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Buying a car is typically the first major purchase in an individual’s life. As such, it needs to be taken very seriously. A mistake with this purchase can destroy the next decade of your financial future.
Don’t make my mistakes.
My husband and I bought our first vehicle when we were very young. We had just started living on our own and we had no idea what we were getting into. It was a terrible, terrible mistake.
Critical Mistake #1: We only looked at one dealership.
When my husband was assigned to Fort Gordon during his military training, I decided to move to nearby Augusta. He wasn’t allowed to leave the base and he wasn’t allowed to ride in a car, but at least we were able to see each other every day.
Anyway, on my first day in town, a local Kia dealership brought several cars onto the base. I wasn’t sure that I would be able to buy a vehicle without David present, so this seemed like our best option for buying a car. In fact, it felt like our only option.
Critical Mistake #2: We only test drove one vehicle, and it wasn’t even the one we wanted.
The dealership had brought about a dozen vehicles to the base that day. We expressed interest in one of them, but the salesman refused to show it to us. He diverted our attention to a little silver Spectra that neither of us really liked.
However, I was young and I had anxiety. He seemed to be very polite and kind, although he was adamant that we would like this car better than the one we wanted. He insisted that we test drive the Spectra first and then decide if we wanted to try the other one.
Since David wasn’t technically allowed to ride in a vehicle, I did the test drive myself. I have a rather severe anxiety disorder and it was an awful, uncomfortable experience. The salesman leaned over into my seat, invading my personal space. He was condescending and rude. He touched my shoulder. It all felt so invasive that I was just dying to get out of the car.
By the end of the test drive, the only thing I knew for certain was that I did not want to get back in any other vehicle with that salesman!
Critical Mistake #3: We discussed our finances while the salesman was in the room.
Of course, we knew we needed to finance the vehicle. We didn’t have bad credit, but we didn’t really have any credit either. This was our first big purchase as a couple.
The salesman settled into a chair a few feet away. He made several phone calls, pausing between to assure us that he was trying to get financing from any bank that would offer it. He had a pained, frustrated expression on his face the entire time. The more time went by, the more worried we became.
In the meantime, we discussed our finances. We had estimated that we could afford somewhere between $200 and $250 per month for a payment. After all, the military doesn’t necessarily pay very well. We were already living paycheck to paycheck. Even though we needed a car, we couldn’t really afford one.
We didn’t realize it at the time but the salesman was listening the entire time. Looking back, I don’t think he was even on the phone with anyone. I think it was all a ruse, designed to stress us out and get as much money from us as possible.
Critical Mistake #4: We were not realistic about our budget.
Finally, he walked over to our table and announced that we would never get a loan for less than $250 per month. He sympathized with us and then pleaded, “Can we do $300?”
I looked at the budget again and tried to rework things. I cut our grocery budget down to less than $50 per month for the three of us. I restricted our fuel budget to an impossibly low level. We were able to find $300 per month on paper, but only because I had decided to live in an unrealistic alternate reality.
Critical Mistake #5: We did not question anything the salesman said.
Another hour later, the salesman returned. He was beaming. He gloated, “Well, I was able to get you guys a loan!”
We sighed with relief. “Good!”
“Your monthly payment will be just $326.80.”
We groaned. It was just too much.
However, when we tried to object, the salesman spoke over us. He insisted that we were lucky to find a loan at all. By the end of the conversation, we were convinced that this was our only choice and that we were indeed lucky to have a car at all.
Critical Mistake #6: We ignored the problems with the paperwork.
We decided to sign the papers, confident that we would find a way to survive. For some reason, the salesman wouldn’t let me sign papers on base. He drove me to the dealership about 45 minutes away, where I was stranded with no way to leave. I was in a full-blown panic and I still remember staring at the eerie white walls of the dealership while I waited.
There was problem after problem with the paperwork. He printed it, had me sign half of it and then printed it again when he noticed a mistake. It took hours to finish everything, even though we allegedly already had the details.
After signing all the paperwork, we discovered that the lender charged a $10 convenience and processing fee with each payment. It didn’t matter how you paid, there would always be an extra fee.
Now that we had just $43 per month for groceries, this was a huge problem for us. There were other hidden surprises that weren’t revealed until after we signed the contract, too.
If this happened to me today, I would have challenged all of these things because I don’t believe they were legal at all.
Critical Mistake #7: We did not realize our insurance rate would change.
Later that day, I called our insurance company. As I said before, I was very young and very naive. I did not anticipate how drastically our insurance rates would change after purchasing a vehicle.
Our insurance had jumped from around $90 per month to nearly $300 per month. Since we had never purchased a vehicle before, we had not realized that we would need to purchase comprehensive and collision coverage to cover our newly financed car – or how expensive that coverage would be.
Critical Mistake #8: We paid way too much for a used car.
It wasn’t until later in the day that I was able to speak with my father. My dad has worked in car sales for most of his life. He was horrified to hear that I had signed this deal.
He informed me that we would’ve paid less to buy a new car. The original MSRP for a brand new Spectra was less than the amount we’d paid for a year-old model with 50,000 miles on it.
Oh, and by the way, the extra miles meant that this was most likely a used rental car. My dad had a lot to say about that, too.
All in all, my dad concluded that this is probably why we had such a hard time getting financing on the vehicle. It was the insanely high price, not our personal credit, that was a barrier.
I’m sure that salesman was laughing all the way to the bank.
Critical Mistake #9: We stretched our budget so thin that we couldn’t handle an emergency.
Obviously, we had not been realistic with our budget. There was no way that we could survive on $45 per month in groceries and less than $10 per week in gas. Since we had just started living on our own, we had also failed to allot money for essentials like laundry, dish soap and toilet paper.
We struggled through the first year of our loan. We were often past-due and borrowed money to make the payments. It was a mess.
Eventually, my husband was discharged from the military for medical reasons. He worked for a while, but his disabilities always interfered. Eventually, he became unemployed.
The payment became 30 days late… then 60… then 90…
Then, after our long struggle, we watched a company agent climb in the car and drive away. We found ourselves without a vehicle again and this time, we had a dastardly repossession on our record that made it nearly impossible to find another vehicle.