Saturday, November 05, 2005

Take a Financial Calculator When Buying a Car

A month ago I bought a new car at Findlay Toyota in Las Vegas. I bought the car through the Costco auto buying program so I wasn't expecting the dealership to try and rip me off.

But they tried.

The salesman showed me the invoice and quoted me the Costco price as they're supposed to do under the Costco program. Then, the salesman goes and talks to the finance guy and comes back and says, "okay, your payment is going to be $334 per month at 5.9 percent interest."

Fortunately, I always bring my financial calculator when buying a car because I've seen this scam before. So I get out my calculator and do the numbers and they don't add up. $334 per month at 5.9% means a total price for my new Corolla of $17,318 but the Costco price I was quoted was $16,540. So they were trying to trick me out of almost $800 extra!

I said, "hey, could you please double check these numbers because they don't seem correct." The finance guy said, "Oh, sorry, that's a mistake. That's the payment for 48 months, not for 60 months."

How do I know this wasn't an honest mistake? For one thing, that's still not the correct payment for 48 months. For another, this was a salesman who remembered every number on everthing. He even knew my zip code when I told him the general location where I lived. Yet when he came back to tell me the monthly payment and I asked him what was the principle and he said, "I don't remember."

Clearly, it was an intentional trick to try and make an extra $800 for the dealership.

I've actually seen this exact same scam attempted on me on the last four cars I've bought in California and Arizona so obviously, it's standard operating procedure at car dealerships. I feel sorry for the people who don't know how to calculate payments and interest and who get ripped off as a result.

The bottom line - take a financial calculator when you buy a car and be prepared to check the numbers!

1 Comments:

At 1/16/2006 11:17:00 PM, Anonymous Uncle Foobar said...

Hi;

ok, can you post the process for doing this? I've also heard there's a formula that you have to figure out the present and future value of money or something.

Since i have a laptop i would like to set this up in Excel to plug the numbers in at the dealer.

thanks,

Foo

 

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