Wednesday, February 8, 2017

Thoughts and insight from the “New Career” files…

I have a friend who built a formidable fortune in the car business. He is still involved in selling cars via his auto auctions.

Here are some insights he gave me about the business.

“The biggest problem in the car business is poor management.”

“Dealers hate the manufacturers and the manufacturers hate the dealers.”

“Some dealers are afraid of the internet and some embrace it. If a customer shows up with a print out from a website, they’ve already bought the car, show it to them, test drive them and write the deal up.”

After 7 months selling cars (or as my sister says, “trying to prove something to Dad”) I have some thoughts as well.

Customers need to do the math. You can’t buy a $50,000 car for $400 a month unless you have a superb, paid for trade-in or are ready to put 30k down on the new car. The rough rule of thumb is $22. a thousand financed over 60 months or 220 a month for every ten thousand financed.

You won’t get a discount for cash. Paying cash for a car makes no difference. Yes, the dealer makes money on the financing from the bank, not a lot, but some.

Leasing makes sense if you drive 15k a year or less. You always have a fresh, up to date car and you only pay for your use of it. Research the residual value of cars you are interested in. For instance a Jeep Wrangler Sport has an extremely high residual and that has a huge effect on the lease payments.

If you finance a new car, know you are going to be “upside down” for a long time. Remember the bank always gets paid first. Essentially you are “buried” for the first 3 or 4 years in a long term auto loan.

Nobody is trying to “screw” you at a legitimate car store. It’s illegal and if a dealer does it, they get huge fines and can lose the right to business.

Buying a car is generally the 2nd largest purchase you’ll make, there are a lot of details to take care of, a lot of papers to sign and it takes time to do it right, Don’t rush it and ask questions if you don’t understand something. If there is something that needs attention, get it in writing and get it confirmed by management, before you sign off on the car.

The credit application has to be filled out correctly, no fudging on income, nothing can be crossed out and leave nothing essential blank. Never let the salesperson or manager fill anything in for you. Never! The credit application generates your car’s registration so it is doubly important.

You’ll never know what your payment is going to be until your credit is run. Payments are determined by the car you’re buying and your credit history. I will get you a ball park number if you know your credit score, not exact but close. Be aware the management hates it when I come in and ask them to run a number without a credit app. However, if you hand me a recent copy of your credit report it’s less of a hassle. Don’t ever go from dealer to dealer and let them run your credit. It’s dumb and it drives your score down.

I sell a lot of trucks. My clients buy trucks for many difference reasons. Here are a few truck tips, unless you drive over 17,000 miles a year don’t opt for the diesel engine, the fuel savings don’t add up. The more miles you drive the quicker the diesel pays off. The Cummins diesel option on the Ram 2500 costs almost 10k more than the V8, think about it. The diesel gets better mileage and has more power, but unless you drive a lot or tow heavy things around on a regular basis you are be spending money you don’t need to spend.

If you buy a truck to tow a boat or a trailer calculate the towing capability this way, use 70% of the towing capacity as the holy grail of towing. Here’s why, add up all the things you are going to be carrying in your trailer, fresh water, black water, food, ice, clothing, etc, etc. Now your 6,000 lb trailer weighs 7,000. Then add people to your truck, 4 people at 150 each. Now add coolers, luggage, bikes, tools, lawn chairs and your dog. Now you’ve added another 700 lbs to the load. If your truck is rated at 8500 lbs towing capacity you are pushing it. Be like a pilot and leave a large margin of error.

One last thing…

Buying a car is the balance between need and desire. That said, there is nothing like owning a car (or truck) that puts a smile on your face every time you start the engine.