Back in March of 2008, I made the decision to buy a brand new car. There was nothing wrong with my old car at the time, but I somehow talked myself into wanting this new item. I made the justification that I wanted to buy a house eventually (I needed the credit history) and that my sister would start driving in September. Clearly, I needed to get this new car (not really). My 2000 Saturn SL2 had 105,000 miles on it and ran great.
My mind was already made up on what I wanted. During my trip out to Nashville earlier that year, I rented a 2008 Mitsubishi Galant. I immediately fell in love with it and had to own one. It was roomy, economical, and had enough power to get onto the highway without difficulty. So I went over two auto dealers to see what kind of selection they had.
I had a few ideas in mind when going to the auto dealer:
- Look for last year’s model
- They usually have specials on left over inventory for the previous year
- In my case 2009 models were already out, so I was looking for a 2008
- Haggle for the best price
- Usually with last year’s model, they are willing to sell it for equal to or less than invoice (what they paid for it)
- Shop around multiple dealers for the same model and year with similar features
- Don’t let them play on my emotions
- A good sales person knows how to work with people’s emotions
- If you get fixed on a particular quality, they will try reel you in using that!
- Be willing to sacrifice some features
- I would have liked a sunroof, but it didn’t make or break the deal
- Shop educated
- I went online and did my homework about the vehicle
- This showed them that I had an understanding of the car to limit them pulling any tricks
I went to the first dealer and found a car that I liked. It had all the features I wanted and they were willing to sell it $1,000 under invoice. Fair enough, I told the salesman that I would go home and sleep on it. It was very difficult to walk away from that dealer; they followed me out to the car! The next day, I went over to another dealer and found a car with very similar features as the other one. It was missing a few things such as fog lights and traction control, but this wasn’t a deal breaker to me.
Talking with the salesman at the second dealer, they did not offer the same pricing initially. So I mentioned that the dealer up the road offered me $1,000 under invoice for a similar model. The salesman talked with his manager and came back with $1,150 under invoice. Between this offer and the color of the car, I was sold.
Now came the big moment of running credit and financing. Since this was my first “big” loan, Mitsubishi Motors did not want to offer me a credit line for their current offer of 0% financing. The dealer was able to find another bank and they offered me 6.69% APR for 5 years; so I went for it.
While paying back this loan, I ran into some interesting situations. The first one was making a principal payment. There were two ways for me to make it:
- Send it to a different address at the bank.
- Include it with my normal monthly check and explicitly specify “use remainder as principal payment”.
There were times where “use remainder as principal payment” was checked on the payment stub and they proceeded to apply the remainder of the balance towards next month’s payment (and the month after that)! I immediately called them to correct the problem.
I also considered paying the auto loan online. However, there was also no way for me to make a principal payment through their website. Plus they charged you a “courtsey” fee of $10 to make the payment if you did not have a checking account with them! Absolute highway robbery.
In the end I wasted $894.83 in interest, but I sacrificed and managed to pay off the loan in less than two years!
What experiences have you had with car dealers and auto loans?