Something crazy happened when we were car shopping a few months ago. Husband Saign was determined to find me a car. (Sharing a car was unbearable for him). We test drove a privately owned car, which I didn’t particularly like. Then Husband Saign asked me to go to a car dealer with him. I didn’t want to go because I am severely frightened of sales people, but Saign pointed out that if we went to a dealer, I’d be able to drive a variety of cars to help us figure out which car model I really wanted. So I agreed.
We arrived at a large dealer here in Tacoma, and were quickly introduced to a sales guy. As soon as we met our sales guy and described what we wanted: A used hatchback. (Yes, that was extent of our list), the sales guy said, “I have the perfect car for you!” I was surprised that he thought so, since, you know, he hadn’t asked us our budget.
Anyway, he was pretty much right…except for the budget part. The car was gorgeous, shiny, red, and in great condition. There was just one problem: It was $6,000 above what we hoped to spend on a car.
The car looked like this, only much shinier and prettier!
I loved that zoomy little red car! I began thinking crazy thoughts, things like, “Well, maybe we could finance…if they brought down the price a little then we’d only have to finance a couple thousand. I have a bonus from work coming soon, it would be okay.”
WHAT? Yes, I know, crazy thoughts.
Thankfully, at some point I had to use the bathroom, and while separated from the sales guy, my sanity returned. “I do NOT want to finance,” I remembered. Oh yeah! I do NOT want to finance!
After we test drove the last car, and then drove around looking for my wallet in each car that we had tried out (because I realized that my wallet was missing just as soon as we finished up our test driving…we found it in the very last car we looked in), we sat down to chat. I then explicitly told the sales guy that I did not want to finance. I wanted to leave, but I felt rude just walking out, so I waited kindly while our sales guy went to ask his manager how low he could go on the price of that red car.
He returned with the same price that was originally on the car, and some financing options…none of which took into account the $8000 that I had already told him we had available to buy a car.
“Look, you can put $2000 down and keep the rest of your money in your pocket,” he said. Then he proceeded to show us two payment options…one with lower monthly payments, but a longer loan period, and one with higher monthly payments and a shorter loan period. “So it makes most sense to go with the first option, because the payments are lower,” he concluded.
What??? In a matter of 60 seconds, the guy had suggested to me that I make 3 huge financial mistakes: 1) Take out a loan for something that I don’t need a loan for, 2) Put the lowest amount of money down on a loan, & 3) Choose the loan that would cost the most amount of money over the long-term. I was shocked.
Then Husband Saign asked a very logical question, “What’s the APR on those loans?”
“Oh, I don’t know,” the man said, “I’d have to go ask.”
Um…really? You’re trying to sell us a loan, but you don’t know the APR for the loan you’re trying to sell?
I kind of wanted to get snippy with the guy. I wanted to tell him about how taking out a loan for something that you don’t need a loan for is ridiculous. I wanted to teach him about interest, and explain to him why it always makes sense to put the most possible money down when taking out a loan. I wanted to explain to him that when taking out a loan, you should always consider the total cost over the lifetime of the loan, and not just consider the monthly cost. I wanted to tell him that you should always, always know an APR before considering any type of credit or loan.
But I didn’t do those things. I just told him that I would not be buying that cute red car. But chatting with him made me really start to wonder… I’m not sure that this guy was trying to trick us into a loan (which could be the case). I actually think he might have thought that he was giving us good advice. (Yes, I know he was trying to sell us the car, I’m just not sure how much he understands about loans). I am not sure that this guy was a dummy so much as he’s a normal American. Most Americans probably think that it’s best to get the prettiest car, and that a car loan is no big deal, and that picking the loan with the lowest monthly payment is a fantastic idea.
Needless to say, I left without a cute red car. I decided to write the things here that I wish I had said to Mr. Sales Guy. Please friends, don’t be disoriented by the shiny red car! Use your great brain! Make the smart choice!
When you go shopping for big ticket items, do you find yourself making compromising or going over your budget? Do you think our sales guy knew that he was suggesting insanity to us, or is insanity a normal part of his financial life?