The Biggest Mistakes People Make when Buying a New Car

Broadcast Retirement Network's Jeffrey Snyder discusses the mistakes people make when buying a car with automobile enthusiast, Ray McGrath.

Jeffrey Snyder, Broadcast Retirement Network

This morning on BRN, the biggest mistakes people make when buying a new car. Joining me now to discuss this, Ray McGrath is an automobile enthusiast. Ray, so great to see you again.

Thanks for joining us this morning.

Ray McGrath, Automobile Enthusiast

Glad to be with you, Jeff.

Jeffrey Snyder, Broadcast Retirement Network

Edmunds just released the five biggest mistakes people make when buying a new car. And I wanted to run them by you to get your perspective. Let's start with number one, trading in a vehicle with negative equity, something that's happening more and more, Ray.

Ray McGrath, Automobile Enthusiast

Yeah, I mean, obviously, that's a problem because people overpaid a little bit during the pandemic. Cars are, you know, they're depreciate, they're not investments, they're depreciating assets. And that's all too familiar.

And people are extending or they're rolling it over into the new loan and extending the time period. So it's a big conundrum. Yeah.

Jeffrey Snyder, Broadcast Retirement Network

And you make a good point. And just to pick up on that, when you have negative equity or an existing lease payment, you roll into another car, they're not just forgiving that loan. They will roll it into the new loan or the new lease.

And therefore, your lease payment will go up. So you're essentially paying for two cars. So maybe not a great financial tactic there.

Ray McGrath, Automobile Enthusiast

No, definitely not.

Jeffrey Snyder, Broadcast Retirement Network

Um, let's talk about the next one here. Rushing this one, I think I've done, I think a lot of people do rushing into a vehicle purchase, Ray. So many people, they see the car that they car, their dreams, the Jeep Cherokee that they wanted, the Dodge Charger, right?

They see this car that they dreamed about. They rush in and buy it.

Ray McGrath, Automobile Enthusiast

Yeah, impulse buying. I mean, it's great for dealers because it helps them become more profitable. But, you know, an educated consumer, and it's probably not the person that's watching us today, would do their research and maybe, you know, rent a car or borrow a car for a while until they figure out what the market dynamics are.

And unfortunately, not everyone does that. They want instant gratification.

Jeffrey Snyder, Broadcast Retirement Network

Well, they do. They want to get the car that sits, sits their image of themselves, right? They're trying to portray an image.

And look, we're all doing that. We dress a certain way to portray an image. You know, I want to look like the, I don't know, the yuppie.

Some people dress like a hipster.

Ray McGrath, Automobile Enthusiast

You look like George Clooney, sporty yet practical.

Jeffrey Snyder, Broadcast Retirement Network

Sporty, okay. Sporty yet practical. But the reality is you need to think about what you're going to buy.

And we've talked about it with you and Ashley King. What's a car insurance going to be, Ray? Because the car you buy, whether it's the Aston Martin, which I love, or the Dodge Charger, or the, you know, Toyota RAV4, that has an impact on your car insurance too.

Ray McGrath, Automobile Enthusiast

Definitely. I mean, Hyundai's, you know, they've gotten a lot of popularity in key years because some of them are easy to steal. Hellcats, we talked about it in the past.

Tesla's come with higher premiums. Yeah, so it's good to do your research.

Jeffrey Snyder, Broadcast Retirement Network

Yeah, absolutely. Let's talk about this next one. I think these all kind of dovetail into each other.

Going to only one dealership. You go to the dealership and look, I know it's a pain in the rear end. It's mileage.

It's the price of gas. It's so expensive, but you really need to, when you do your due diligence, think about going to neighboring dealerships because you might get a better deal.

Ray McGrath, Automobile Enthusiast

And that is 100% true. You know, just go, and I'll pick on Honda. Just go into one Honda dealer.

You're not going to get the same price as another. It's not like Walmart, really. You have to negotiate and do your research.

Jeffrey Snyder, Broadcast Retirement Network

And why is that, Ray? Is it because they're all centers of profitability? They all have different, they're all different sales.

Ray McGrath, Automobile Enthusiast

I mean, if the sales rep can sell you X, Y, and Z and market up to this and you're not an educated consumer, you don't know. It's not like you're going to the, you know, the 7-Eleven and buying a big gulp where it's all $1.99. It's not, it doesn't work that way because they're independent franchises, these dealerships.

Jeffrey Snyder, Broadcast Retirement Network

And what about dealer loyalty? I know someone who always buys from the same salesperson. I guess I can kind of see where that would have merits and benefits.

But again, I always think of the time I'm going in to buy anything, a car, a house, not that I bought a house recently, but there's a market and that market exists today. So does that loyalty to your favorite car salesperson, salesman, saleswoman, whatever, pay off?

Ray McGrath, Automobile Enthusiast

I think it does because you know what? I, you know, maybe you're not overly concerned about, you know, saving a hundred dollars here, a hundred dollars there, but if you get good service and you have a good relationship and it's someone you can trust, there's definitely a value in that. And really, I mean, I know a lot of people probably after the fact, look at what they, that car goes for somewhere else.

But I think if you're happy with doing that, why not? You know? And especially if it's someone you have a good relationship with and they'll take care of you down the road, honor any type of warranty claims you might have, you could put a value on that.

It's a comfort value. It's not always about saving $400, so to speak.

Jeffrey Snyder, Broadcast Retirement Network

Yeah. Or $400 amortized over a five year, 60 payment loan, right? I mean, it's really small, even for the most modest consumer.

Ray, just to follow up one more, one more thing, you go, you buy the car from the dealership. Do you have to get it serviced there or do you look elsewhere for service? So say I bought it over here by company A, they're closer.

And then company B also offers service. Maybe they're a little bit further, but do you have to get your car serviced at the same place you buy your dealership? Because I bet you they would like that.

Ray McGrath, Automobile Enthusiast

They would. Because I mean, theoretically dealerships make a good living off the service part of their franchise. But you know, if it's Ford or General Motors, their products can basically be serviced by any, you know, you can take your Buick to a Chevrolet dealer or vice versa.

But if it's a Tesla, obviously, you know, you're kind of in their infrastructure, so to speak, you know.

Jeffrey Snyder, Broadcast Retirement Network

Yeah. I mean, you've got to get it serviced by Tesla. They're not, are they individual franchises or are they?

Ray McGrath, Automobile Enthusiast

That I don't know. I believe it's all corporate owned because when you look at a Tesla, you're going on Tesla's website and it tells you where to pick up the car. So I believe that's all.

It's not the traditional dealer network that we're familiar with. You know, when you're dealing with Audi or Honda or Chevrolet, you know, so.

Jeffrey Snyder, Broadcast Retirement Network

Yeah. Much more homogenous, homogeneity, if I can use that word. I'm into big words today.

Last question, Ray. Let's talk about dealership pricing. I think buying a car, I can't think of anything else, maybe buying a house, but that transparency, not always there.

How do you align the costs of the same car from each dealer? Because they all have, they all have different features and functions. It's really hard to get the same car at each deal.

I mean, the same color, same features. How do you, how do you figure out how to get that transparency?

Ray McGrath, Automobile Enthusiast

Yeah. And there's definitely a gap in the marketplace for that. But I'm not sure, Jeff, because that's a tough one because you're never going to find the exact same suite of, well, even, you know, if you want a particular color and exterior, interior, but then it, and the same options, it's hard.

But a lot of times, you know, you have to make concessions if, you know, or especially if you want the hot model, you know, there's still premiums on certain vehicles where they're charging over sticker, you know.

Jeffrey Snyder, Broadcast Retirement Network

Yeah. I wonder if it's helpful to take a piece of paper like I have here, which is the story, put some columns and say dealer A at the top, dealer B, dealer C, put the car, and then you can put the MSRP. I mean, I think you got to apply it almost like you're building a little spreadsheet.

And I guess it makes sense, Ray, to get several bids. And you can do a lot of that online now.

Ray McGrath, Automobile Enthusiast

Right. And one thing you didn't mention is the extended warranty. I mean, the dealer, while you have your wallet open, they'd want you to buy that extended warranty.

But, you know, you have a window of where you still can buy it, you know, a month later. And actually, there are some dealers, and I'll just say in the Midwest, that'll sell a Chevrolet warranty for a lot less than your local dealer, and it's the exact same warranty. So it's always good if you're going to buy the warranty, if it makes you more comfortable, buy one issued by the vehicle manufacturer.

So then you have a guaranteed level of service. Third party warranty companies, a little bit hazy there, and you don't always get what you promised, you know.

Jeffrey Snyder, Broadcast Retirement Network

Yeah. And there are a lot of commercials, by the way, I see on the local TV here, trying to sell warranties by third parties.

Ray McGrath, Automobile Enthusiast

We could probably do a whole show on warranties, although we might get sued. I don't know.

Jeffrey Snyder, Broadcast Retirement Network

Well, we would try to be open and facts and not defame anybody. Ray, we're going to have to leave it there. Thanks so much for joining us this morning.

We look forward to having you back again next month.

Ray McGrath, Automobile Enthusiast

Thank you, Jeff.

Jeffrey Snyder, Broadcast Retirement Network

And don't forget to subscribe to our daily newsletter, The Morning Pulse, for all the news in one place. I'm Jeff Snyder. Stay safe, keep on saving, and don't forget, roll with the changes!