Money To Live

September 15, 2008

I bought a new car

Filed under: cars,negotiation — by moneytolive @ 5:00 am
Tags: ,

Despite the rain from Hurricane Hanna, I went to a Honda dealer and bought a Honda Fit — for most of the 4 hours that I was there, I was the only customer in sight. Here are some of my experiences and thoughts about the car buying experience.

Test drives in extreme weather

Earlier in the week I test drove the Fit at another dealer in 90F weather. It was hot, which is the perfect time to test the A/C. On the day of purchase, I test drove in the rain, a great chance to test the wipers. The car handled well, and I felt confident driving home.

Being much lower to the ground, I hear a lot more road noise than when I was in a Ford Escape. I kept expecting water to seep in through the floor, but of course the water never did.

Paper and a calculator

Admittedly, I am very comfortable with numbers, and much more so than the average person in the population. This is an advantage whenever numbers are being thrown around — I can approximate tax and discounts quickly.

While sitting down with the salesman, I kept my own running tally of numbers. When we agreed on a number, the salesman took it to his manager. He came back with a big smile to tell me his manager approved it. But, all of a sudden my numbers did not match his with a difference of almost $200. When I said this, he did not believe me. I walked him through my numbers, and there were only three relevant numbers: O.T.D. price – trade in value – negotiated discount. (O.T.D. = out the door) He was confused and re-did the math himself. More confused, he went back to the manager and agreed to my numbers because he had made a mistake with the first O.T.D. number.

At one point, the amount of tax did not seem right. It was about 2.5% of the price, but the tax rate on a new car is 3.2%. I brought this to the guy’s attention, and he became very confused because he simply reads numbers off the computer.

Notice a theme? Lots of confusion over numbers. I felt better knowing exactly what numbers were on the table, and I kept a very neat list on my pad of paper.

Ask a lot of questions

When I get going, I can ask a ton of questions. At the dealer, I read every document I signed, and when I did not understand a term, I asked for the definition. Surprisingly (or maybe it should not have surprised me), the salesman could not answer many of my questions. At one point, another salesman brought over a brochure to answer my questions, but the brochure just raised new questions, which the salesman had trouble answering. In the finance office, the guy could not answer some of my questions about the language of the contracts.

I had a small balance to pay (less than $2,500), and I wanted to pay with a credit card. Before signing papers, I wanted a guarantee that I could pay the entire balance by credit card with no fee or penalty. Since the salesman got frustrated and did not want me to write this condition into the contract, I pulled out a piece of paper and wrote a statement that I could pay the balance with a credit card with no penalty. He took me to his manager, who had to approve the statement. The manager then explained the policy: the maximum credit card charge allowed is $2,500. The salesman acted offended that I did not trust him, and I said, “It is business” (and I thought about telling him that he should have just told me the policy, but telling him that would not have accomplished anything, so I kept quiet). His manager agreed with me and signed my statement.

A new car warranty

Before going to the dealer, I had not done done any research on a new car warranty. Since the finance people guaranteed I could cancel with no penalty, I went ahead and got it. Of course when I got home though, I did some research and decided against a dealer warranty. Consumer Reports says not to get a dealer warranty and has analysis backing this up: how many people lost money (the vast majority), how much was lost on average ($100-300), and how many people came out ahead by buying the warranty (not many).

The tire/rim warranty could make sense for a person who gets a lot of flats. When I first learned to drive, I had a ton of flats because I kept hitting curbs on right turns. It would have been a good deal for me to get this plan. But now I don’t hit corners so much.

To cancel the warranty, I had to drive back to the dealer and wait 15 minutes to sign some paperwork.


1 Comment »

  1. I’ve never bought a car, and probably won’t in the near future. However, I found this post very useful because it really says a lot about how the world of money works in general. People generally don’t do the maths, read contracts, ask questions, or do the research. I guess I was taught to do all of these things, but sometimes I do get a bit lax.

    Congratulations on your new purchase! I totally understand the funny stomach feeling. I’m sure it will go away soon as you become comfortable with your choice (and next pay check :)), and continue to back in your car!

    Comment by Anita — September 18, 2008 @ 7:56 am |Reply

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