January 31, 2006

Tony,

I just spent the past couple hours reading your car-buying tips and wanted to say how great this information is.

Also, I wanted to relay my own recent experience at a dealer and ask you if this practice is common. I admit up front I made a lot of mistakes with this dealer, but luckily I walked away before any harm was done. Here's my story...

Interested in buying a new car with MSRP of $33K and change. I am currently trying to sell a classic car that I plan to use as down payment toward the new car. I expect to sell the car for $12-$15k. I tell the dealer I'm not going to buy, I've got a plan, I need to wait until after I sell the car so I have cash for down payment.

He says "What do you want your payment to be?" I foolishly say "$400."

So then he says "I can sell you this $33,000 car for $400 a month with no money down." So of course I'm interested, right? He says "How long do you think it will be before you sell your car?"

I have no idea. Maybe a week. Maybe six months.

He says, "Do you think you can have it sold in a year?"

"Yes," I say, and I mean it.

He then shows me a finance plan that has a payment of $700/month for 72 months.

"No way," I say. "I told you I can't afford that!"

He says that the dealership will cut me a check for $3,600 that will cover the $300/month difference between the $700 payment and the $400 I wan to pay for an entire year. He says, "You sell your classic car, you refinance the loan and you're probably under $400 a month from there on out."

It sounded good. It made sense. I wanted the car and this looked like a viable solution. Certainly I didn't like the idea of where I'd be if I didn't sell my other car and just the shock of actually making a $700/month payment was pretty staggering for a regular guy like myself. But at the time it didn't sound too bad. It was a way to drive off with the brand new car.

Until I started thinking about where that $3,600 was coming from.

Of course the salesman was adding that $3,600 to my loan and then cutting a check back to me, in essence charging me sales tax and 8.9% interest for my own money. So when it was all said and done, I was paying nearly $40,000 for a $33,000 MSRP car. The worst part is I almost didn't even realize it and nearly took the deal before walking out, feeling nervous and embarrassed about the whole thing.

Is this something dealers do often? I haven't found anything like it on the web.

Thanks.

Eric,
Florida