On Car Buying, Part I – Not Getting Fleeced

I’ve been thinking lately about what we buy when we buy a car, and how to make the best personal financial choices when car buying.

Can you buy your personality at the car dealership?

From birth, until now, you have been taught that your car is your personality.

Are you Ford Tough?  GM Patriotic?  Audi Sporty?  Toyota Dependable?  Volvo Safe? Mercedes Classy?  Lexus Svelte?  BMW Quick?  Volkswagon Quirky?  Hyundai Cost-conscious?[1]

Without hardly trying, I can conjure a car to match each of those adjectives as quickly as I can type the words.

I am here to tell you the shocking news that your car is not your personality, and that instead your car is a transportation tool for moving your physical self from one location to another, via paved roads.

The more you purchase your personality at the car dealership, the more you will pay for something you don’t need, which puts you further from your financial goals.

On minimizing merciless fleecing at the car dealership

Many of us associate purchasing a car not only with purchasing our personality via a 2-ton consumer transportation device, but also with financial trickery.  The latter association is well earned – the ‘used-car salesman’ stereotype is no accident.

To minimize personal fleecing, the best thing you can do is limit the number of transaction you engage in with your car dealership.

When you walk on to the car dealer lot you may think you’re buying a car.

Frequently you’re simultaneously buying a car, trading in your old car, negotiating a loan, settling on an affordable monthly payment, picking automobile accessories, and discussing dealer warranties and services.

You do these transactions once every 5 or 10 or 15 years, whereas your counterpart from the dealership does this multiple times a day.  The information and skill disadvantage between you and the car salesman is extraordinary.  Each simultaneous transaction presents a fleecing opportunity.

My advice: Try to do only one thing at a time.

If you need a car loan, try, try, try, to get this loan lined up ahead of time, ideally from your local bank or credit union. 

If all goes well, you begin your car shopping at the dealership with a known price limit, interest rate, and monthly payment amount.  If, at the end of your car purchase the dealer can do better than your bank, so be it.  But you can at least leave all of that loan negotiation until the end, separated from price.

If you need to trade in your old car, you may find it most efficient and convenient to drop off and pick up a car in the same place, so I can’t frown too much on the practice, for non-financial reasons.  On the other hand, just know that the introduction of another ‘moving part’ to the transaction allows for another opportunity for your friendly car salesman to dip into your wallet.

Car loans – Your mortal weakness

The most effective way to fleece a car buyer is to focus his attention on the car loan monthly payment, and away from the price of the car or the interest rate on the loan.

“How much can you afford per month?” asks your friendly car salesman, who has thereby tilted your head back to better expose your throbbing jugular to his surprisingly pointy canines.

If you got your loan approval ahead of time at your bank, monthly payment is an irrelevant question that you can ignore.  

Ideally, you reviewed a maximum purchase amount, bank loan interest rate, and resultant monthly payment at the bank, away from the charged and scary atmosphere of a car dealership.

Even if you need the car dealer’s loan you should still ignore the monthly payment question while inside the dealership.  Focus first, instead, on the overall price of the car.  After that is firmly set, you can move your focus to the interest rate of the loan, which reflects the cost of money.

At the risk of stating the obvious, if you got the best price possible on the car itself and the interest rate is acceptable, then the monthly payment will be fine. 

Or it won’t.  But it will be the best you can get.  You should know your acceptable car price and interest rate – based on your income, and your credit rating and the local cost of money – before walking onto the dealer lot.

Please also see upcoming post Car Buying II – Thinking About Your Car’s Price