What not to do when car shopping?

Buying a Vehicle

This guide offers advice for each step of the complicated process of buying a new or used vehicle.

Also learn about your rights under Oregon’s Lemon Law.

Before You Go to the Dealer

1. Know the fair purchase price.
   • Edmunds » and Kelley Blue Book » are resources to compare different cars and how much you should expect to pay for them.
2. Do the math.
   • Before going to a dealer, calculate the most you want to spend and then figure out what monthly payments fit your budget. If you negotiate based solely on what you can pay per month, you may end up paying more over the life of the loan.
3. Research your financing options.
   • Often, the best rate is available when the manufacturer is offering special rates. If you are not looking to purchase a new car during a sales event, or are looking to purchase a used car, check financing rates with your bank or credit union. You may be able to pre-qualify with a bank or credit union before you visit the dealer.
4. Know your score.
   • Knowing your credit score will help you determine if you may qualify for better financing.
5. Choose a dealer you trust.
   • Before you do business with anyone, check our Consumer Complaints Database » to see if others have reported problems.

Negotiating the Deal

1. Everything is negotiable.
   • Keep in mind that everything is on the table, this includes:
     • the price of the vehicle
     • the trade-in value of your current vehicle
     • financing options
     • insurance and service contracts
2. Buying a car includes multiple transactions.
   • Buying your new car, selling your old car and financing your new car are three separate steps in the transaction. Approaching your purchase this way will help you understand what you are paying for.
3. Get the best interest rate.
   • Put your research to work. Always ask the dealer if the interest rate being offered is the lowest available. You can even inquire how much the dealer profits.
4. Don’t lower your monthly payments by opting for a longer loan term.
   • It may seem like a good idea, but it could cost you thousands of dollars in interest over the term of the loan. Plus, vehicles lose value the moment they leave the lot and continue to do so every year after. The longer the term of the loan, the more likely it is for the value of the car to fall below the amount left on the loan. This creates “negative equity.” If you sell or trade-in a vehicle and you owe more than it is worth, you have to pay off the negative equity.

We offer the following advice:

1. Take notes.
   • Once you have agreed on a price with a dealer, make written notes of what the agreement is and make sure to include the cost of each item.
2. Bring a calculator.
   • Compare the agreed-upon prices with the prices listed in the purchase agreement. Make sure they match before signing anything. For example, you may think you are getting a great deal on your trade-in, but in exchange the dealer may have increased your interest rate.
3. Take someone with you.
   • Two people are less likely to miss something.
4. Do not believe that additional products or services are free or included in the cost of the car.
   • Verify there are no hidden charges or fees before you start signing the documents.
5. Be cautious of aftermarket add-ons or treatments offered by the dealer.
   • Consider your needs. Some add-ons are unnecessary, or significantly overpriced, and may greatly increase the price or cost of your overall financing.
6. Ask for a copy of the purchase agreement and Retail Installment Contract.
   • It is your right to keep a copy of every document you sign.
7. Request a vehicle history report.
   • If purchasing a used vehicle, search it’s vehicle identification number for information about the car.

Closing the Deal

1. Be prepared to walk away.
   • You have no obligation to sign a contract – especially if its terms have changed.
2. Make sure that all promises are in writing.
   • If a contract has terms substantially different from what the salesperson initially promised, do not sign the contract unless you are willing to accept the new terms.
3. Take your time.
   • Do not let anyone rush you to sign paperwork without reviewing the terms of the agreement. Read all documents and understand all terms before you commit to them.
4. Get an expert opinion.
   • If you are purchasing a used vehicle, have it inspected by a trusted mechanic. This may cost $100 or more, but could save you thousands in the long run. Be wary of any dealer who resists an independent inspection.
5. Do not lie.
   • Do not allow false information on any forms. Beware of any salesperson who suggests putting false information, such as a higher income, a larger down payment, or false living expenses on your finance application. If something goes wrong, you will be held accountable for that false information.
6. Do not sign a blank contract or application.
   • Do not sign anything that contains blank spaces – especially on contracts or credit applications. Draw a line through all blanks on any document you sign.
7. Free DEQ Emissions Test.
   • A used vehicle in good condition will still fail an emissions test if the exhaust sensors have been tampered with or disabled. Visit a DEQ Clean Air Station during a test drive and ask for a free, “voluntary,” test.
8. Processing the paperwork.
   • A purchaser of a vehicle may negotiate the amount of the document processing fee with a vehicle dealer, but in no case shall the document processing fee charged by a vehicle dealer exceed: (a) $150, if the vehicle dealer uses an integrator; or (b) $115, if the vehicle dealer does not use an integrator (see ORS 822.043 »).
9. There is no sales tax on any vehicle purchased in Oregon.
   • As of January 1, 2020, certain Oregon businesses will need to pay a new Corporate Activity Tax (CAT) ». Oregon vehicle dealers are allowed to pass the cost of the CAT on to consumers who purchase vehicles from them.
   • If you are buying a car in another state, make sure the dealer fills out paperwork for Oregon residents so that you do not have to pay sales tax.
10. In Oregon, you can take a new or used car home before financing is approved.
    • This practice is called “spot delivery.” It is designed to lock you in to a purchase. If you are tempted to do this, take a moment to read up on the Yo Yo Scam ». There is no 3-day right of rescission for a car purchase or lease, even if you do not yet have final approval of financing. However, if you cannot get financed at the exact same terms for which you signed an agreement, or if financing is not complete within 14 days, you must bring the car back to the dealer and the dealer must give you back your trade-in vehicle and down payment.

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5 Tips For Buying A Car The Smart Way

New cars these days have better safety features and more tech gizmos than models from a decade ago. And let’s face it: Trading in a beat-up clunker with grimy seats is an enticing idea.

But many Americans make big mistakes buying cars. Take new car purchases with a trade-in. A third of buyers roll over an average of $5,000 in debt from their last car into their new loan. They’re paying for a car they don’t drive anymore. Ouch! That is not a winning personal finance strategy.

But don’t worry — NPR’s Life Kit is here to help. Here’s how to buy a car without getting over your head in debt or paying more than you have to.

1. Get preapproved for a loan before you set foot in a dealer’s lot.

«The single best advice I can give to people is to get preapproved for a car loan from your bank, a credit union or an online lender,» says Philip Reed. He’s the autos editor at the personal finance site NerdWallet. He also worked undercover at an auto dealership to learn the secrets of the business when he worked for the car-buying site Edmunds.com. So Reed is going to pull back the curtain on the car-buying game.

For one thing, he says, getting a loan from a lender outside the car dealership prompts buyers to think about a crucial question. «How much car can I afford? You want to do that before a salesperson has you falling in love with the limited model with the sunroof and leather seats. «

Reed says getting preapproved also reveals any problems with your credit. So before you start car shopping, you might want to build up your credit score or get erroneous information off your credit report.

And shop around for the best rate. «People are being charged more for interest rates than they should be based upon their creditworthiness,» says John Van Alst, a lawyer with the National Consumer Law Center.

Van Alst says many people don’t realize it, but the dealership is allowed to jack up the rate it offers you above what you actually qualify for. So with your credit score, «you might qualify for an interest rate of 6%,» says Van Alst. But, he says, the dealership might not tell you that and offer you a 9% rate. If you take that bad deal, you could pay thousands of dollars more in interest. Van Alst says the dealership and its finance company, «they’ll split that extra money.»

So Reed says having that preapproval can be a valuable card to have in your hand in the car-buying game. It can help you negotiate a better rate. «The preapproval will act as a bargaining chip,» he says. «If you’re preapproved at 4.5%, the dealer says, ‘Hey, you know, I can get you 3.5. Would you be interested?’ And it’s a good idea to take it, but make sure all of the terms, meaning the down payment and the length of the loan, remain the same.»

One word of caution about lenders: Van Alst says there are plenty of shady lending outfits operating online. Reed says it’s a good idea to go with a mainstream bank, credit union or other lender whose name you recognize.

2. Keep it simple at the dealership.

If you’re buying a car at a dealership, focus on one thing at a time. And don’t tell the salespeople too much. Remember — this is a kind of game. And if you’re playing cards, you don’t hold them up and say, «Hey, everybody, look — I have a pair of queens,» right?

So at the dealership, Reed and Van Alst both say, the first step is to start with the price of the vehicle you are buying. The salesperson at the dealership will often want to know if you’re planning to trade in another car and whether you’re also looking to get a loan through the dealership. Reed says don’t answer those questions! That makes the game too complicated, and you’re playing against pros. If you negotiate a really good purchase price on the car, they might jack up the interest rate to make extra money on you that way or lowball you on your trade-in. They can juggle all those factors in their head at once. You don’t want to. Keep it simple. One thing at a time.

Once you settle on a price, then you can talk about a trade-in if you have one. But Reed and Van Alst say to do your homework there too. A little research online can tell you what your trade is worth in ballpark terms. Reed suggests looking at the free pricing guides at Edmunds.com, Kelley Blue Book and NADA. On Autotrader, you can also see what people in your area are asking for your car model. And he says, «You can get an actual offer from Carvana.com and also by taking the car to a CarMax, where they will write you a check on the spot.»

So he and Van Alst say don’t be afraid to walk away or buy the car at a good price without the trade-in if you feel the dealership is lowballing you on your old car. You have plenty of other good options these days.

11 Mistakes to Avoid When Buying a Car

Buying a car is a significant expense, so you want to make sure you’re making the right decisions. Doing your homework ahead of time can save you from making mistakes that could cost a lot of money. Before car shopping, come prepared first and read the tips below to be ready to purchase your new vehicle.

1. Failing to research cars and prices ahead of time

Before buying a car, it’s crucial to research all the different types of vehicles available and their prices. You never want to rush into buying a car or buying the first one you see.

Determine which kind of car will suit you best and what will work with your budget to ensure you don’t go into a huge debt you can’t afford. For example, SUVS are popular and higher in price but do you need an SUV, or will a sedan work just as well for your needs?? Researching models, trim, each brand’s reliability, and gas mileage is also important.

Keep an eye out for reports of new models arriving soon because dealers often cut down prices to move their old inventory. It’s your responsibility to find out what’s available rather than being persuaded by a dealer’s advertising. Remember, don’t walk into a dealership without researching first.

2. Not finding your own financing options

Interest rates when financing through the dealership is usually much more expensive than financing with a credit union or other banks.

You could be talked into signing an agreement favorable to the dealership and not you. For example, you could wind up paying more interest than you need to. This technique is called “interest-rate bumping.” If a dealership’s loan is the fairest, you can choose it, but it’s good to come to the table with financing options.

3. Shopping for a car at only one dealership

When you have an idea of the car you want that suits your needs and wallet, make sure to search multiple different dealerships in your area.

If you’re set on a specific type of car like a Kia and only have one Kia dealership in the area, find out if other dealerships carry that brand you like. Browse online to find typical deals on Kias, then go back to your local dealers to negotiate now that you have a better idea. If not, try to look into competitive brands as well.

4. Focusing on monthly payments only

The best way to pay less per month is to increase your down payment. If you tell a dealer you want to pay less, all they will do is extend the term of the loan or lease, which will increase your interest charges. The net price of the vehicle matters far more than the monthly payments.

A longer loan term with higher interest rates can quickly turn a car worth $15,000 into $40,000 in payments over the life of the loan – that’s not a deal you want to make! Car salespeople like to steer you away from talking about the net price of the car but keep the pressure on them about it and try to negotiate it down. After you agree on a price, you can choose the best payment terms.

5. Not negotiating enough

The number on the window sticker is not the final price. This is called the Manufacturer’s Suggested Retail Price, emphasizing “Suggested.” Don’t use that price as your starting point, as you’ll end up overpaying. Instead, concentrate on the second, lower price the dealer calls “dealer invoice.”

A dealer invoice is what the dealer pays the manufacturer for the car.

The best and easiest way to negotiate is by contacting dealers for a free price quote. This will show you which dealer is more flexible on pricing and which ones are more willing to discount their prices to sell the car.

Before going to the dealership, research and find out their cost. Once you have all the information you need, you can start your price negotiations from a stronger position – the dealer invoice cost, not the suggested retail price.

6. Not test driving the car

This will ensure you’re comfortable with the car and the features it comes with. Even though you may have one car in mind, experts recommend that first-time buyers drive at least seven different vehicles and four cars for buyers who have previously owned a car.

Spend at least half an hour in the test drive. If the salesperson only gives you a few minutes, let them know you want more time to drive it. You need to feel confident owning that car and be sure that it’s free of defects.

Find out what it does and doesn’t have and whether it fits your needs. Be sure to drive it on the highway to see if it makes any strange sounds, and drive over different road surfaces and feel how it rides. Most importantly, check that you’re comfortable and that you like everything that it comes with.

Buying a vehicle you can’t get comfortable in or enjoy is one of the biggest car shopping mistakes you can make.

7. Falling in love with a specific model

We all have a favorite car we’d love to have.

However, sticking to one specific model can be a costly mistake. The salesperson may notice your enthusiasm and determination to get that particular model and will be less flexible on the price because they know you will probably buy it anyways.

Not only that, you’re not likely to be open-minded to other models that may be less expensive and better for your needs. You may get an even better deal if you let the salesperson know that you’re interested in buying the car if you can buy it at a specific price, but if you can’t buy it at the price you want or can afford, you’re happy to look at other vehicles.

8. Focusing more on the deal than the car

Dealerships have deals every holiday, season, and sometimes every week.

They try to entice you to buy with “limited time offer” deals, special financing, and rebates. You can find offers everywhere that sound appealing and worthwhile but don’t dwell on the deal.

Instead, focus on the car you need and its reliability. You can always negotiate even when there’s a deal because special financing and rebates are usually offered by the manufacturer, not the dealer. These limited-time offers are created to rush you to buy before you consider the actual fairness of the deal.

The idea that these offers will expire and you’re going to miss out on a huge deal is false. Take your time and know that these offers are still going to be there when you’re ready to buy.

9. Buying unnecessary extras

Salespeople will always ask you if you want to add rustproofing, fabric protection, windshield coatings, and coating to guard the paint, but the truth is, you don’t need them.

The bodies of new vehicles are already protected, so it’s better to say no. Saying yes just puts more money into the dealer’s pocket while you take on a bigger debt. Thinking, “I’m spending this much already, so why not spend a little more to make it extra special?” will be trouble.

If you need something later down the road, you can always shop around, and you’ll usually find it at a much better price. Read the contract carefully before signing it, and if it contains unwanted extras, have them removed.

10. Not knowing the value of your current car

If you’re planning to sell or trade-in your car, it’s important to know its value. If you owe more than your current car is worth, this won’t stop the salesperson from selling you a new car and trading yours in.

They have many ways to convince you to add your debt to the vehicle you’re buying. The dealership simply adds the difference to your new loan, which means you’re borrowing money to repay the money you’ve already borrowed. When you stop to calculate the numbers, this can be very expensive.

If you can’t pay off your existing car loan before trading it, consider holding onto your current vehicle if it doesn’t have any mechanical or safety issues. When you buy a new car, try to do it with a significant down payment, about 20% of the purchase price, so you don’t find yourself owing more than the car is worth.

11. Not having a used car inspected

Used cars are sold as-is, and most salespeople won’t tell you all that is wrong with the vehicle, which can get you into trouble if you’re not a skilled mechanic. It’s a good idea to hire a professional inspector to inspect the car and inspect the title history by purchasing a used car vehicle history report. A mechanic will come to look at the vehicle, usually for $100 – $200. It might seem like a lot, but that investment can save you thousands in expensive repairs down the road if your mechanic finds a problem.

About the Author

Stephany Lamas

Stephany joined the RentReporters Marketing Team in 2021.