Three Mistakes to Avoid When Choosing Your Next Car

It’s a great time to buy a car.

These days, even basic economy cars offer a level of quality, performance, safety, and technology not found in luxury sedans 10 years ago.

But with hundreds of models for sale, special discounts, and vague marketing promises, it’s an intimidating challenge to find the right car.

It’s tempting to just give in and choose something quickly… before the car-shopping process drains your energy along with your wallet. And even if you try to research and shop around, it’s still easy to overlook the car that’s best for you… at the best price.

Here are three common mistakes we’ve seen – and the steps you can take to get the best possible car for you, maybe even for less money than you expected.

1) Don’t rely on trusted names or personal stories.

Maybe your 2001 Toyota Camry ran for 200,000 miles. Maybe your brother-in-law walked away from a near-deadly crash involving his Volvo.
It’s tempting to choose your next car based on a positive personal experience. After a vehicle proves itself, why not stick with it?

There are several reasons…

First of all, automakers usually redesign their cars every four to six years. Redesigned cars often have many brand-new parts… which may be more or less reliable than the parts used in the previous model. Furthermore, an automaker may decide to change a car’s focus.

You love the sharp handling of your old BMW… But today, the brand tends to prioritize comfort, quietness, and technology. You bought your old Honda Civic for its user-friendly character, but the 2018 model has a low, sporty seating position and relies on a touch screen even to adjust the radio volume.

Second, some factors that seem impressive on the surface are now everywhere. Rear cameras used to be a perk, but now even most base models offer them.

So don’t just look at past history or trust your friends’ stories. Look at data and expert reviews on current models. The best sources tell you exactly how a car differs from its competitors.

2) Don’t focus your search too narrowly.

You don’t have to research every vehicle on the market to find the right one for you. You can rule out most of them pretty easily… the ones that are too big or too small… too expensive or too modest… or that clearly aren’t the right fit for some other reason.

But keep an open mind about the size and shape of car that could work for you. Focus on what you want from the car, and what you’re willing to spend.

Instead of saying, “I want a full-size sedan,” you could say: “I want four doors, a lot of room inside, a quiet ride, and leather seats, for less than $35,000.” You might find a small SUV or a crossover would work best for you.

3) Consider costs carefully.

Even if price isn’t a leading factor in your buying decision, it’s an important factor to understand… and an easy one to misunderstand.

There are so many financial factors in a car purchase that it’s easy to be distracted by just one of them. There are cars with low base prices… but which cost extra for any option you might want, or the car gets terrible gas mileage.

Most people know that they shouldn’t pay the “sticker price,” but nearly every car sells at a different discount from its manufacturer’s suggested retail price (MSRP). They vary based on the price actually paid by the dealership, on how easily the dealer can sell a particular vehicle, and on various rebates and incentives available to customers or dealers.

The final negotiated price could turn out to be the MSRP, or even above it, for a high-demand new model… But it could be $10,000 less for a competitor. When comparing prices, you’re better off ignoring the sticker price altogether. A more useful tool is TrueCar, which collects real-life transaction prices from dealerships to estimate what you’ll actually pay.

Also consider what features you want on your car. A car that’s a great deal for one person might be a terrible deal for you… because it might bundle something you do want with expensive add-ons that you don’t. I like to use the pricing and reliability site TrueDelta, which can tell you the minimum price of any car equipped with certain features you select.

Besides the purchase price, other important costs are depreciation, fuel economy, and insurance premiums. Edmunds.com offers a handy “True Cost to Own” calculator that estimates these factors and more.

Also, consider both new and used cars. It’s often easy to find a gently used car at a substantial discount off its new price… But you can also sometimes find a new car with discounts that make it cheaper than a pre-owned version.

Again, we wouldn’t encourage you to choose your car solely by the numbers. But without knowing how much extra you’re paying, it’s hard to judge whether a more expensive car is worth the money. And although a car may seem out of your league based on its sticker price, it may prove more affordable than you’d expect if you consider all the other cost factors.

So next time you’re choosing a car to buy, keep these steps in mind: Research today’s cars, carefully consider what qualities you want, and fully understand prices. Putting in this extra work up front can get you a car that better fits your needs, costs thousands of dollars less… or both.

What We’re Reading…

Here’s to our health, wealth, and a great retirement,

Dr. David Eifrig and the Health & Wealth Bulletin Research Team
January 25, 2018