4th of July Car Deals: Avoid These 6 Critical Mistakes

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Senior Pricing Analyst

As CarsDirect’s resident pricing analyst, Alex offers must-know analysis of pricing & incentives to those looking to buy or lease a car. His consumer-oriented coverage of the latest trends and breaking news has been featured in publications such as Car and Driver, Motor Trend, Automobile Magazine and Autoblog.

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, Senior Pricing Analyst - June 28, 2019

4th of July car deals are ramping up, offering a broad (if confusing) range of offers like special financing, rebates, and lease deals. However, not every deal is a good deal, and there are major pitfalls you can avoid with a little planning. The result could save you money and prevent you from making a mistake you may regret.

Buying more car than you can afford. We live in a world in which consumers are choosing longer and longer loans. In some cases, manufacturers are even offering 0% financing for up to 84 months. Sure, deals like this can be tempting, but it's important to look beyond the monthly payment.

Consider whether or not you feel comfortable making payments on the same car for 7 years. You could be putting yourself in a position where you owe more on the car than it's worth, a situation referred to as "being underwater" that can have consequences if you decide to sell your car earlier than planned.

Buying the deal and not the car. Deals are nice, but it's important to determine whether a car meets your needs. For example, the Jeep Renegade features up to $3,250 in incentives but our review notes it gets below-average fuel economy and has lackluster safety ratings. Similarly, Ford Escapes feature some of the largest discounts but offers poor acceleration in base form plus unimpressive fuel economy.

Jeep RenegadeChoosing the wrong deal. Automakers offer a confusing array of offers that may require you to choose between rebates and financing. Here in Los Angeles, Mazda just cut rates on the CX-5 Sport to 0.9% APR for 60 months (previously 2.9%). However, the rebate has also doubled to $1,000.

On a $25,000 vehicle, a 5-year loan at 0.9% would cost $25,576 before taxes & fees. With the rebate and a loan at 6%, the cost would come out to $27,839. Here, financing through Mazda would save you over $2,200. Make an informed choice by using an interest cost calculator like the one on Bankrate's website.

In some cases, you may be dealing with a model with outstanding rebates. For example, the Chrysler 300 S is eligible for 0% APR for 36 months or a $6,000 rebate. On a $35,000 car, taking the 0% would cost $35,000. With the discount, the same car would cost $31,761, assuming a 6% loan for the same term.

Not knowing your credit situation. Finding a great deal won't mean much if you can't get financed. Consider spending some time to better understand your unique situation by checking your credit score and reviewing your credit report for errors. In some cases, you may want to get pre-approved for a loan.

Consumers with a FICO score under 620 will most likely be subject to subprime rates that have special requirements. If that's the case, consider working with a dealer that specializes in subprime credit. Once you know what you can reasonably borrow, you'll be in a position to make a smarter decision.

Not knowing if a car is better to lease. Leasing isn't for everybody, but it's important to know that some cars can be smarter to lease than buy. For example, the 2019 Hyundai Kona SE is eligible for $750 when buying but $2,000 when leasing. Be upfront with your dealer about your intent to get the best price possible.

Assuming you should buy new over used. While it's true that new cars often feature lower rates, that's not always the case. For example, Acura is offering 1.99% APR for 60 months on certified used MDXs, but no special rates when buying new. Mainstream brands like Subaru are offering rates as low as 1.99% APR.

See our ongoing 4th of July deal coverage »

, Senior Pricing Analyst

As CarsDirect’s resident pricing analyst, Alex offers must-know analysis of pricing & incentives to those looking to buy or lease a car. His consumer-oriented coverage of the latest trends and breaking news has been featured in publications such as Car and Driver, Motor Trend, Automobile Magazine and Autoblog.

Follow On: Twitter | Website

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