My fifteen-year old minivan bit the dust over the summer, so I reluctantly pulled out the vehicle research I’d done over the past few months (this was not an entirely unexpected event) and became a car shopper. I took advantage of the fact that my son was home from college after his freshman year; I brought him along with me to the car dealership to help me test drive and for company. It turned into a very useful real-world financial literacy lesson.
We found a vehicle that we both liked, wasn’t too expensive, and had low mileage. I had forgotten how many hours it takes to buy a vehicle from a dealership. All that waiting time together gave us an opportunity to talk through all the trickery I was subjected to once I’d agreed to buy the car and the finance talk started:
SPEED: The volume of the pile of documents that was put in front of me, and the speed with which the finance guy flipped through them, was overwhelming.
UPSELL: Despite telling me during the selling process how amazing the 7-year powertrain warranty was, during the money talk, suddenly that warranty was downplayed and I was pushed hard to buy the extended warranty. I was warned that it was only available that day and I could never buy it again. I did not buy it. I have never regretted not buying an extended warranty.
“MISTAKES”: I asked the salesman to remove a few items I didn’t need or want to pay for, so he crossed them out. When he brought a new document 30 minutes later, all of those items were still on there as part of the price. I played along that it was an honest mistake and asked him to remove them again.
MONTHLY PAYMENTS: This is the one that kills me, and I absolutely warned my son ahead of time: they only talked in monthly payments. Sure, I saw the price of the car, but every number was quoted as a monthly payment amount (and he was using a 72-month loan, so it all sounded like really low numbers). When I pushed back on the interest rates, and suggested I could get a better one from my bank, he dismissed that, saying that a rate that was 1% higher would only increase the payment by a dollar or so per month (actually, it would have been $18/month, or over $1,300 if I had agreed to a 72-month loan).
UPSELL #2: I had put down only a small down payment, so I was going into the loan a little bit upside down (meaning that I owed more than the car was worth at the beginning of the loan). The finance guy pushed VERY hard for me to buy gap coverage. Gap coverage is insurance that provides coverage in the case that the consumer totals the car but the insurance company won’t pay enough to pay off the loan; it pays the remainder of the loan back so you’re not stuck with a loan balance for a car you no longer own. I did not worry about this – I could have put down more, but the loan very quickly will be paid down to where I’m not upside down anymore. The finance guy acted shocked, and told me that almost everyone buys it, and that insurance companies are quick to total cars these days, and what would I do if that happened? I told him that it would be extremely unlikely that I would total this car, and that I have savings to cover the difference. He emphasized how “cheap” the $36/month cost was, but didn’t mention that that fee would last the entire length of the loan, far beyond when I’ve built plenty of equity in the car. That’s over $2,000 I’d have paid for something that will almost certainly not occur. The takeaway is the harder they push, the more likely it’s something you’d be overpaying for, and that they likely are personally profiting from.
This kind of real-world experience is invaluable in preparing our young adults to navigate their own financial situations. It’s possible my husband or I might be right next to my son when he purchases his first car, but it’s equally possible he’ll be living in a different state and he’ll have to handle it entirely on his own. I’m glad he’s had a firsthand view not only of the tactics they used, but also heard my responses, questions, pushbacks, and refusals. I ended my first car dealership experience in tears at age 26 – thinking about it still makes me angry – and I want to equip my children with the tools to understand what they’re agreeing to, and to advocate for themselves.