Car Payments
We like cars, we love trucks.
Great to get from A to B.
The amount of time we spend in them makes them almost like a second home.
They can feel as expensive as a second house, too.
They are our second biggest outlay of our money.
Our cars are often our first if you are renting.
There are three big problems with cars:
The Salesman Game.
The True Cost of the Car.
Buying Beyond Yourself.
The Salesman Game.
You are going to go buy a car.
Maybe you have a few hours of experience dealing with the car buying market.
However, the salesman or woman has thousands of hours of experience and hundreds of hours of training.
This is a game to them.
The salesperson you’re talking to to buy the car or truck is not your friend. They are working to get the best possible commission for themselves, even if they are trying to get you in a good car.
They will be friendly, and you do not want to become adversarial with them.
However, they are not your newest best buddy.
If you are not in sales, then this is foreign territory to you.
If you are in sales, but your sales hat on and don’t become the product.
Important points to remember
- Who you buy the car from Never holds the loan; their whole focus is getting you in the car and off the lot.
- Cash is not King; keep it out of the conversation.
- Focus: what is the final off-the-lot number?
- You do not need a credit check run to talk cars.
- Never talk about car payments until you have a final price
- Come prepared with a loan already available, just don’t tell them this.
- Do not be rushed. (That is a sales tactic)
- “This car is really popular; it won’t be here tomorrow.”
- “This price is only good for today.”
- “I have other buys
- Always be willing to walk away.
How the game is played.
When you are with the salesperson, they will ask you questions you do not need to answer.
They ask you these questions so they know how to frame and guide the sales experience. These questions are not to help them help you; they are designed to help them get the most from you.
This is a game to them.
They’re playing this game every day.
I am not trying to disrespect the salespeople; they are not necessarily playing this game against you.
Selling cars is what they do.
That is the purpose of this game.
They are playing against all the other salesmen and saleswomen.
It’s both fun for a conversation in the break room and, in reality, for the top slot on the commission board.
So it is a game!
They get a huge dopamine rush when you sign those papers, when they win, and when they get their commission.
You are playing on their tuff.
- You have come to them, and you are playing on their court.
- You might only be talking to one salesman, but the others will work on his behalf for the sale.
- You don’t know the rules of the game.
- You don’t know the tactics of the game.
- There is a sleight of hand.
- There are sneaky ways to play.
How do you survive?
As I have already said, take it slow.
Know you can leave at any time.
Now, let’s look at some other things.
The True Cost of the Car.
We like cars; we really love trucks, and the sticker price is never the price.
That big number you see at the beginning is not the number you will be paying at the end.
What the salesman does.
Divorcing the price from the monthly payments.
Have you ever noticed how the price of a thing is never a nice round number?
This is by design. An odd number like $21,454.75 never becomes an easily calculable monthly payment number.
Taking off a down payment of $5,000 and $16,454.75 at 60 monthly payments of $335.44 sounds about right, right?
What is involved in a car loan?
The price of the car, well, yes, but once you start talking about monthly payments, reference to the price of the car will be lost from the conversation.
Credit Checks & Monthly Payments
Never let the conversation go to Credit Checks or Monthly Payments when buying a car.
“Let’s just get a credit report started.”
No.
This is unnecessary for you to start exploring a vehicle purchase. They may try to insist, but this is a question to their advantage.
We answer, “No, you do not need my credit score yet. Let’s look at some of your vehicles first.”
If they insist: “If you are unwilling to show me what you have for sale, I will leave.” Call their bluff.
The Car
When you have found a car you think you might like, keep the conversation at this level, “I think I might like this car.” Watch the salesman turn that in to:
- “You look good in this car.”
- “This car is you.”
- “This really suits you.”
Then, watch the conversation change, to:
- “I already have buyers for this car.”
- “You better choose now; it won’t be here tomorrow.”
It is a Gamer.
And you are the ball.
And they are trying to score with you.
Keep the game on the car as the ball.
Just the car.
What is the final price of the car?
Not with a credit check.
Not with cash.
Not with car payments.,
If you get asked, “Oh, so you will pay for this with cash?” Answer, “No, I just want to know the final price you are willing to sell me this car at.”
Get the car to it’s true sale price.
Buying Beyond Yourself.
We like cars; we really love trucks, I think I have already said this.
When we go to buy them, this like of them is used against us.
By the advertisers, by the sales yards, by the banks.
Each one is after the money in our wallets and want to get a hold of as much of our future wages as possible.
Eyes Bigger than your Pay Cheque.
Whatever you like, no matter how much you feel you deserve it, our desires can lead us to places our wages can not take us.
Believing the Advertising.
Social media, cable TV, and Mainstream Media are all designed to turn you into the product.
Facebook, Instagram, Snapchat, CNN, and NBC are not free because they like you. Those things, Facebook, etc., are not products you enjoy for your entertainment pleasure; YOU ARE THE PRODUCT.
You are sold and traded across countless mediums; your eyeballs are a commodity.
The “You deserve this.” and the “Go ahead, treat yourself” are brainwashings that we all have to learn to fight against.
Back to cars; the Upsell
Your whole conversation on the sales yard is about the salesman getting an idea of what else he can sell you.
- Can he sell you a lift kit?
- What about a bed liner?
- Then, there is the paint upgrade.
- A rear spoiler?
- And don’t forget an extended warranty.
- Or windscreen chip insurance!
Nothing is ever free.
I have seen a contract in which a hidden preparation fee is included. They say they have to charge you because they prepared the car for it on the day you picked it up.
Every one of these items adds a new cost to the car or truck and a bit more commission to the salesman.
It’s not that the salesman is bad; he is only doing his job the way his boss has told him to do it.
You are the customer, but not in the sense of “the customer is always right,” but rather in the sense of “leaving none of the customers’ money on the table.”
Once you have a price.
So, there has been no reference to credit score or monthly payments, and you have the final priceon a car you like.
Ask them who they use for financing.
See if you can work with that finance company directly.
Better still, before you go car hunting, find out the finance agencies used by car dealers in your area.
Find out if you can get a personal loan from your bank.
If you can go car hunting with a $15,000 loan pre-approved, great.
Have a budget and stick to it.
Every bank a loan shark.
The Implementation Fee
Generally, I have seen that all financial arrangements have an “implementation fee,” even banks.
This is a sneaky way of getting more money from you than you realize.
Let’s say you want a $15,000 loan to buy a car. The loan is for 60 months (five years), with an annual interest rate of 12%. This is high but in the ballpark for a second-hand car loan.
Unless you dig into the paperwork, you don’t realize that the $15,000 loan became a $15,650.00 loan with a $650 “implementation fee.”
This is a monthly repayment of $348.13 for a total of 60 months or $20,887.80 on the original $15,000.
Financial institutions connected to car yards could be even worse.
This is why they want to separate the car prices from the monthly payments. Doing so makes it difficult to see what things cost.
Another trick is to NOT use a 60-month term. That is too easy a calculation.
That is why 72 months might be used, or 48 or 54. Anything to make it hard for you to know what is going on.
And if you try to ask any questions, they will make it seem like you are the fool.
Live below your means.
Living below your means is hard when you struggle for so many things; then, when it comes to a car, where people are willing to lend you stupid amounts of money, you can end up with an impossible loan. I have lived in low-income housing where there are cars I could never afford. How on earth can these people afford these repayments?
They can make the payments until they can’t.
Monthly, I see flatbed trucks come in to take expendable vehicles away. Repos? Most likely.
But why do banks and financial institutions make these loans?
Once the loan is approved, the Car Yard, the Bank, or the Financial Lender sells it to a Loan Institution. The bank gets its money back with a little profit and moves on to the next person. The Loan Institution collects the money from you, and you may never know how many times your loan got resold from Loan Institution to Loan Institution over the lifetime of your loan.
So long as the Car Yard can get you signed off and driving out the year with the car, they win. So long as the bank or lender transfers the money to the Car Yard in your name, they win.
When it comes to cars, can I make a suggestion?
While you are in the process of getting yourself financially literate and financially stable, not living paycheck to paycheck, not living on payday loans, not living on credit card minimum payments, consider driving a clunker.
My current car of five years cost me $1,200.
I spend about $500 a year on repairs.
The total cost for 60 months is $3,700. It has done everything I need it to, just not in style.
My loan example’s car, with a $5,000 downpayment plus a $15,000 loan, after all interest and fees, is $25,887.80.
I don’t plan on driving a clunker forever, but I will not become a slave to a Loan Institution. A big reason why I am back at having a clunker is because I have chosen a debt-free path when we reinvented and immigrated to Hawaii to work with YWAM.