Monday, June 8, 2015

You Can't Afford It

Many Americans live beyond their means. 

Who doesn’t want a shinier bauble than the people next door?

One place where we are sometimes stupid is when we buy a car.

We should know what we can and cannot afford, but even if we do know the bottom line, we sometimes ignore that and think the extra money will come from “somewhere”.

Some of us are too timid to negotiate the price of the vehicle. Yes, my eyes are rolled at the idiocy.

While it’s true that an invoice amount you find online may not be the real invoice at the dealer, assume it is.

Be prepared to walk away if the numbers won’t make sense the morning after your orgasm of glee over a new car.

If you won’t negotiate hard and be prepared to walk, then you deserve to get screwed.

One of the entities I find to be vile is CarMax and any place with “no-haggle” pricing.

No haggle pricing is in no way advantageous to the customer and 100% advantageous to the seller.

Haggling is only stressful if you don’t know what you can afford and / or if you won’t walk away when the numbers don’t pencil out in your favor.

I remember years ago being in Mexico among tourists afraid to negotiate the prices of things in Mexico's truly amazing open-air marketplaces. 

The timid paid full price.

My strategy was to select what I wanted so that the seller knew I was serious. Then I would lowball the price and work toward a sales price lower than asking price.

That is how you win at negotiating. 

Did I cheat a mercado owner out of profit? Hell no!

Did I get a fair price? Hell yes!

Some total boobs out there think that Tesla has it right. 

I think Tesla is Satan.

Tesla wants to have all of its dealerships owned by Tesla. They also have no-haggle pricing.

What that means is price fixing. 

If I have a product that is in demand and sold only through my stores, I call the shots.

The consumer LOSES.

Several decades ago, Porsche tried to get away with so-called company stores and backed down when threats of anti-trust unpleasantries arose.

Most dealerships are not company owned and that is GOOD for the consumer. 

Let's say I'm sitting in Jim Burke Ford in Bakersfield and I don't like the price of the vehicle I want. I could go to Galpin Ford in the San Fernando Valley to try my luck there.

Yes, I will have to delay the gratification of getting the new car now, but in the end I will win.

To Jim Burke's credit, they have always treated me marvelously well so that I did not need to go elsewhere.


People pit dealers against each other all the time.

Remember that unless you're going for an "unobtainable" car like a Shelby Mustang GT350, the car market is a BUYER'S market.

Don't like the price of that Camry? A Fusion, Sonata, Optima, 200, Malibu, Altima, Accord, Mazda6, or a Passat will do the same thing for the same price and equally well to boot.

A trick that many dealers are using to get the monthly payment to be “more affordable” is to offer loan contracts for 72 or 84 months.

Six years?

Seven years?

One of the first things most salespeople ask when the negotiation is happening is what do you want the monthly payment to be.

Longer-term loans drop the payment price. So they're amazing, right?

The longer the term of the loan the longer you will be paying interest. The longer you pay interest, the more of it you pay.

With these new longer-term loans, you won’t own your vehicle for six or seven years.

Let’s say you drive 20 thousand miles a year. 

You could wind up at five years and 100 thousand miles—with two years to go on payments—when the automatic transmission goes out.

If you cannot pay off the vehicle in five years, you simply cannot afford it.

Some people are utterly askance at the notion of leasing, but if the reason you’re going to a 72 or an 84-month contract is to get something flashy, then it’s probably better to lease or buy a CPO (certified pre-owned) version.

Some people refuse to be seen in a base model vehicle. 

Dealers know this. 

The base model has all of the inherent goodness of the car, but exists ONLY so that the dealer can say “for a few dollars more per month, you can have these upgraded features” and it works.

Ask to see the bare bones model. You may be surprised.

In March of 2013, I leased a base Ford Fusion S—because it was dirt cheap to do so—for 24 months. Yeah it had plastic wheel covers and was a strange shade of brown-maroon, but it was an extremely high quality car for 22 thousand dollars out the door.

A fully optioned Fusion can flirt with 40 thousand dollars, but I doubt I will get nearly double the goodness of the base car...as good as the Fusion is.

In November of 2014, I turned in that Fusion and leased a 2015 Fusion SE—for 24 months—because Ford had a Black Friday sale and would buy me out of my lease. 

I wound up at a lower payment because of the heavy “incentivization” that day. The numbers worked in my favor.

I love the Fusion as a product. I don’t want to own one forever and ever though. I'd rather lease.

I could drive a Mustang until it dies. 

That was my plan at least.

When a moron ran a red light and totaled my paid-off 2005 Mustang GT, I put the payoff toward a base Mustang and signed a five-year loan.

Instead of ticking all the options, I went bare minimum. The base Mustang has amazing goodness.

The base 2015 Mustang has the same power as my 2005 had. 

The base 2015 Mustang has more options. 

The base 2015 Mustang cost me 10 thousand dollars less than my 2005 in 2005.

The Mustang GT 5.0 is an amazing car for 40 thousand dollars and in my opinion worth every cent, but I decided to be more prudent and I am happy.

I’m buying this new Mustang because I loved the 10 years I spent with my last Mustang.

And...I can afford it.

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