Stay in driver’s seat when you buy a car - Military Financial Advice - Army Times

Stay in driver’s seat when you buy a car

You’re young (or not) and you want your first car (or your fifth). The big G is paying you and paying for your housing, too. What else are you going to spend your money on — beer? The kids? You want that Mustang, the Z or maybe a Tahoe or a Suzuki sport bike. Whatever. You want it and you can afford it.

Vehicle salespeople and finance managers know how to take advantage of people. They do it day in and day out. They are superior forces with superior training.

The salesman sees you coming and licks his lips. Ka-ching! The finance manager looks up, too. His wife wants a room addition. Ka-CHING! Another service member to fleece.

“Come on in,” the salesman says, greeting you with a big smile. “What kind of payment are you looking for?” or “How much payment can you afford?”

Stop right there.

You answer that question and you are just more meat for the auto dealer and his employees. Another sucker.

I can hear you now. “Dave — I ain’t no sucker, man!” Well, keep your boots on and keep reading. You might learn something and save $15,000, too.

Buying a vehicle or motorcycle (or a boat or a house) is really buying two things unless you have cash. Purchase No. 1 is the vehicle. Purchase No. 2 is the financing. Mixing these two purchases into one deal is a costly mistake.

Where do you want that extra $15,000 — in your wallet or in the dealership’s and lender’s pockets?

Do I hear the word “Duh?”

The correct answer to the salesman’s question is, “I’m shopping for a 2006 Mustang GT convertible (or whatever year/make/ model you want). The color I want is black. Here’s the list of options I want. Gimme your best price and if it is the best price I have, I’ll buy it here.”

Leave emotion out of the purchase. Once you know what you want, shop for it. I don’t know anyone who would pay $180,000 for a house if he could get it for $169,000. Why would you pay too much for a car? You can easily pay too much if you shop for a payment. You’re buying a car. You are not buying a payment. Get the best price you can.

My turn to say “Duh.”

I know you would not pay $28,000 for a vehicle if you knew the dealer would sell it to you for $26,250. Just because the sticker on the glass has a dollar amount does not mean you can’t buy it for less.

The thing a salesman fears most is a buyer who walks out the door. So strike some fear into the hearts of the enemy. Go shopping for a car with the certainty that you won’t buy that day. Why? Just consider it a battle-training drill. Take a couple of test drives on a Saturday.

Shop for a car you hate. (Gee, isn’t this three-cylinder engine powerful? Dents on a car add character.) Sit down and start talking price. Pretend you’re paying with cash. Keep telling the salesman he has to do better. When he says that’s his best price, shake his hand and say, thank you, wish him a good day and walk out.

I bet some of the salesmen will try to stop you from leaving and will get you a better deal. Walking away is the most powerful negotiating tactic there is when you are shopping for something.

The dealer’s finance manager makes part of his money because he finances you at the dealership, and he makes more money when he takes advantage of you with a rate that’s too high. There are lots of ways to trick you with numbers and paperwork.

How badly can rates hurt you? Financing $20,000 for five years: At a 6.5 percent rate, total payments are $23,479. At 19 percent, payments are $31,129. At 25 percent, payments are $35,222.

See why it pays to shop?

Shop at your local bank or federal credit union for auto financing.

Shopping for financing first will force you to pay attention to the rate you get. That’s what you are shopping for, the best annual percentage rate.

Another reason to shop for financing first is that the finance managers at dealerships can harm your credit. I have seen up to 30 credit inquiries caused by one auto finance manager at one dealership from one Saturday visit. Credit inquiries hurt your credit scores. And when you have lower credit scores, you get worse financing rates.

Dave Peters is a semiretired loan officer and credit repair specialist. He is a trustee of the nonprofit organization Credit Learning Systems, which teaches college students about credit and debt. He’s the author of the book “How Credit REALLY Works” and is a guest on radio shows nationwide. E-mail him at creditmatters@atpco.com.