Buying a New Car

Us millennials are a screwy bunch. We love Twitter, share our dinner on Instagram and really like to sign up for subscription services. It’s no surprise then, that a lot of us look at buying a car the same way. Targeting a payment sounds good in theory, but it’s actually the absolute worst way to buy a new car which is why millennials are really bad at buying new cars.

Don't Get Screwed Buying a New Car
Don’t Get Screwed Buying a New Car

Automotive News reports that, unsurprisingly, millennials are the fastest growing segment of car buyers. In fact, by 2020 we will represent 40 percent of the new car market. With money moving into the hands of eager new buyers you best bet that dealerships and automakers along with some industry “disrupters” (god I hate that word) are looking to cash in on the millennial market.

According to Jeff Schuster, senior vice president of forecasting with LMC Automotive, millennials like to focus on monthly payments instead of the vehicle’s cost. We are a subscription based culture that thinks in terms of monthly payments (think Netflix or Spotify) so car payments are more in line with our language than a large total amount.

Now, companies are arriving on the scene to offer ways for millennials to find cars that meet their monthly budget.

Check out this scary quote from the article:

AutoGravity, a financial technology company whose leasing and financing mobile app and web platform enables consumers to arrange their transaction with a dealership and lender, is working on a solution that would enable customers to search by monthly payment and vehicle type. Customers could search for an SUV at a maximum payment of $300 per month, for example.

You might be saying, “that sounds great, what’s so scary about it?” I’ll tell you what. It’s a supremely stupid way to buy a car. Talking about payments instead of price isn’t anything new. It’s been the car salesman’s number on

Talking about payments instead of price isn’t anything new. It’s been the car salesman’s number one tool for screwing unbeknownst car buyers for ages. Talking about the payment alone means a salesman can screw you in any number of ways; they can stretch out the payment on a car you shouldn’t otherwise be able to afford and they can add fees or jack up the price and make the difference disappear. That can end in a car buyer being upside down in their loan.

Here’s what it looks like to get screwed by a car salesman:

Let’s say you pick out a really sweet Lexus IS 250 F-Sport. The dealer says he can get you in the car for $350 a month and $3,000 down, you say cool, sign and drive off. Here’s where the math turns sour: a 2017 Lexus IS 250 F-Sport is a $42,000 vehicle. With the down payment and $350 payments each month, you’d be paying for that Lexus for 9 years. If you had financial trouble or just wanted to sell the vehicle at any point during your ownership of it, you’d owe a whole hell of a lot more than it would be worth and that’s a very bad place to be.

There are very specific circumstances in which buyers might want a long-term. Say the automaker is offering 1.9% financing for any term and you know you’re financially secure and can make payments no matter what. In that case, it might make sense to stretch the loan because your ability to make money on investments outweighs the 1.9% you lose to financing. For most millennials, however, this isn’t the case.

When you’re buying a car the most important numbers to talk about are the price of the car, the interest rate, the down payment and the term. Allow those numbers to dictate your payment. If you’re happy with the price, rate, money down and how long you’ll be paying for the car but the payment still comes out too high, you can’t afford the car. Plain and simple.

The "I Just Screwed Another Customer" Dance
The “I Just Screwed Another Customer” Dance

This is where a salesman will jump in and “help” you afford the vehicle, and that’s the point where you start getting screwed. Buying a car isn’t like signing up for Netflix, don’t treat it that way.

 

 

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