You’re in the market to buy a new car.
Your current car is great, but it’s getting old, it’s starting to make strange noises, there’s dings on the sides, it has lost that new car smell, and frankly, you’re just getting tired of it.
You want something new, something fresh, something exciting – but obviously something that you can afford.
You start researching options and going into dealerships for test drives.
YouTube videos, forum posts, auto blogs are indispensable tools in your search.
You eventually decide what it is that you want and narrow it down to two options.
Another test drive of both cars does it for you. You know what you want now, and you’re going to go get it.
Next thing you know, you’re driving to the dealership, with both a feeling of pure excitement and butterflies in your stomach.
Your old car? You’ll trade it in. Probably won’t get much for it in private sale anyway.
Plus, you’d rather avoid the hassle.
You park out front and go inside. The scent of new car and tire dressing fills your nostrils.
As you make your way to the offices in back, the only thing that gets in your way is the collection of shiny new cars in the showroom.
Ooh, there’s the one you’re getting. Not that exact one, lower trim.
That one’s nice… Maybe you can upgrade?
Ah, pricetag. No, too expensive.
Really nice though, look at the seats. Maybe this will be next once you get promoted…
A salesman greets you: “Hello, how can I help you today?”
You tell him you’re looking to test drive a car and perhaps make a purchase today if it feels good and the price is right.
“Wonderful. I’ll grab the keys and we can get going. Can I grab your license to make a quick copy?”
As you punch the accelerator into the apex of the turn, you think, Yup, I could get used to this.
You think about how much more fun your morning commute is going to be.
Getting out of bed is not going to be a problem anymore.
You know the perfect spot in the parking lot where birds won’t shit on your car.
The salesman is great at making small talk. Almost too great…
He asks a lot of questions about you, your life, your work, your desires.
You return the favor. You’re really trying to focus on the ride and the big decision ahead of you, but you don’t wanna come across as rude.
You talk about work. Times are tough for the salesman. He’d be happy if he got a few more in before the end of the month so he could buy something nice for his wife – it’s been too long.
“But of course, absolutely no pressure, my friend.”
As you round the corner into the parking lot, you’ve decided to go for it. This is going to happen today.
“So, what do you think? Wanna take it with you?”
“Yup, let’s do it.”
“All right. Let’s head into my office. Can I get you anything? Water? Coffee? Tea?”
“Some water would be great, thanks.”
He comes back with one clear cup with condensation already on the outside.
First he wants to go over what trim and options you want.
Leather seats? Cloth?
Tinted windows? We can do that for you, just bring it in again later.
He punches things into his computer, prints out a page and walks you through the pricing.
“Cars like this are going fast and there aren’t that many left here.”
The going price he shows you is a few grand above MSRP.
“This is typical. But I’m going to go to bat for you on the price.”
He crosses out the going price and reduces it by just over a grand.
But you’ve done your research and you know what others are paying for the same car, so you’re not going to be fooled so easily.
You wait for him to finish his charade.
You tell him the price you’re willing to pay. You don’t want to waste his time so you say that’s your highest price and if he can’t do it, then you’ll pass.
He looks at you like you’ve just committed blasphemy.
“Hmm, I’ll have to go ask my manager. By the way, your old car, are you doing a trade in?”
“Ok, great. I’ll be back in a minute.”
It takes him seventeen. You counted.
The back and forth continues for another quarter hour, and then you finally decide on a going price.
You’re happy, he’s happy, manager’s happy, finance is happy, oil companies are happy, your employer is happy, everybody’s happy.
He takes you over to the finance manager’s office. You take a seat as he’s being told how lucky of a guy you are today.
After it’s all said and done, what’s going to need to come out of your pocket is $23k.
“How would you like to pay?”
Hmm, well, you have $29k to your name, and you wouldn’t want to almost empty your accounts to pay for your car.
You’d be crazy if you did.
What if an emergency comes up?
What if you need to make another big purchase soon?
You’re thinking about putting a down payment on your own place in a few years, so it’s best to have more cash handy.
What would you do? Leave?
Not at all!
Luckily, finance experts have developed a great product that lets you get something immediately without needing to pay for it:
“I’d like to finance it.”
“That’s a great choice, take advantage of the really low promotional rate we have right now.
How much would you like to put down?”
Your checking has $5k. You figure $2k is a good amount – that’ll leave you with enough in case you need cash.
Plus, you’ll get it back shortly because you’re getting paid soon.
“Great, so your monthly payments will be $376. Not bad for what you’re getting huh?
Only the down payment today. Because of our sales event, you’ll have no payments for six months. You’ll get more details in the mail.
How would you like to make the down payment?
I can take credit card, by the way.”
You got the car you want.
Your obligation is $376/month, something that is very doable in your current situation.
You’re now only worth $6k.
And you have debt.
And your car has lost about 10% of it’s value. It’ll lose 50% more if you keep it long enough to own it.
It’s not on your mind now, but the average cost of owning a car was $8.5k in 2015, so you could now say you’re almost broke.
Good thing you have a job.
- We often buy things we want but can’t afford because of financing.
Continue to the next story.
You can read about my own experience with new car ownership here.