Edmunds: The five biggest mistakes people make when buying a new car

Car buyers are now better equipped than ever to find the perfect vehicle at a reasonable price. Nonetheless, pitfalls are still relatively simple to come across. Frequently, buyers allow themselves to be swayed by emotions or are rushed, making mistakes in the process. Edmunds' professionals share the five main errors car shoppers commonly experience and provide advice on how to sidestep them.

Trading in a vehicle with negative equity can be a complex issue, posing significant challenges to both parties involved. If a motorist seeks to trade in their vehicle and the trade-in value is less than the outstanding finance amount, the financier might request for the difference to be paid in cash by the motorist. This could be due to factors like adverse market conditions or damage to the vehicle, meaning its value has decreased below the outstanding amount. For instance, "If the debt is £5,000 and the trade-in value is £3,000, the motorist would need to cover the remaining £2,000. However, they could concentrate on the extra amount the motorist would need to find in their budget to clear the outstanding debt." The financier may also opt to settle the debt for less than the outstanding amount, often referred to as writing down the debt. This would result in a loss for the financier but would solve the imbalance between the trade-in value and the outstanding finance amount.

A concerning trend is emerging where people are becoming increasingly underwater on trade-in vehicles. According to a recent report from Edmunds, nearly a quarter of the consumers who traded in their existing vehicle to finance a new purchase in the second quarter of 2024 were facing negative equity on their previous car loan.

"Upside down", "underwater" and "negative equity" refer to the same problematic situation: the car owner is in debt more than the car's worth. What's more, the number of people falling into this predicament has increased since 2022, and so has the total amount they owe.

If, for instance, you are £3,600 over-budget on your existing vehicle and decide to part exchange this car and buy a new one, you will have to pay the cost of the new car plus the £3,600 you owe on the current vehicle. Your monthly instalments will be significantly higher because you're transferring the debt you owe on your old car to the finance agreement on your new one.

The most financially sensible approach would be to keep your current vehicle for a longer period and continue paying off the loan. It may be a bit of a waiting game, I appreciate you having your heart set on that new car - it's only fair, after all - but if you can ensure that the trade-in value doubles as the same amount as your existing loan, you won't be out of pocket for the new vehicle purchase.

Beware of the Slippery Slope of Hasty Car Buying "
Are you in the market for a new car? If so, it's easy to let emotions guide your decision-making process and rush into buying a vehicle. However, taking a step back and doing your research will likely save you a lot of money in the long run.
**Why Rushing into a Purchase Can be a Bad Idea**
1. **Regret**: You could end up with a vehicle that doesn't suit your needs or lifestyle, leading to regret.
2. **Higher Costs**: A hasty purchase might result in overspending, and you could end up paying more than you would have had you done your research.
3. Lacksoning Ownership Aspects: You might overlook important factors such as vehicle maintenance, insurance costs, and fuel efficiency, only to find out later that they're more expensive than expected.
4. Lower Resale Value: A vehicle that's not right for you may depreciate faster and be harder to sell in the future.
5. Safety Concerns: If you're not careful, you might end up with a vehicle that's not roadworthy or has some critical safety issues.
**The Benefits of Taking Your Time**
1. **Buy What's Right for You**: Taking the time to research and test drive different vehicles allows you to find the one that best fits your needs and lifestyle.
2. **Savings**: Doing your research can help you avoid overspending and find better deals.
3. Use Your Knowledge: Understanding the ins and outs of car buying process will give you more confidence and negotiating power when it comes time to make a purchase.
4. Warrany and Financial Safety: With a car that's right for your, you'll be less likely to have issues with the vehicle and you'll have a better understanding of the costs involved.
Take your time and do your research to make sure you find the right vehicle for you. Your wallet (and your future self) will thank you.

There are good reasons why you might need to rush through buying a vehicle. For instance, your car may have been written off after an accident, or it's so broken that it's not worth repairing. Whatever the reason, you'll need a new car quickly. However, many people don't consider doing their research properly before making a purchase.

There'll be various new and unfamiliar features and technologies in cars now, perhaps worth looking into if it's been a while since you purchased a new vehicle. If you're willing to take your time, you can obtain multiple quotes before making a decision and arrange for a vehicle inspection, especially if the car is second-hand.

Even if you need to acquire a replacement vehicle promptly, it's often more sensible to seek alternative transport while you conduct research for a new purchase. Hiring a car for a short period may cost a few hundred pounds, however, this is preferable to selecting the wrong vehicle or falling victim to an unscrupulous sales deal.

I'm sold. I'll visit a dealership.

Don't be rushed into buying a car - allow yourself time to make an informed decision. Most price research can now be carried out swiftly at home, whether online or on your mobile. Steer clear of hastily walking onto a dealership without exploring other options first.

Make sure that dealers are competing genuinely on your behalf. Be open about your shopping, and present them with multiple quotes, so they appreciate your commitment.

Puzzled by Motor Sales Prices
You receive an email from Ford of Britain with a link to a 4.7 per cent APR representative example for the Fiesta 1.0 Ecoboost Zetec three-door. The interest is computed on the cash price of £10,950 for 24 months, with 24,000 miles, one owner, 12 months first registration, and 12 months' warranty. The total amount payable is £13,956, including £1,500 dealer contribution, which equates to a cash price £2,006.

Some consumers may feel bewildered by a salesperson bombarding them with numerous figures, encompassing the initial price, the trade-in value of your vehicle, a deposit, and your expected regular instalment. While some dealers still employ confusing tactics, it's a good idea to be prepared to counter them should they adopt this approach.

Before you start negotiating, research the market value of the vehicle you're interested in buying to help guide your strategy. As a starting point, note the market value, then focus on two key factors: the final sale price of the car, which includes any additional costs such as tax and registration, and the value of your trade-in.

Be mindful of additional features, such as anti-theft devices, extended warranties, protective coatings for the paint and interior, floor mats, and wheel locks, which dealerships may try to sell. You can try to negotiate their prices, but this might take your focus away from securing a good price for the car itself. It's generally advisable to buy the vehicle without these extras.

Edmunds Says

Spare a little extra time to think through all the details of a car deal, and it could be worth thousands. It's definitely time and money well invested.

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This story was supplied to The Associated Press by the automotive website Edmunds.

Josh Jacquot is a contributor for Edmunds.

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