No matter how financially literate you are, it’s hard to avoid the temptation of a shiny new car when you’re young and stupid!
In the fall of 1999 I was in a pretty good spot. I had just graduated from college and started my career working for an oil drilling contractor in the Gulf of Mexico. My job wasn’t glamorous by any stretch of the imagination, but it paid well and opened my eyes to a whole new world I otherwise never would have seen.
At the time I was driving my brother’s old 1989 Chevy Silverado 4×4. I bought the truck from him 6 months prior for $7750. The truck was in great shape, ran well, and never gave me any problems, other than it was 1o years old and I felt that I “deserved” something a little newer.
It was this feeling of entitlement that ultimately brought me to commit my first big financial mistake; the new vehicle lease. I don’t exactly remember the details of how I got there, but there I was at the Local Toyota Dealership standing in front of a used 1997 Toyota 4Runner with stars in my eyes.
Though I had never driven a 4Runner myself, I always liked their rugged exterior styling , and had always heard excellent things about it’s reliability. I thought that it would be the perfect vehicle for my “active” lifestyle. I was such a sucker for marketing, and slick advertisements.
“Beautiful” I thought to myself as I stood before the freshly waxed SUV “I could do a lot of cool things with this baby!”
“Good afternoon” came a voice from behind me. “Can I be of any assistance”.
I turned around to see Eric (who happened to be two days into his job as a car salesman) come running out of the showroom to greet me.
“Umm, yeah, what would my monthly payment be on this 4Runner?” I said tentatively.
First lesson, anybody who has experience buying cars from a dealership will tell you that worrying about the monthly payment, and loosing sight of the overall cost, is a sure way to get taken for a ride.
Inexperienced, but not dumb, Eric realised that he had a golden opportunity before him as he stated empathically “Oh, don’t waste your time with that ‘97 model; with the current deals we have running right now on the new 2000 4Runners, we’ll be able to work out a much better deal for you”.
“Oh really?” I said, even though I was still a little apprehensive. It just sounded to good to be true.
Second lesson here, if it sounds to good to be true, it is!
“Oh sure!” He said. “Let me show you the new 4Runner that was just delivered to our lot yesterday”.
And there it was. A 2000 4Runner SR5 4X4 “Highland Edition” complete with 31″ tires, jet black paint with color matched grill and fender flares, and the signature “hood scoop”. It sounds a little cheesy to say, but I honestly think my heart skipped a beat when I saw this truck.
It didn’t matter what the price was at that point, I knew that I wasn’t driving off the lot in anything else.
“Would you like to take it for a test drive?” Eric’s tone implied that he was doing me a favor.
“Sure, that would be cool” I said. Remember, I’m only 22 at the time and this is a $33,000 vehicle.
“OK, let me just run in and check with the manager real quick and get the keys”
Eric came running back out with the keys and handed them to me. “OK, I’m going to ride in the passenger seat” he said.
As we left the lot, Eric started talking about the cool features of the 4runner, but more importantly, to establish his connection with the buyer, he began asking questions about me, what I did for a living, etc.
“So what do you think?” he asked excitedly, as we made it safely back onto the dealership lot.
Of course the reality was that I loved it, and he knew it, but I played the cool customer and said that the 4Runner was “nice”.
“Well, would you like to come inside and talk about a few things over a can of Coke?”
“Sure” I said.
Eric was so new, he didn’t even have his own desk yet. Instead, after apologizing profusely, he guided me to the employee break room to talk business, which incidentally was right next door to the general managers office.
“Tell me again, what kind of payment where you looking for on your new 4Runner.” he asked me.
“Oh, I don’t know, I was hoping for something around $400 a month.” I still have no idea how I came up with this number, it just seemed like the car payment someone my age, with my income should have.
Third lesson, although I wouldn’t learn this one until 2 more car purchases, is that you shouldn’t have a car payment no matter what your age or income if you can avoid it.
“Hmm…$400, OK” he said, as he scribbled the figure in the upper right hand corner of a preformatted “deal sheet”.
He then asked me what I later found out to be one of the key phrases in the automobile industry.
“$400 up to…” he asked. Without finishing his sentence, I knew he was asking what my maximum monthly payment was.
“Oh… I don’t know, up to $450″ I said, without giving it much thought. What he basically had done was “up to” me another $2400 if he could get me to agree to a 48 month loan term.
Fourth lesson, if you absolutley have to have a car payment set a budget that works for you and don’t get “up to’d”
“Great” he said. And why not, this really was great for him, he had the perfect customer sitting in front of him, and it was only his second day on the job! “I’m going to have the manager check out your trade-in and then we’ll see what we kind of a payment we can get you into”.
Read Part 2 here.
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Ha ha!! I love these posts of the good ol’ days. I don’t think I was quite as bad as you… but I still had a lot of things to learn with my first car purchase. Thanks for the trip down memeory lane!
I feel lucky to have missed this trap during my years before becoming money-savvy, but the first car I called my own was a $500 very used Plymouth Horizon. While there are huge benefits to paying cash for used cars … it’s not always pretty! That thing finally died and I paid cash for a Hyundai Accent, a step up for me. When I sold the Hyundai, I paid cash for my current vehicle, which needs ot be replaced soon. As always, I’ll be paying cash. Thanks for sharing your experience!