First-Time Buyers: Pitfalls to Avoid at the Dealer

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Shopping for a vehicle as a first-time buyer can be exciting but stressful, and there’s a lot to remember. First-time car buyers face many challenges when it comes to finding the perfect first car, securing an auto loan with limited credit, and negotiating a good deal. So what are the common pitfalls you should avoid at the dealership?

Related: More Advice for First-Time Buyers

Common Pitfalls to Avoid as a First-Time Buyer

Whether you’re shopping for your very first car or you’re looking to buy a new car instead of leasing for the first time, the process can be overwhelming. Read on to learn some of the most common mistakes first-time buyers make and how to avoid them.

Leaving too much time between test drives: We know; you’re busy, but if you spend a month test-driving on the weekends, it’ll be hard to make accurate comparisons. Instead, find an auto mall and test your top picks back to back on one day. Use a notebook or your smartphone to create a scoring grid and evaluate the same aspects of every car you drive.

Try these 10 factors to score: visibility, driver’s-seat comfort, backseat space, cargo room, interior quality, multimedia functionality, acceleration, handling, ride comfort and noise. Remember to consider EPA mileage ratings and (of course) price. Make detailed notes about exactly what you love (and don’t love) about every vehicle you test-drive.

Shopping only by monthly payment: Too many first-time car buyers set their budget by the monthly payment, a number that’s easily manipulated by changing auto loan terms. Consider this example: You had $3,000 for a down payment and wanted to spend $500 a month on your new car. That may get you a 4% rate for a 48-month loan on a $25,000 compact sedan. But that same $500 monthly payment and $3,000 down could also get you a $35,000 SUV with leather seats and a moonroof. What’s the catch? You’ll be making payments for much longer (72 months) at a higher interest rate (4.5%). Bottom line: You’ll spend an additional $12,000 over the length of the loan.

One benefit of going with a shorter loan term: You won’t be upside down on your auto loan as long. Let’s say that a year into ownership, circumstances force you to sell the car. With the sedan scenario, you’d still owe $16,825 in loan principal. If the sedan had depreciated (seen its value decline) by 25%, you’d be able to sell it for close to $19,000 and pocket about $2,000. But in the SUV scenario, you’d still owe $27,247 after a year, and if it had also depreciated by 25%, you’d owe $1,000 more than the SUV was worth.

Adding options by monthly payment: Some automakers pitch extra options, accessories or service contracts (like extended warranties) by monthly payment. Make sure you do the math. An extra $13 per month for those fancy wheels might not seem like a lot, but over a 72-month loan, they’ll cost you $936.

Not knowing the deals: New-car incentives took a significant dive during the inventory shortage but are slowly making a comeback. The average incentive in April 2023 was estimated at $1,599, according to J.D. Power — that’s up approximately 59% from the same time a year prior.

Knowing which factory and dealer incentives are available gives you the best starting point for negotiations. You may not qualify for that loyalty rebate or have good enough credit for the low-interest loan, but general factory rebates have fewer eligibility restrictions. Many automakers offer special cash or financing incentives for recent college grads; if you have a freshly acquired diploma, it can help you land a new car in addition to a new job.

Forgetting to negotiate an “out the door” price: If you think you’ve negotiated the MSRP down to a great deal, the actual total you pay might still give you sticker shock. An internet sale price might seem like a big discount, but it’s seldom what you actually pay in the end. The number often excludes the vehicle’s destination price, which can range from around $1,000 to $2,000. It also usually omits the dealer documentation fee, which can add hundreds of dollars depending on which state you’re buying in. Then you’ll have to add sales tax and vehicle title, registration and license fees. Some cars even have dealer prep fees or extras like vehicle identification number etching.

The good news? You can avoid such surprises by mentioning up front that you want the out-the-door total. Tell the dealer that you want a number that includes sales tax and all fees. We’ve shopped anonymously for many cars, and many salespeople are open to requests such as this. Once they know that’s what you want, they’ll get you an out-the-door figure, and you should negotiate on that number alone.

Not securing backup financing: Auto loan rates have been on the rise recently, and a high-interest loan can undo a lot of negotiating on the vehicle’s final cost. Before you head to the dealer, it’s smart to secure loan approval from a bank or credit union. This is especially true if you have limited credit history or you have had credit problems in the past.

“Line up financing before you go to the dealership,” said Greg McBride, chief financial analyst at “That way you have an offer in your back pocket.”

Automakers want your financing business, so if you have preapproved loan terms, dealers will often beat (or at least match) those terms. At worst, you have a fallback option if the dealer can’t provide a decent loan.

There’s another benefit to securing prior financing: You’ll learn your credit scores and anything in your credit history that could keep you from getting a loan. For first-time auto buyers, this could be a huge advantage.

“Understanding what’s on your credit is a big step in that direction toward being informed,” McBride said. “You can scenario-play and see what [a sticker price translates] to in terms of monthly payment.”

Not knowing your current car’s trade-in value: If you plan to trade in your car, you should know how much it’s worth. As used-car prices spiked during the inventory shortage, trade-in values followed suit, and while the average trade-in amount has dipped in recent months, it remains elevated compared to averages seen prior to the shortage: J.D. Power estimated the average trade-in equity for April 2023 reached $9,162, nearly double the pre-pandemic average. Like a high-interest loan, a lowball offer on your trade can undo a lot of apparent savings elsewhere in the deal. You can click here to estimate your car’s trade-in value, and if you want the most money, you can choose to sell it yourself. You may also want to get a few trade-in offers from other dealers as a backup plan. Remember: Just because you’re buying a new car from a given dealership doesn’t mean you have to trade your old car in with that dealership.

Buying a used car without an inspection: Buying a used car without having it inspected is a common mistake among first-time shoppers. If you buy a used car that’s out of warranty, we strongly recommend an inspection by a trusted mechanic. Any reasonable seller should let you take the car to a mechanic or make the sale contingent on a third-party inspection. There’s only so much the average shopper can tell from vehicle history reports and a test drive. Mechanics can test engine compression, inspect the underbody and detect drivetrain issues that aren’t readily apparent. A good inspection can save you from buying a lemon — or at least give you some more negotiating leverage — and can cost around $130-$200.

In the market for a “cheap” first car? Find cars priced at $8,000 or less near you.

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