Philip Reed is the friend everybody wishes they could have accompany them to a car dealership.
As the senior consumer advice editor for automotive website Edmunds.com, Reed has been dispensing car-buying wisdom for more than a decade. Here, Reed tells insuranceQuotes.com what mistakes to avoid and what to look for when buying a car.
People are overwhelmed about the car-buying purchase and they don’t like (the process), so they go in with a lot of resistance. Some of the mistakes they make are extremely basic mistakes. At the head of that list is the fact that they don’t consult pricing information.
One of the problems is that very often people haven’t bought a car for years. They may not know the resources available to them. For example, one of things Edmunds.com does for free is our feature called True Market Value pricing. It calculates the average price that people are paying (for a car) in the market.
Is there anything else people should consider when buying a car?
The other thing people aren’t doing is that they don’t know about the Internet department (the website of a dealer), and they don’t use it. The Internet department believes they’re dealing with more informed shoppers that check pricing and more or less know what they want. They’re willing to make a deal without needing the buyer to be physically in the dealership. This accomplishes a number of things. First of all, it’s much more comfortable for the consumer. Secondly, you can cover much more ground when you comparison-shop dealerships. And finally, you’re probably going to end up with a better price.
Why do you think the car-buying process is so stressful for some people?
There’s pressure everywhere. There’s pressure not to make a mistake and not to spend too much money, not to make the wrong choice. The second part of it is pressure from the salespeople. They’re under a fair amount of pressure because, in a lot of cases, salespeople are working for commission only. They need to sell cars, and because of the way the industry is going, the (profit) margins are smaller and smaller. However, buyers tend to be sympathetic. They want to help these salespeople by buying a car through them.
There are also time constraints. A lot of people want to buy cars on the weekend. They don’t want to take time off work to do it. But actually there’s some good news there. Once you do the test drive, you can leave the car lot and do the rest of the deal remotely so you can have the car delivered and do the paperwork at home or over your lunch hour.
What tips do you have when it comes to negotiating a car purchase?
I would tell people that when they’re heading into negotiation, if you know what the True Market Value (TMV) price is and you get some quotes from the (dealership’s) Internet department, you’re going to find yourself well below TMV. Let’s say you contact three to five dealerships in your area and get their best price. Once you have those, you can start making comparisons. Sometimes it might not be an apples-to-apples comparison, because you’ll have different options and colors and the prices might bounce all over the place.
Ultimately, your decision is going to be a mixture of price and the way that you feel about the dealership – your level of trust in the dealership to honor the deal and not follow up with any surprises.
Before you go to the dealership and you conclude the deal, you need to ask, “In addition to the cost of the car, what are the other fees?” Hopefully, they’ll say sales tax, which is legitimate; registration fees, which are legitimate; a documentation fee – and that’s it.
Is there anything people should keep in mind regarding car insurance when they buy a new car?
Insurance for sports cars and specialty vehicles can be very expensive. So make sure you plan ahead and get a rough idea of what the car insurance is going to cost you. Also, if you’re planning to lease, the leasing company is going to have requirements for insurance. Finally, if you’re leasing a car, make sure the lease contract has gap insurance (which covers the difference between what your car is worth and how much you owe). They nearly all do, but make sure you verify it.
How does someone determine whether it’s better to buy or lease a vehicle?
If you can take a business deduction (if you use your leased car for business, you can write off a percentage of the monthly payment as a tax deduction) for the lease payment, that really helps. Some people just want cheap transportation. For other people, their car is a personal expression. For those people, getting in and out of new cars frequently is important to them. And a good way to do that is leasing. But if you’re interested in limiting your automotive expenses, leasing is not a good idea.