5 Ways to Avoid Common Financial Pitfalls When Shopping for a Car

Q: What is responsible car buying?

Responsible car buying means researching financing, comparing loan offers, saving a down payment, avoiding overly long loans, and considering resale value or leasing based on how long you’ll keep the vehicle.

Q: How much should I put down when buying a car?

Aim for at least a 10% down payment to reduce negative equity risk and lower monthly payments; pairing it with GAP or new-car replacement coverage can offer extra protection.

Q: When should I consider leasing instead of buying?

If you don’t plan to keep a vehicle for many years, lease terms often offer lower monthly payments and let you avoid long-term depreciation concerns, making leasing a practical option.

Q: Why avoid auto loans longer than 60 months?

Loans longer than 60 months increase the chance of being upside-down (owing more than the car is worth), cost more in interest, and can leave you vulnerable if the vehicle is totaled early in the loan term.

Q: How can I compare auto loan offers effectively?

Get preapproved from multiple lenders, compare APRs, fees, and terms, and use calculators to estimate monthly payments and total cost so you can choose the most affordable and appropriate loan.

Published by

Clara

Jan 14

Responsible Car Buying Tips for Smart Shoppers

You follow traffic laws. You keep your insurance current. You would never text behind the wheel.

But does that same prudence extend to the way you purchase vehicles?

Analysts at Edmunds, the online car resource, examined more than 842,000 vehicle purchases made between May and September to determine which states’ residents exhibited the most responsible car-buying habits.

The researchers measured buyer behavior using four factors:

The share of trade-ins where the seller had negative equity (meaning they owed more than the vehicle’s market value)
The average balance owed on those negative-equity trade-ins
The average duration of the auto loan
The average interest rate on auto loans

Edmunds’ analysis showed that buyers in the Northeast tended to be the most prudent, while shoppers in the South generally had room for improvement.

The states topping the list for the most responsible buyers were Connecticut, Massachusetts, Rhode Island, Michigan and New Jersey. At the other end were New Mexico, Arkansas, Alaska, Mississippi and Oklahoma.

Ivan Drury, Edmunds’ senior manager of industry analysis, noted in the study that being informed and prepared before stepping into a dealership helps people make wiser purchases.

The researchers also observed that residents of the top five states spent roughly 55% more time using car-shopping calculators prior to buying than those in the bottom five states. Specifically, they used auto buying calculators at Edmunds.com to estimate monthly payments, affordability and other factors.

“There are certain elements of car shopping you can’t change, like your budget or needs, but doing solid research is something every buyer can control,” said Matt Jones, Edmunds’ senior consumer advice editor, in the report.

5 Practical Ways to Be a More Responsible Car Shopper

Edmunds highlighted five habits that savvy buyers practice when purchasing a new vehicle.

Compare auto loan offers and get preapproved before you visit a dealership.
Save a down payment of at least 10%, and pair it with GAP insurance or new-car replacement coverage so you avoid being underwater if the car is totaled.

(GAP insurance — guaranteed auto protection — covers the difference between what you owe on the loan and what the car is worth after depreciation. New-car replacement coverage can pay to replace a totaled vehicle with the same make and model, though it typically has limits on age and mileage of the original vehicle.)

Steer clear of loans longer than 60 months.
Consider the vehicle’s residual value — its likely future worth — before purchasing a new car.
If you don’t intend to keep the vehicle for many years, think about leasing instead of buying.