7 Common Mistakes to Avoid Making When Buying a New Car

7 Common Mistakes to Avoid Making When Buying a New Car

Buying a new car can be an effective way to ensure that you always have transportation when you need it. However, as a new car is an expensive purchase, it’s important to know what to avoid to ensure that you get the best possible deal.

1- Don’t Forget to Shop Around

Ideally, you will visit at least two or three different dealerships before making a purchase decision. At a minimum, you should peruse the websites of multiple dealers to get a better idea about pricing and other features that might be available.

2- You Don’t Have to Accept Dealer Financing

You are encouraged to get financing from a bank or credit union prior to visiting a dealership. This ensures that you can get the money that you need without being at the mercy of your salesperson.

3- Check Your Credit Before Applying

Your credit score will go a long way toward determining if you get a loan or what your loan terms are. Checking before you apply ensures that there aren’t any mistakes holding your score back. Alternatively, it tells you exactly what you need to do to rebuild your score before you seek credit.

4- Never Skip the Test Drive

Test driving a vehicle is the only way to make sure that your preferred car or truck is safe and that you understand how all of its features work. Ideally, you will take it on a city road as well as the highway to see how it handles in different environments.

5- Consider a Down Payment

Typically, the positive equity in your current car is used as your down payment. However, if your current car doesn’t have any equity, you may need to make a withdrawal from your checking or savings account. As with a home, you’re encouraged to put at least 20% of the purchase price down if possible. If you have negative equity in your vehicle, it will need to be rolled over into your new loan. Remember, a dealer will only pay what it could get for the car at auction, which is typically less than if you sold it to a private party.

6- You Probably Don’t Need Gap Insurance

Gap insurance will give you a check for the difference between what the car is worth and what you owe on your loan if the car is totaled. However, it’s unlikely that you will ever use a gap insurance policy, so you can safely decline it when offered at the dealership.

7- Other Offers to Forego

In addition to gap insurance, you probably don’t need to pay for VIN etching, undercoat sealing, or similar products. This is because the VIN is already listed on the car as well as on your registration documents. Furthermore, most vehicles already have coatings that can repel salt or other debris.

If you are buying a car in the near future, it’s critical to shop around and buy only what you need. Otherwise, you could unnecessarily increase the cost of your next vehicle, which can make it harder to accrue equity.