind of having a warranty, then an extended service plan may make sense.
Then again, you have to ask yourself how long you plan on owning the vehicle you're purchasing. If it's not long past the manufacturer's warranty period, then purchasing an extended warranty might not be worthwhile. Similarly, you have to consider that a number of car brands these days extend powertrain warranties out for 10 years or 100,000 miles, and cars are manufactured to operate for a longer period of time on the road without major complications relatively to even two decades ago. Is an extended warranty really cost effective?
If you do decide to buy an extended warranty, consider shopping around for the best price. Little known fact: You don't have to buy the extended warranty from the dealership! Bargain the price down or shop around for the best price.
No. 4: Bought from an untrustworthy source (16%)
Here's one I really anticipated would be higher, because building trust between the dealer and the customer is the basis for return business and referrals, which is the cheapest, but most lucrative, form of advertising for any dealership.
Not to take away anything from the consumer, but being a car salesmen is difficult to begin with. Simply saying the phrase "car salesman" will send shivers down the backs of most people because it's associated with the perception of someone who's not always upfront with the consumer. The good news is there are a good number of honest car salespersons, but as we can see from this poll, there are also a considerable number of not-so-forthcoming salespeople as well.
The best way you as a consumer can avoid dealing with a questionable dealership is by asking friends and family about their car-buying experiences and reading reviews of various local dealerships online to see what other consumers had to say. Keep in mind that you're most likely going to read more negative reviews than positive reviews online, but it'll still give you a good jumping off point on which dealership might be your best bet to establish trust with.
No. 3: Bought the wrong car (16%)
Edging out buying from an untrustworthy source by a minuscule two votes were consumers who literally bought the wrong car for their needs. I know it sounds almost comical on the surface, but there are consumers whose eyes light up at the sight of a car without truly thinking through their actual needs.
I will fully admit that it's sometimes difficult to overcome the impulse buy urge, but the smartest thing you can do is think about what features are important to you and make your purchase based on those criteria. For instance, purchasing a long-bed truck while living in a major metropolitan area might be a poor choice given a crowded parking situation and poor gas mileage. The same can be true in reverse for people who need to haul a number of items or live in areas where winter driving may be difficult.
The point being that you need to understand what features are important to you and stick to only those features when purchasing your vehicle.
No. 2: Didn't do the research (22%)
This is another one that I was surprised only garnered 22% of the vote!
Perhaps one of the biggest no-no's of the car-buying experiencing is not spending enough time understanding the features of the car you're buying, or foregoing your right to shop around for the best possible lending terms when financing your car purchase.
As I noted last week, although dealerships will use your credit score to determine the lending rate on your loan, you're almost always going to find more attractive rates by shopping around with your bank or local credit unions.
Next to a house your car is among one of the largest purchases you'll ever make, and you certainly wouldn't buy a house sight unseen, so why would you consider doing that with your car purchase? Instead of rushing your car-buying experience, take your time to plan out what features you want, exactly how much you want to spend, and arrange for financing well in advance of your car-shopping experience.
No. 1: Paid too much for a new car that depreciated quickly (26%)
Here we are, at the worst car-buying regret: paying too much for a car that's going to depreciate quickly once it's off the lot.
We've nearly all been there and understand that purchasing a car isn't an investment in the traditional sense of the word. Instead, buying a car is an investment in getting comfortably from points A to B for the next however many years. Long story short, cars depreciate, so consumers need to use that knowledge to their advantage to negotiate the best deal possible with a car dealership, or to consider whether or not buying a used car would be in their best interests.
The easiest way to overcome this obstacle – not to sound like a broken record – is to do your homework and find out what the estimated value will be of your car a couple of years from now if you're planning on selling it. Hashing out the time frame you plan to keep your car will do wonders for helping determine what the smartest route will be (new versus used) for your car buying experience.