1. Don’t know your options
Do not even think about going into a car dealership if you haven’t done your homework on prices, vehicle reviews and financing options. Unarmed with info, you may be easily manipulated by shrewd salespeople. The internet is your friend and you an easily find all this information in just a few clicks. Sites like Auto Trader, Consumer Reports, and Canadian Black Book are great places to start.
2. Buying new
The minute you drive a new car off the dealer’s lot, it loses value. The average depreciation rate for a new car is 15 to 20 percent per year. The savings can be substantial on a used car that’s just a few years older. At the same time, there are certain models and makes of cars with lower deprecation rates that will make it easier to sell down the road. Check out Canadian Black Book for their list of cars with the best retained value.
3. Haven’t set a limit
Make sure you calculate a budget and stick to it. From upgrades — do you really need leather seats? — to financing options, there are many costly money traps that await you when you walk into a dealership. They will try to convince that these extras are essential and will save you money in the long run — rust proofing, paint protection… the list goes on. Stick to your budget rigidly, despite the carrots the dealer dangles in front of you.
4. Skipping the fine print
With interest rates at all time lows, there are tons of financing options out there to help you buy a car. But not all options are created the same — so make sure to read the fine print. For example, right now you can get a 96-month car loan, which means lower monthly payments but over a longer period of time. And that can cost you substantially more in interest charges. You can do the math here.
5. Leasing for the wrong reasons
If you’re only leasing a car because you want to keep your car payments at a minimum, you might be doing it for the wrong reasons. Ultimately a leased vehicle can end up costing substantially more in interest rate charges — and you don’t own the car at the end of the lease. But the monthly payments are much lower than they would be if you were borrowing money to buy the car. But do the math: in this example from the Globe and Mail, a $34,000 car can be leased for $520/month for 10 years versus $560 for five years. Overtime, financing the car makes more sense, saving nearly $14,000 in cost — and owning the car at the end of the term. So while leasing makes sense of some, it’s not for everyone.
6. Not negotiating
Women tend to dread shopping for cars and feel taken advantage of by car dealers. Unfortunately, the auto industry is male-dominated and until that changes women need to do their homework, know their options and be able to push back and negotiate when buying a car. The best approach is to go in with a list of what you want and how much you’re prepared to pay based on your research.