Nearly four in ten Americans who financed a car said they regretted the purchase, according to a Bankrate survey conducted in recent years. The reasons varied, but the pattern was consistent: buyers stretched too far on price, underestimated ownership costs or got swept up in the moment at the dealership. With the average new-vehicle transaction price hovering above $48,000 and average auto loan rates still elevated compared to pre-pandemic norms, according to Experian’s auto finance data, the margin for error has never been thinner.

The five mistakes below surface again and again in buyer-regret research. Each one is preventable, but only if you recognize the trap before you sign.

1. Buying more car than you can afford by fixating on the monthly payment

The most expensive mistake usually happens before anyone sets foot on a lot. Shoppers pick the vehicle they want, then reverse-engineer a monthly payment that feels manageable. Dealers are happy to help: stretching a loan from 60 months to 72 or even 84 months can shave $100 off a monthly bill while adding thousands in total interest. Data from Experian shows the average new-car loan term has crept above 68 months, and loans of 72 months or longer now represent a significant share of originations.

Financial planners at Edmunds, as reported by CBS News, recommend a straightforward guardrail: cap your total car payment, including insurance, at no more than 10 to 15 percent of take-home pay, and aim for a loan term of 60 months or less. That math should include taxes, registration fees and realistic maintenance estimates, not just the sticker price.

Discipline matters just as much for used-car buyers working with a smaller budget. A $7,000 lump sum spent on an older vehicle without a pre-purchase inspection, title-history check or comparison to current market values can evaporate in a single engine failure. Getting a pre-approval from a bank or credit union before shopping gives you a firm ceiling and removes the dealer’s ability to manipulate terms behind the scenes.

2. Rolling negative equity into a new loan

Negative equity, owing more on a car than it is currently worth, affects a meaningful share of trade-ins. When drivers are desperate to escape a vehicle they no longer want, dealers offer what looks like a solution: fold the remaining balance into the next loan. The problem, as Edmunds analysts have warned, is that this does not erase the old debt. It simply hides it inside a larger loan on a new car, putting the buyer thousands of dollars underwater from day one.

That gap becomes a crisis if the new vehicle is totaled or stolen. Standard auto insurance pays out the car’s market value, not the inflated loan balance. Without GAP (Guaranteed Asset Protection) coverage, the driver is left with no car and a bill for the difference. Even without an accident, stacked negative equity can trap a household in a cycle where every trade-in deepens the hole.

Better alternatives exist, even if none of them feel as satisfying as driving off in something new. Owners can make extra principal payments until the loan balance matches the car’s value. Selling privately, which typically brings more than a dealer trade-in offer, can close the gap faster. And if a replacement is truly necessary, choosing a less expensive vehicle keeps the rolled-over amount small enough to pay down quickly. Buyers who do roll negative equity should, at minimum, add GAP coverage to protect against a total-loss scenario.

3. Letting emotions override your actual needs

Car purchases are among the most emotionally charged financial decisions people make. A buyer pictures weekend road trips or the look of a particular truck in the driveway, and suddenly one specific model in one specific color becomes the only acceptable option. Negotiating leverage vanishes the moment a salesperson senses that kind of attachment, as Nasdaq’s analysis of costly car-buying mistakes has noted.

Emotional buying also leads people to ignore vehicles that would serve them better. A compact crossover might fit a family’s daily life more comfortably than a full-size pickup, but the truck wins because it feels aspirational. A plug-in hybrid might cut fuel costs in half compared to a large gasoline SUV, yet the buyer never runs the numbers because the SUV looked better on Instagram.

A simple framework helps counter the bias: start with a segment and a short list of three or four models that match your actual driving patterns. Compare reliability ratings from Consumer Reports or J.D. Power, total five-year ownership costs and available incentives. Only after that homework is done should you start caring about paint colors and trim packages. The best fit is rarely the first vehicle that catches your eye, and walking into a dealership with alternatives in mind is the single strongest negotiating position a buyer can hold.

4. Skipping research and shopping at only one dealership

Information gaps cost buyers real money. Some shoppers still walk onto a lot with no firm sense of what a vehicle should cost, what their trade-in is worth or what manufacturer incentives are currently available. Without checking listings on sites like Edmunds, TrueCar or CarGurus for comparable vehicles, it is easy to overpay by thousands on a used car or accept a lowball offer on a trade-in. As AAA’s car-buying guide stresses, checking service records and using independent reliability data before visiting a dealer is no longer optional; it is basic homework.

Even well-researched buyers sometimes stop at the first dealership and accept the first offer. That is a mistake. Edmunds advises emailing or calling at least three dealers for out-the-door pricing, which should include all fees, taxes and documentation charges. The spread on identical vehicles at dealerships in the same metro area can easily reach $1,000 to $2,000. Having competing quotes in hand turns a negotiation from a guessing game into a straightforward comparison.

One more step that many buyers skip: getting a vehicle history report (Carfax or AutoCheck) and scheduling an independent pre-purchase inspection for any used car. A $150 mechanic’s exam can uncover hidden accident damage, deferred maintenance or looming repairs that would cost far more than the inspection fee. Dealers who refuse to allow an outside inspection are telling you something worth hearing.

5. Ignoring depreciation and getting upsold in the finance office

New cars lose value fast. Industry data from iSeeCars consistently shows that the average new vehicle loses roughly 20 percent or more of its value in the first year alone, with some models depreciating even faster. Buying a lightly used car, say a two- or three-year-old model with low mileage, lets the original owner absorb that initial hit. Certified Pre-Owned (CPO) programs from manufacturers like Toyota, Honda and Hyundai add inspections and extended warranty coverage, offering a middle ground between new-car peace of mind and used-car savings.

Once a buyer agrees on a price, the finance office introduces a second round of potential regret. Extended warranties, paint sealants, fabric protection and theft-etching packages are among the most profitable products a dealership sells. Consumer Reports has long cautioned that many of these add-ons duplicate coverage buyers already carry through their auto insurance, credit card benefits or the vehicle’s own factory warranty, which on most new cars runs three to five years.

That does not mean every product is worthless. An extended service contract can make sense on a vehicle known for expensive repairs, especially if the buyer plans to keep it well past the factory warranty period. The key is to never agree on the spot. Ask for the contract terms in writing, compare the dealer’s price to independent warranty providers like Endurance or CARCHEX, and take at least 24 hours to decide. The finance manager’s urgency is manufactured; the offer will still be available tomorrow.