I Made Every First-Time Car Buyer Mistake This Week

I finally became a car owner this week and bought not one-- but two cars. After almost 25 years of depending on other people for rides, I finally decided to take the leap! Okay...so I returned the first car I bought, but each experience taught me really important lessons about how to and how not to buy a car that I'll be sharing with you.

My first car purchase was a perfect example of what not to do when car shopping. Here's how it went:

To start out my journey to owning a vehicle, I did absolutely no research. I went into the dealership with pretty much no knowledge of different vehicle values, functionality, financing options, dealership sales tactics etc. I knew I wanted something used and that was about it.

I give myself an ounce of credit because I did know that there was a lot that I didn't know. I knew I couldn't go alone. So I decided to have my boss, who happens to be great friends with the dealership owner, come along with me. I figured he would be a good person to have in my corner. But what I failed to see it that I brought along someone who knows nothing about my finances or what I can reasonably afford. For some reason, I thought he would have a good enough connection with the dealership to get those sticker prices lower.

As soon as we got to the lot, my heart sank. There wasn't a single car at the dealership in my price range. Common sense would say to leave. There's no point in shopping somewhere you can't afford, right? Well we stayed and started picking some cars out to test drive and my boss reassured me they would have a good deal.

It was time to crunch the numbers. We went inside and sat in the salesman's office. We sat for a very long time. Almost an hour went by before he really began to talk numbers at all. I realize now the wait was because it was pretty hard to convince a bank to loan me $20,000, being that my entire annual salary is just a smidge higher than that. Somewhere in this period of waiting, it started to feel like I was becoming obligated to leave the lot with a car that day. Wouldn't I be wasting everyone's time if I didn't?

Finally, almost two hours later, there was a number in front of me. That number crept up higher and higher as the dealer talked me into a service contract, gap protection, and other "must-haves" for a my car. The final number was way, way, way bigger than I could reasonably afford to spend on a car. They convinced me that the monthly payments would be manageable and that the rate was too good to be true. A steal, they told me. My boss agreed.

A dozen signatures later, I had become the new owner of a Subaru Impreza...and effectively doubled the amount of debt to my name. I drove straight home, my head spinning with the numbers the dealership had just rattled off. I parked the car and went inside without turning back to look at it. What had I done?

There are laws, in some states, that protect a consumer from making poor, impulsive purchases at a car dealership. They call it a "cooling off period." It allows people to cancel certain contracts or sales for any reason, such as buyer's remorse. There is no cooling off period when you buy a used car from a dealer. I got lucky. I called my boss in tears ten minutes after I got home and explained that I had made a mistake. He called his friend who owned the dealership who then agreed to let me return the car.

In Review: What Not To Do When Buying A Car.

• Don't go into a dealership blind. Do your research about the type of car you want and get a sense of what local prices are for it.
• Bring along someone who knows your budget. Not your rich uncle who thinks $20,000 is affordable.
• Research again. Look up dealership inventories before you go and when you get to the lot, ask to see the vehicles you know you can afford.
• Don't be naive about the salesman game. They'll make you wait. They'll do anything and everything they can to make you feel like you've already decided to leave with a car that day.
• Stand your ground. If you didn't go in wanting the extras, don't let them talk you into all the tack-ons that will raise your final price $2,000 to $3,000.
• Do not let your total monthly vehicle expense, including principal, interest and insurance, exceed 10% of your gross income. You'll be a slave to your new wheels if you're not careful.
  
  In the end, it all worked out. I learned a ton from my first car buying experience and did a week of research and number crunching before I went back into a dealership. I'm happy to report that I am the owner of a very reasonably priced Ford Focus. I hope your car buying experience is a good one after reading this!