The Little Demon that Could

During my formative years, my parents owned a 1971 Dodge Demon.  It was the family hand-me-down car that I called the "Dentmobile" because just about everyone managed to put a dent in it at one time or another.  My grandfather, who bought the car new.  My aunt who learned to drive on it.  My mother who drove it every day for nine years.  And once I side swiped it with a trailer I was pulling behind a riding lawnmower. 

 

There was nothing special or fancy about the Demon.  Except for an automatic transmission, it was as basic as basic transportation gets.  School buses and U-haul trucks are more lavishly equipped.  The Demon didn't just have rubber floor mats, it had rubber on the floor in place of carpet.  Heat and ventilation were abstract theories--there were vent boxes below the dash opened for fresh air, but they let in other things like leaves and water.  The heater had two speeds, "Low" and "Hi".  Both settings were equally feeble and blew as much air as a hamster through a straw. 

The Demon had one redeeming quality--stalwart dependability.  Powered by a 198 cubic inch Slant 6 engine, it always started on the second try, coughing and settling into a lumpy, agrarian  idle.  One cold January, my aunt and uncle visited from Phoenix.  The temperature dropped below zero the day they were supposed to leave, and their rental car failed to start.  My parents offered to take them to the airport in my dad's Oldsmobile Cutlass.  But it too failed to start.  Only the Demon, sitting at the bottom of the driveway under fresh snow, dormant since before Christmas, started.  On the second try. 

When I was in high school, my parents gave me the choice of the Cutlass or the Demon.  I chose the Cutlass because it had bucket seats and the Olds 350 Rocket engine.  But I sometimes wonder what would have happened if I had taken the Demon.  It probably would have needed less care and feeding.  The Cutlass was a thirsty beast with gas mileage measurable in feet per gallon.  It also racked up a daunting list of repairs, requiring just about everything, including a transmission rebuild.  Adding it up, car payments on a new Cutlass would have been cheaper.

In the early 1990s I happened upon the Demon again in midtown KC.  It was the same car, rustier than ever, its blue paint faded like acid washed denim jeans.  It sported all the same dents, plus some new ones, and still had the bumper sticker my family added that said, "Mom knows best, buckle up."  

Twenty years later, I still think about that Demon.  It was a simple car, one with only one objective: providing basic, dependable transportation.  That idea seems quaint and old fashioned today.  In an era where the cheapest new cars come standard with air conditioning and power windows, the idea of rubber floor mats and vent boxes seems as antiquated as hand cranks and magnetos.  There probably will never be a market for a car that basic in the U.S again.  

Even so, I'd like to think that Demon is still out there somewhere, coughing to life on the second try and ambling down the road.        

How to Buy a Car: Part 6 - When to Walk

No matter what happens in the finance office, or at anytime during the car buying process, remember this:  You can always walk. 

If for any reason you don't like the deal, or the deal changed for the worse between the time you left the sales person and entered the finance office, you can walk. 

Even if you signed a piece of paper for the salesman, committing to buying a car, you can walk.  Only when you've signed the final contact in the finance office, are you obligated to take possession of the car.     

There are always good reasons to walk away from a deal, and you should always have that option.  But there are two things to be conscious of if you do decide to walk away:

1. The deal may or may not get better by walking away.  Yes, it's possible to get a better deal by walking and coming back later, but it might not.  

2. You may not get a better deal someplace else.  Dealers have access to the same information you do and they keep a vigilant eye on their competition, including prices and sales volumes.  They also use the same tools to price their cars and appraise trade ins. 

If you do walk away from a deal, you have to be prepared to start over from square one.  Car buying is a lengthy process that takes several hours or more.  If you've already invested a whole Saturday or evening negotiating a deal, you have to decide if it's worth spending more of your time to try and get a better deal. 

This is where the time value of  money comes in--how much is it worth for you to try and get a better deal?  Are you willing to give up another evening or Saturday?  Take time off from work?  Miss out on an activity you enjoy?  You have to ask yourself:  "Is what I'm giving up, worth what I'm getting in return?"

It's a question only you can answer.  And to help answer it, we've come back full circle to the beginning of this series--the key to knowing when to walk is information.  It's another reason why it's important to do your research up front and gather enough information to make the best decision.    

How to Buy a Car: Part 5 - The Finance Office

Once you've agreed to the deal, you're only half done.  After negotiating with the car salesperson, the next step is the finance office, where the next battle begins.  Hard won concessions on the sales price or trade in value of your car can be easily lost in the finance office.  This is not to say the Finance office is shady, just an acknowledgement that it is a profit center for the dealership.     

When I was in the car business, the dealer I worked for made about $150 on every new car sold.  But if a customer financed a car with the dealer, bought an extended warranty or car care package, the dealer could make ten times that amount.  This is why it's important to do your homework on financing and your credit score. 

Most dealers work with a number of lenders, including local banks.  These lenders will give the dealer a "buy rate" or a base interest rate the dealer can use to finance auto loans for its customers.  The buy rate is based on tiers of credit scores--a good credit score might have a buy rate of 3% while an excellent score might be 2.5%.  The dealer then marks up the rate and makes a profit on that mark up. 

For example, if a dealer's buy rate is 3%, they might offer you a loan for 3.25% and will make money off the .25% markup.  If you are prequalified for a loan at or over the 3.25% rate, it makes sense to use the dealer financing.  If you can get a loan for less than 3.25% then you're better off financing the car from your own source. 

You can also use your prequalified rate to negotiate with the dealer.  If the dealer offers you a 3.25% rate, but you have access to financing with a 3% rate, the dealer might try to match the rate or get close to the rate to earn your finance business.  Most of the time I will go with the dealer's financing because they can either match or beat the rate I'm prequalified for.  But I always go in prequalified so I have options.    

Another place car dealers make money is on extended warranties and care packages.  The finance office will show you how adding an extended warranty or a rust prevention package will only cost you a few dollars a month but add years of peace of mind.  As a rule, I generally avoid every protection package except for the extended warranty, which I might consider based on the following criteria:

1. If the car I'm buying is out of factory warranty or has less than a year of factory warranty remaining. 

2. If the warranty cost less than $1,000 but provides at least 3-5 years of comprehensive coverage. 
3. If the make and model of the car I'm buying has a reputation for costly repairs. 

4. I plan to keep the car for more than 3-5 years. 

I passed on the extended warranty with the Chevy Traverse my wife and I bought, because it had two years of bumper to bumper coverage left on the factory/certified warranty.  I also passed on an extended warranty when I bought my new Ford Fusion, because it's covered for three years or 36,000 miles.  Had I bought a used high end luxury car, like a Jaguar or Porsche, or something like an Infiniti with over 70,000 I would have strongly considered one.