10 Common Car-Buying Mistakes

Walking onto a car lot can feel like a train wreck in slow motion: At every turn you get a little more derailed, until finally you're off the tracks entirely and the dealership has what it wants: your entire bank account.

Part of the problem is the sheer number of variables involved in negotiating the sale: the price, the options, the financing, the monthly payment, maybe a trade-in. You should methodically research and consider every conceivable scenario before setting foot on a dealer's lot. Otherwise, dealers will do everything they can to tilt the transaction in their favor.

"They're looking at making money off you in stages," says Jeff Bartlett, deputy online editor for autos at Consumer Reports, "so it's important for customers to keep the stages separate and not lose track of what's going on."

To help you do that, we talked with several experts about the most common mistakes that car buyers make and what you can do to avoid them.

The goal is not to pull one over on dealers — they're hard-working folks trying to earn a living, too. It's about arming yourself with as much information as possible to make the best decision on what is for many people the second-largest purchase of their lives.

Buying Unnecessary Add-Ons

Some dealers might try to sell features they add on themselves, such as rust-proofing, VIN etching or fabric protector. Avoid them; they're unnecessary, Bartlett says. If the vehicle you want already has them, negotiate their cost down as much as possible. Research features you do want online and print out the information before heading to the dealer. Bartlett recommends pricing several different variations in case the dealer doesn't have the exact model you want. This can help avoid being up-sold to pricier models or to ones with features you don't need or want.

Not Enough Cross-Shopping

Many car shoppers focus on a few popular brands or models, to their detriment. "On average, people only shop about three vehicles," says Steve Witten, executive director of U.S. automotive research at J.D. Power and Associates. "If someone's shopping a midsize car, there are probably at least 10 different vehicles that would meet their exact specifications and needs," he says. In terms of safety, reliability and features, there are very few lemons for sale anymore. So don't get stuck on one brand and put blinders on about others because of old perceptions. Cast a wide net when comparing models online. Otherwise, you might miss a good value or overlook your ideal car.

Settling for What Is on the Lot

American car buyers are impatient. Only 5 percent special-order a vehicle through a dealer and wait for it to be delivered, according to J.D. Power. The other 95 percent either find exactly what they want on the lot, or settle for something that's not quite what they wanted. There's no reason to do that when making such a large purchase. If you're set on a specific model or feature that you don't see in stock, dealers can search nationwide inventories and have vehicles shipped from several states away, Witten says. They can also custom-order exactly what you want from the factory.

Skipping the Test Drive

Consumer Reports' Bartlett hears family and friends complain about uncomfortable seats, poor visibility or a stiff suspension in vehicles they have just bought. It's because they did not perform a thorough test drive — if they did one at all. He recommends spending 30 minutes driving the car, entering and exiting the highway, taking it on roads like those you drive every day. Be sure to take competing models for a spin, too. "It will reaffirm that you made the best decision ever, or you might find that you like one of the other ones better," Bartlett says.

Focusing on the Monthly Payment

One of the first questions salespeople ask is, "So, how much were you looking to spend per month?" It's to your benefit not to focus on that number, because doing so can make the final price of the car a moving target. Adding "only $50 a month" to get leather and more power might sound tempting, but it will add thousands to the bottom line. Part of this goes back to knowing what you truly need or want. The other part involves negotiating the total price of the vehicle, not the monthly payment. Breaking up the buying process can help: Part one is choosing the car; part two is settling on a price; part three is financing. Be clear with the salesperson what you want to focus on for each step so you don't get sidetracked.

Buying More Car Than You Need

s soon as gas prices dropped from their spike in 2008, Americans went back to buying large vehicles. Hey — it's their prerogative. But those looking for ways to save in these lean times might do so on their next car purchase by being honest about what they really need. "If you end up buying a V8-powered pickup truck when all you need is a 4-cylinder commuter car, well, you are your own worst enemy in that case," says James Bell, executive market analyst for Kelley Blue Book's KBB.com.

Saying Up Front That You Want to Pay Cash

Telling a salesperson right off the bat that you intend to pay in cash might seem like a power play, but it is usually not. Doing so tips them off that they will not be making any money on you in the loan department, and this could make them less willing to negotiate the price of the car as they seek to maximize their profit. There is nothing wrong with that; dealers need to turn a profit to stay in business. Witten says that to get the best deal, first negotiate the final price of the car, and then tell them you will pay in cash.

Being Clueless About Financing

Consumers haggle hard for several hundred dollars on the price of a car, but can lose thousands in the financing office without even knowing it. That's because the loans that dealers offer through partnerships with banks might not have the most competitive interest rates. "Dealers get paid back from those finance institutions for every loan they make," Witten says. "They're not really out to rip people off, but they definitely have their best interests in mind." Learn your credit score and find out from several banks or credit unions what kind of rates you can get on a car loan before you go to the dealer. Then you'll know if the financing terms that the dealer offers are worth taking, or whether to fall back on another loan.

Negotiating Down from the Sticker Price

"The price on the window sticker is all you have to work with if you didn't do your homework," says Consumer Reports' Bartlett. That puts you at a huge disadvantage. Before you set foot in a dealership, go online and research the prices of vehicles you're considering. Not just the manufacturer's suggested retail price (MSRP), but the invoice price, which is what the dealer pays for each car. Also look up consumer rebates, direct-to-dealer incentives and dealer holdbacks, which are a percentage of the invoice price that dealers sometimes get back from the manufacturer. "When you have all of those numbers, it gives you a figure to move up from, rather than down from the MSRP," Bartlett says. The goal is to aim for the best price possible while still allowing a fair profit for the dealer.

Fumbling on the Trade-In

n the same vein, it behooves buyers to negotiate the value of a trade-in as a separate step in the car-buying process, independent of negotiating the price of the car being bought. If discussion of a trade-in gets thrown into the mix from the get-go, the dealer can use that information to adjust the final price more to his liking than yours. The first step is to understand the value of your trade-in before you go to the dealership by looking it up on websites such as MSN Autos or KBB.com. Once at the dealer, negotiate the trade-in only after you have settled on the price of the new car. If a dealer asks upfront about a trade-in, focus his attention back on the process at hand, whether that is selecting the car or negotiating its price.

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