It’s no surprise to anyone buying a new or used car in 2022 – the market is hotter than it’s ever been before. In fact, according to the U.S. Bureau of Labor Statistics Used Car Index, prices have risen 42% since December 2019. We’d love to tell you the end of this inflated market is in sight, but experts aren’t quite sure it is. What we can tell you though, are mistakes to avoid when purchasing a car in today’s market. So, fasten your seatbelt – we’re going to help you navigate this ever-changing environment.
Here are 5 car-buying mistakes to avoid in today's market:
Not doing enough research
Before purchasing a vehicle in any market, it’s important to do the necessary research. In today’s car-buying market, it’s more important than ever to reset expectations and thoroughly research what to expect. Here are a few things you’ll want to keep in mind:
When purchasing a new or used car today, you can almost guarantee there will be some type of markup. In fact, some car brands are charging upwards of 5-8% over the manufacturer’s suggested retail price. According to Kelley Blue Book, new car buyers in July 2022 paid an average of $48,182, which is the highest figure the company has ever recorded. This price hike was triggered partly by a worldwide microchip shortage affecting the production of new cars, driving their prices up. And this, in turn, caused the used car market to skyrocket as well. Experts don’t anticipate the microchip shortage to ease until 2023 at the earliest, so prices likely won’t drop significantly for some time.
Another challenge you may face when buying a car in today’s market is the lack of inventory. Because of the microchip shortage and other supply chain-related issues, there are fewer vehicles on car lots than in the past. It may be beneficial to conduct a broader search to find a car you want. You may also need to be flexible when it comes to brand, color and features.
With supply as low as it is, and demand as high as it is, make sure you’re able to purchase the vehicle you want as soon as it’s available at a competitive price. In this environment, cars don’t sit on the lot for long and are often sold before they even arrive. If a car you want isn’t on the lot, be prepared to reserve the vehicle and pay a deposit to hold your car as soon as you select it.
Not getting preapproved for a loan
Getting preapproved for a car loan means the lender agrees to offer you a particular rate if your selected vehicle meets its loan requirements. With pre-approval, you’ll know what size loan you qualify for, and what kind of rate you’ll pay, and it shows the car salesperson you’re a serious buyer. Preapproval also removes the pressure of negotiating financing contracts at the dealership and allows you to focus your attention on finding the right vehicle at the price you can comfortably afford. Not having this bargaining chip when you head into a dealership will put you at a disadvantage.
Accepting a lowball offer on your sale or trade-in
In today’s car-buying environment, you can expect top dollar for your used vehicle (especially if it’s in good condition). Before you set foot on a car lot, make sure you’ve researched the trade-in value for your vehicle so you can negotiate the highest possible price. Kelley Blue Book is a great resource for finding the trade-in value of your car.
Keep in mind you don’t have to sell your car to the same dealership you plan to buy from, so see where you can get the most money for your current ride by comparing offers from multiple dealers. Places like CarMax and Carvana can give you quotes for a selling price, and you can use these prices to negotiate a better rate from the dealership you plan to buy from.
Buying unnecessary extras
With low inventories and high buyer demand, car dealers are encouraged to sell you extras to boost their profit margins but ultimately waste your time and money. These items include, but aren’t limited to rustproofing, fabric protection, paint protection, VIN Etching, wheel locks and additional warranties. Avoid hearing their sales pitch for these unnecessary items by asking for the out-the-door price, which then empowers you to tell the dealer exactly what you want and what you don’t need. Also, make sure to fully read the contract before signing. If it contains any unwanted or unrecognizable items, don’t be afraid to have them removed.
Being afraid to walk away
Although the market is hot and inventory is low, you can walk away from a deal if you’re unsatisfied. Remember, if you keep your options open, do your research, and visit multiple dealerships, you’re in a far better position to negotiate. Shopping around will ultimately make you feel more comfortable walking away if negotiation isn’t going to plan or you don’t like the way you’re being treated.