How can I beat the dealership in the finance office?

[00:00:00] Ralph Estep, Jr.: Have you ever felt intimidated walking into a car dealership's finance office? Have you ever wondered if you're getting a fair deal or being taken for a ride? Well picture this. A 12-year-old boy rescuing his mom from a predatory car deal. Sounds unbelievable, right? Well, that young hero was me and I'm about to share how that experience shaped my understanding of the auto finance world. Stay tuned as we uncover the secrets of avoiding common pitfalls when finalizing your auto purchase.

[00:00:34] Ralph Estep, Jr.: Before we dive in, if you missed yesterday's episode on how do I live out my Christian calling, make sure to check it out at askralph.com. It's a powerful discussion on aligning your daily life with God's purpose for you.

[00:00:51] Ralph Estep, Jr.: Well now, let's get to today's topic. I received a message from Bruce. He comes to us from Oklahoma, and he writes this.

[00:00:59] Ralph Estep, Jr.: "Dear Ralph, I'm in the market for a new car and I am terrified of the finance office. I have heard horror stories about those hidden fees and unnecessary add-ons. How can I protect myself and ensure I'm getting a fair deal? Your advice would be a real blessing, Ralph. Thanks."

[00:01:16] Ralph Estep, Jr.: It's from Bruce. Bruce, your concern is valid and I'm glad you reached out. Your question is precisely why we do the show. It's why I get up in the morning. It's to equip you with the knowledge to make smart financial decisions that honor God and protect your resources.

[00:01:33] Ralph Estep, Jr.: And speaking of questions, I want to remind you, the listener, to keep sending in your financial queries. This show is called Ask Ralph for a reason. I'm here to address your specific concerns and talk about your challenges.

[00:01:48] Ralph Estep, Jr.: Welcome to today's episode of the Ask Ralph show. I'm your host, Ralph Estep, Jr., And I'm thrilled you've chosen to spend part of your day with me. Your trust and time mean the world to me. Now, before we dive into today's topic, I want to invite you to visit our website. That's at askralph.com. I want you to join our community there. And please, if you find value in today's episode, do me a huge favor and share it with someone who might benefit from this information.

[00:02:14] Ralph Estep, Jr.: And here's a special offer for you. When you join our email list, you'll receive a free copy of my book. This is it right here. Mastering your finances, a $10 value on Amazon, but it's my gift to you for being part of the community. So if you've got a burning financial question, send it my way. You can do that at ralph@askralph.com or as I said, visit askralph.com. Click on the microphone icon at the bottom and just start recording your message. I would love to address your specific situations in a future episode.

[00:02:44] Ralph Estep, Jr.: As we tackle today's topic, let's keep in mind the book of Proverbs 22:3. It says this. "The prudent see danger and take refuge, but the simple keep going and pay the penalty." This verse reminds us of the importance of wisdom and foresight in our financial dealings.

[00:03:08] Ralph Estep, Jr.: Well now let's address Bruce's question about navigating the auto dealer's finance office. To do that, I want to share a personal story that changed my perspective on car buying forever. And let me just tell you this. So it's a personal story. Now listen. Here's the deal. I can picture it to this day. As a matter of fact, I want to say this. Today is actually my 52nd birthday. So this story actually happened 40 years ago.

[00:03:33] Ralph Estep, Jr.: It also happens to be my wedding anniversary. So I want to wish my wife, Jennifer, a very happy anniversary. We are together 24 years today. But let me get back to my story. So picture this: my mom, my sister and I, we were out shopping for a new vehicle for my mom. Now, my dad and mom split up when I was about eight and my mom had this old Honda Accord hatchback.

[00:03:54] Ralph Estep, Jr.: I don't know if you remember those, but kind of looked like an egg. And if you wanted to get in the backseat, because of course my sister and I were always fighting about who's going to sit in the front, who's going to sit in the back, it's one of those deals where you had to flip the seat, roll it forward.

[00:04:06] Ralph Estep, Jr.: And I was always a big guy. I'm still a big guy now. And I had to climb to the backseat of that. So we had this Honda Accord, and it was a stick shift. And let me just tell you. My mother would panic every time we got anywhere near hill. And there was one hill up the street from where we lived. It was a place where she used to go buy our clothes for the school year. And there was a hill as you left there in, and I can still remember it.

[00:04:29] Ralph Estep, Jr.: I'm like 10, 11, 12 years old when this happened, and she would get on that hill with that stick shift. And I don't know if any of you have ever been there, but it is kind of scary. You got to work that clutch in that, that accelerate the same time. Anyway. So this is the first car my mother had ever bought on her own. You know she had always had my dad there. You know, my dad left. And so now it's time to go look for a car. So we get to the car dealership, and she finds this car she really likes. If I remember correctly, it was a Pontiac Grand Am, was blue, had four doors and set it to, I mean, this thing was sweet.

[00:05:00] Ralph Estep, Jr.: Had a nice engine, had a nice hum to it. So, you know, she gets down, sits down with the sales guy and you know the game, the back and forth of, you know, let me see what your trade is worth. And they gave her, I don't remember. Let's say $5,000 for her trade. Okay. Now we're going back and forth with, well, let me go see what the sales manager, let me see what this one.

[00:05:17] Ralph Estep, Jr.: And we go back and forth. So finally, we arrive at this price of $30,000. Okay. So my mother says, yep. That's something I can live with. And a guy threw some numbers out, or like here's what your payment's going to be based on a four-year term or a five-year term. I don't remember what it was, but we had arrived at that $30,000 number. So the next thing you know, we're ushered into the finance office to start taking care of this deal.

[00:05:40] Ralph Estep, Jr.: When we move into the finance office, and next thing you know, he passes some paperwork over to my mom and she's looking over and she's like, now wait a second. I thought we arrived at 30,000. And the guy looks at it. He's like, yeah, but Mrs. Estep, you didn't think about, well, you got to add a tax and tags, and you've got to add this and you got to add that.

[00:05:58] Ralph Estep, Jr.: And I kind of nudged my mom. I'm like, wait a second. And I'm 12 years old at the time, but ever since my dad left when I was 8, he kind of said to me, Hey, you're the man of the house now son. So I kind of took on this role of being like, my mom's husband, not in a weird way, but just, I kind of had to look out for. So he passed his paper, and I said, well, mom, hey, let me take a look at that. It's when a guy says to me, Hey, kid, butt out.

[00:06:18] Ralph Estep, Jr.: It's none of your business. I'm like, yo, you don't say that to me. My mom's you know we're Italian. Right? We don't play those games. So my mom's like, you know, wait a minute. You said that this deal was going to be $30,000. And I said to the finance guy, I said, listen, dude. You told my mom it's going to be 30 grand. Again, he tells me, hey, be quiet. And I said, you're going to have to honor this.

[00:06:39] Ralph Estep, Jr.: Well then, the next thing I know, he's okay. That's fine. We'll go ahead and we'll give you a little bit more on your trade and so on and so forth and it got the number back to 30 grand again. Okay. We're in good shape. Now we can start moving forward. The finance guy goes, well, Mrs. Estep, you also want to consider a Gap policy. And I'm sitting there. I didn't really know what a Gap policy was, but I said to the guy, what does Gap mean? And he explained to me, he says, if the car is worth X and you owe Y on it, well the insurance company is only going to pay whatever the car value is, not what you owe on it. And I said, well, wait a second, dude. I said, my mom is putting like 6, $7,000 down because the trade, I said, why would she need a Gap policy? Again, I'm told, hey be quiet kid. This doesn't involve you. So my mom says, I don't think I need a Gap policy. The next thing the guy says, well, you need an extended warranty. And of course at this point, I'm annoyed with this guy. I'm like, I want to go battle with this dude because he's just annoying me. And I said, why would she need an extended warranty?

[00:07:35] Ralph Estep, Jr.: Is your car a piece of garbage? Again, I'm told, hey dude, be quiet. Shut up little kid. This doesn't involve you. So my mom says, now I think I'll pass on the extended warranty. Well then, the next thing he says to her, how about credit life and credit disability insurance? I know a little bit about this because my dad had talked about this at the dinner table with clients. I said to my mom, I said, look, you don't really need this credit life and credit disability. So again, he looks at me, says be quiet. At this point, my mom's really getting annoyed with this guy, but she's kind of annoyed with me too, because I keep on talking, you know.

[00:08:06] Ralph Estep, Jr.: Yeah. Typical thing. Mom, two kids. But finally I said to my mom, I said, listen. Just make sure you're getting a good deal. That's why I'm here today. I want you to get a good deal. So the guy says to her, well, Mrs. Estep, are you going to take such and such?

[00:08:19] Ralph Estep, Jr.: Are you going to take such and such. And she goes, nah, I don't think I want those things. So the guy says he goes, well, everybody buys them. And she says, well, you can sell them to everybody else then. But you know, that day really transformed how I view these financial transactions. My mother was taken advantage. It taught me that knowledge is power and taking time to understand the details can save you from costly mistakes. So off my story, get back to Bruce's question and all of you who are listening, here are the key things to watch out for in the finance office.

[00:08:50] Ralph Estep, Jr.: I learned these things at 12. Number 1. Don't let them pressure you to decide quickly. A legitimate deal doesn't evaporate in 24 hours. Take your time. There's no magic to this. They'll try to scare you with, well if you don't get this car now, they're going to sell it, and we can't hold this price forever. Almost at a time that's nonsense. Second thing. As I talked about. Watch out for those unnecessary add-ons, those extended warranties, Gap insurance, paint protection, tire protection, glass protection, blah, blah, blah, blah, blah. In fact, I'll tell you another funny story. We're just in the car dealership the other day. My wife decided she wanted to get one of these Toyota Rav4. And I knew the sales guy. I said to the sales guy, said, listen dude, his name's AJ.

[00:09:33] Ralph Estep, Jr.: I said, AJ, look. You know how I roll. I don't want any garbage on this thing. Tell the finance manager when we come in, we want to go into the finance office, sign the papers and be done. Fantastic. So we go to the finance manager's office. He's really nice, you know, share in the moment as they're supposed to do, which I'm cool with, you know, I used to work in that industry. And he starts going down his spiel.

[00:09:54] Ralph Estep, Jr.: I got to show you this slide show and I'm like, dude, look, listen. I don't want any of the extras. Here's what we want. Well, he started copping an attitude with me and I'm like, dude, listen. We don't want any of these extras, we just don't want them. Well, everybody buys. I'm like, dude, I'm about ready to get up and walk out. With that all of a sudden, he changed his tune and anyway, so it goes on now.

[00:10:15] Ralph Estep, Jr.: So this is 40 years ago, and I was trying to do it to me and my wife. So let's move back to my list. And number 3 was focused on monthly payments instead of the total cost. This is where they get you. This is what these car sales guys do. They come in and they say, hey, Mr. Jones, you really liked that car huh? Yeah. Okay. What kind of payment are you looking for? And see, that's what they sell you on cause you got this thing in your mind. My budget, I can afford a $500 car payment. But you have no concept of what they're giving you for your trade, what they're giving you for the actual price of the car.

[00:10:48] Ralph Estep, Jr.: So stop focusing in on those payments because this is a place where they can hide the overall price or longer loan term. Cause they can always say, look, you want a $400, $5500 payment. That's fine. We'll put you in 84 months. You don't ever realize that they, oh, you think so happy. Cause you got something. The fourth thing. Look out for what they call packed payments. And that's where your extra costs are hidden in your monthly payment.

[00:11:11] Ralph Estep, Jr.: Just like they were trying to do with my mom. They were trying to add the credit life, the credit disability, add that Gap insurance, add that extended warranty and Hey Mrs. Estep, it's only going to cost you an extra $75 a month. Yeah, but think about that. $75 more a month. Another thing to watch out for, as I call it yo-yo financing. And that's where you drive off thinking your approval and it will be called back days later when they say, oh, Mr. Estep, you've got a problem with your financing. This is one of the things I'll tell you to do. Always say to the finance manager, do you have a commitment deal from the lender? If you don't, don't drive the car off the lot. So there's a lot of things you can do to protect yourself. So here's a quick list of those things.

[00:11:52] Ralph Estep, Jr.: Number 1. Do your homework. Research car prices. Get the idea of what your credit score is before you go and know what the interest rates are before you go, even go in. Listen, if you don't know this. The finance office is the profit center for a dealership and those folks in that office are trained to make the money for the dealership.

[00:12:11] Ralph Estep, Jr.: Second thing I'm going to tell you to do. Get pre-approved for a loan. Call your credit union, call your bank, whoever you deal with and get that pre-approval because it's going to give you leverage when you go into the finance manager's office and you can say, look, I've already gotten pre-approved. Here's the deal. A lot of people don't understand is that finance person and listen. We're not, we live in capitalism. I'm cool with this. But they're there to make money. And they add a percentage to that rate. Let's say the bank says, okay, well, we'll give Mr. Jones a rate of 8%. Well that finance manager might charge you 9%. A lot of people don't know this. So know what the interest rates are before you go in.

[00:12:48] Ralph Estep, Jr.: Another thing you want to do is focus on the out of the door price. And again, like we tried with my mother. Including all the taxes, all the fees, all the ads on, all the other things come up with a number that you are willing to pay. Another thing I'm going to tell you to do is read everything before you sign. You got to take your time and don't be afraid to ask questions.

[00:13:07] Ralph Estep, Jr.: That's what I think they were trying to do with my mom. They were trying to intimidate her. Fortunately, I'm this 12-year-old little fat kid that's saying, hey, watch out, dude. Don't try to scam my mom. And the big thing you need to do. Like I said the other day when I was doing this thing on my wife with the Toyota, you got to be willing to walk away.

[00:13:24] Ralph Estep, Jr.: If something feels off, trust your gut, trust your instincts and tell them look, I'm out of here. Remember this. You're in control. The dealership needs your business more than you need that specific car. So let me wrap things up. Navigating the car dealers finance office doesn't have to be intimidating. Listen, if you want to hire me, I'll go help you. Stay informed. Take your time and don't be afraid to ask questions or walk away. Your financial wellbeing is worth more than any car deal.

[00:13:55] Ralph Estep, Jr.: Now tomorrow we're going to be discussing what is squishing? It's a scam I'm going to talk about how to avoid it. It's a timely topic in our increasingly digital world. So make sure you tune in. Now, listen. If you're feeling overwhelmed by your financial situation or just want some personalized advice, I am here to help. You can schedule an appointment with me at askralphpodcast.com/store and together we can create a plan to achieve your financial goals while continuing to honor your faith.

[00:14:22] Ralph Estep, Jr.: So before I go, I want to leave you with three action steps you can take right away. Number 1. If you're planning to buy a car, research current interest rates and your credit score. You got to know those things before you go into the dealership. Number 2. Make a list of the must haves versus your nice to haves in a vehicle to avoid being swayed by unnecessary features.

[00:14:42] Ralph Estep, Jr.: Listen, when you go to test drive a car, they're going to put you into one that has all the bells and whistles because that's what they want you to buy. And number 3. Practice saying this. "I need to think about it." Say it out loud. I think it's funny even say to the salesperson before he even starts talking. I need to think about it. It's a powerful phrase in any negotiation. Remember this. Your financial decisions impact not just your wallet, but your ability to serve God and others.

[00:15:11] Ralph Estep, Jr.: So you got to choose wisely. Don't be afraid to seek guidance. So as I wrap things up, as I always say, stay financially savvy and God bless you.