MONEY MATTERS with Ken Barnes: When Buying A Car…
Posted by Isaac Amo Kyereme | Posted in African Market USA, African Trumpet News, Education,
“Ken, hmm, I sunk into depression a week after I got home with the car, I felt stupid, my intelligence insulted, violated and fooled. I became very mad with myself. I called the dealership to complain about the price, my monthly payments and the fact that there are similar cars on line way cheaper, but there was nothing they could do! I had already signed and there was no return policy.”
I want to devote this month’s write up to discuss my very personal experiences and that of some of my clients in Car buying with you in response to some of the many questions I have received over the years. The aim is to prevent the above experience from happening to you. I will do my best not to be judgmental or accusatory because some of my very best friends are in car industry and they are good people.
Buying a car is a process that should be taken seriously because it is the second biggest investments most people make in their life time, second only to buying a house. Secondly a car is one investment which looses value as soon as it is driven out of the lot and thirdly if care is not taken a car buying experience could be a nightmare even worse than the experience narrated above!
It is one thing getting a buyer’s remorse, which happens in almost every buying transaction. But it is another thing being taken advantage of and given a bad deal like what happened to my client who shared the above experience.
There is therefore the need to prepare very well before you go to the Car lot. Here are a few of my suggestions to you.
Know what you want and why you went there and stick to it. Go to the lot having decided which car you want. Do not go and show signs of not knowing which car you want. It portrays to the salesmen that you are vulnerable, not prepared and indecisive and can thus be manipulated and taken advantage of. You also have to decide whether you are just going to window shop on that first visit to the car lot or you are buying that day. Don’t let anyone rush you into buying when you only went there to look and explore. Don’t be the guy who went to do oil change and came home with a brand new car!
Don’t be sold on monthly payment, be sold on Price! Decide by looking at your budget, how much you can realistically pay a month before you go to the dealer’s lot and never ever disclose this to them. If they ask you, never tell them. They would want to condition you as a payment buyer that takes your mind off the selling price and all other charges. Their rational is this, so far as you are happy and comfortable with the payments, you don’t care about the selling price and others charges. Tell them you don't deal that way, you negotiate based on its price and interest rate, not monthly payments.
Don’t let the Sales man be your expert and advisor, in most cases he is not looking out for you. The sales men are there to sell cars and make money. They have their quotas to meet and their interest to protect not yours! They are not your friend and in most cases, say things that will suit their whims and caprices and make you buy. They employ all strategies both overt and covert sometimes to achieve their aim. Learn a lot about the car you want, the car buying process, the car loan approval process, the charges etc first before you go there.
Appearance and Impressions Counts! It's hard to convince someone you can barely afford to pay invoice price wearing all those jewelry and designer clothes. I first learned this from Bill Cosby. In one of the episodes, Dr Huxtable didn’t want the car salesmen to know he was a Medical Doctor so he dressed in some cheap clothes to the dealership only to be exposed by one of his patients. Over the years I have come to appreciate the financial wisdom in what he did! Don’t let the dealership know your status in society, you will be “penalized” for that. Don't arrive in a flashy expensive car either at the dealer’s lot, unless that's all you have or that's what you're trading in. It makes them know you can pay more and that jeopardizes your ability to negotiate.
Take emotions out of the equation and stay rational at all times. One thing that a test drive does is to heighten your emotions and desire to buy that car by all means, which blurs your judgment and pushes rationalization to the background. Stay focused. Don’t let them play on your emotions either! During the test drive don't act excited, they need your euphoria. They'll say "Isn't this great"? Feeding the euphoria, and they have you hooked. All you want to do is get the pricing information. If they turn on the radio, turn it back off. You want no distractions, while listening for strange vibrations or rattles. Music from the radio may get you in a partying mood, which you don't want. Act unimpressed!
Don’t Rush. You can avoid high-pressure tactics by letting the salesperson know you don't have to buy the car today. "You want them to think you have all the time in the world," says one pundit! Again, act unimpressive, never let your love for that car show and don’t let them know you are in hurry. Then again, don't waste your time. You can always leave your phone number and come back later. Don't sign anything just because you're tired.
Do your best not to trade in a car you owe money on. It is usually not advisable to trade in a car you still owe on, most likely; the balance of your loan will be rolled into the new car's loan amount, piling the debt of two cars onto your plate. Even if that's not the case, you'll have less bargaining power if the dealer has agreed to pay off your old car loan. Pay off one car at a time or refinance the old car loan. Another disadvantage of that arrangement is that before you even drive your new car, you are steeply underwater and that is not good.
Don’t let them put you down. It’s a negotiating strategy, by constantly pounding into you the fact that your credit is bad and that they are trying to help you. Sometimes that is a lie! They gain advantage over you in the whole negotiation that way. Know your credit scores, talk to your bank about car loan prior to your visit to get an idea of what interest rate you qualify for. If possible take your bank or credit union’s loan approval documentation with you and ask them to beat it.
Beware of bogus Fees and charges. There is always the tendency for the dealership to nickel and dime you at the slightest opportunity. Beware of fees and charges like "Additional Dealer Markup"-ADM or "Additional Dealer Profit-ADP. (an artificial buffer or cushion to offset a reduction in price) There are other fees like, advertizing fees, Dealer floorplan fees-(the interest that dealers pay for loans to buy the cars on their lot.) There are also dealer prep fees, which is the cost of getting the car ready for sale like cleaning removing stickers, vacuuming etc. Look over the so called documentation fees, destination fees, Registration fees, Drive off deposit, gap insurance, factory hold back fees etc. there are so many of them, especially when purchasing a brand new car. Find out about them even before you go to the lot.
Again the idea for this write up is to give you tips to augment what you already have to avoid being taken advantage of in any car buying experience. I hope I have done that! Beloved whatever financial resources we have is a gift from God, we are caretakers; we are holding these financial resources in trust for our family, our country and society. One day we will have to account for them, let us be wise about how we utilize it!
