5 costly mistakes to avoid before buying your next car, according to Edmunds

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Buying a new car can be a daunting financial decision, especially with the current trends in the automotive industry. A recent analysis by Edmunds revealed that a significant 19.3% of consumers who financed a new vehicle in the second quarter of 2025 opted for monthly payments of $1,000 or more. This shift is largely driven by high interest rates and the continuous rise in vehicle prices.

While it may be tempting to stretch your budget to get the car of your dreams, committing to a high-cost loan can have serious consequences. Before signing on the dotted line, it’s crucial to avoid common car-buying missteps that could lead to financial strain in the long run.

Buying outside your means: With the average new vehicle price hovering around $49,000, many buyers find themselves stretching their budgets to afford the latest models. Opting for extended financing terms like 72 or 84 months may seem like a solution, but it can significantly impact your financial health. It’s advisable to buy within your means, aiming for a loan term of no more than 60 months and keeping car-related expenses under 15%-20% of your monthly take-home pay.
Getting a dealership loan: Waiting until you’re at the dealership to think about financing is a common mistake. Dealerships may offer convenient financing options, but they often come with marked-up interest rates and hidden fees. To save money, it’s recommended to secure a preapproved loan from your bank, credit union, or an online lender before visiting the dealership. This puts you in a stronger position to negotiate competitive rates.
Trading in a car with negative equity: Trading in a vehicle with negative equity, where you owe more than the car’s worth, can worsen your financial situation. Rolling over this deficit into a new loan prolongs the problem and keeps you underwater for longer. If faced with negative equity, consider keeping your current car longer, making extra payments, or refinancing to break even.
Not working with internet sales team first: Many dealerships have internet sales teams that offer better prices and convenience compared to traditional in-person visits. Utilizing these online resources can save you time and money by comparing prices, rebates, and incentives across multiple dealerships. Working with internet sales departments gives you leverage during negotiations and ensures a smoother car-buying experience.
Overlooking used car options: While buying a new car has its allure, considering certified pre-owned vehicles can be a financially savvy choice. Certified pre-owned cars come with extended warranties, rigorous inspections, and lower prices compared to new models. Additionally, new cars depreciate rapidly, losing 20%-30% of their value in the first year alone. Opting for a used car can help you avoid this depreciation hit and save thousands in the long run.
In conclusion, purchasing a new car is a significant financial commitment that requires careful consideration and planning. By avoiding these common mistakes and conducting thorough research, you can secure a deal that not only fits your budget but also ensures your long-term financial stability. Remember, the right car deal isn’t just about the vehicle itself but also about the lifestyle you envision post-purchase.