Almost everything is a Scam Part 2: The Automobile Scam
So you need a new car. Great! Hop on down to your local “Fordsmo Oldsmo Buick” dealer (take your pick as it matters not). Cars are metal, plastic, engines, colors and rubber tires. It really does not matter the make or the model.
So you walk in and sign up for this shiny new $25K car but you don’t have the money. It’s OK! We have financing. So you’re going to pay at least $30K for this. Oh wait, let’s back up a bit.
The price is a joke. The first thing here is the MSRP which means Manufacturer’s Suggested Retail Price. Even if you negotiate the tar out of them and get them for “invoice” (and believe me they will complain to high heaven about how you “took advantage” of them and how they are not making a dime on this car), don’t you believe it. There is dealer holding back and an entire host of other things. Even the options and packages that you ordered above the “S” model have insane profits built right into the price. You are the one being taken advantage of, not them!
Now let’s not bother going over the “song and dance” routine of the negotiations at the table with the salesman. Forget it. You are getting screwed. It’s as simple as that. Once this “negotiation” is over, the “salesman” signs you off to this little mousy looking girl in the back office who will “just handle the paper work for you”. Yeah right!
You have just been handed over from one shark to the next! That mousy looking girl, the finance manager in the back room, is the real shark! She approaches you with a smile and says: “Congratulations! It’s over now, you can relax. By the way, you made a great deal. We just have to get through the paperwork now and you can drive away in your new car!” She is trying to get your guard down. She is the real scammer in the building. They pay her triple what the salesman makes.
Her job is to sell you simonizing paint protectant, mud flaps, scotch guard for the fabric and “gap insurance”. And let me tell you…. she is darn good! If you don’t double up your guard right here and now she is actually going to sell you thousands of dollars’ worth of crap that you do not need and they will just “roll it in” to the price of the car as it only adds $12 a month to your payment and other such nonsense. Do not fall for this or you can just go tattoo “sucker” across your forehead.
In addition to all this, there is the dealer “prep fee” (hundreds of dollars for ripping the plastic off that it was shipped in to the “stealership”) and then the “documents fee” could be around $500 and that is for the cost of doing paperwork. Remember that the office worker who actually does the paperwork is making $15 an hour.
Then you have the sales tax (where I live its 6%) and this is gigantic! Then you have the title, tags and registration fees and now the real fun begins.
Your insurance company will require full coverage and this is going to seriously jack up the price of your insurance. There is no way you are getting by on $65 a month, heck no! Double that. You must have full collision coverage for the bank loan.
You think you’re done yet? How cute. In one year you will receive a tax bill in the mail from your town. It’s known as the “Stupid Tax”. Yes, that is right; you are the sucker so you must pay. Don’t you feel special? Fork over $1K just for the “privilege” of driving “your” car.
Don’t worry, that goes down to $800 the next year and then slowly falls by about $100 a year after this.
So let’s review things shall we?
In 6 years of your loan you will pay at LEAST $30K or more for that $25K car. You will pay around $9K in insurance costs. You will suck up 4,000 gallons of fuel to go 100K miles in the six years. This is assuming you only drive 16,666 miles a year. Granted, some folks only do 12,000 or 15,000 miles a year. This is true, but let’s keeps it simple. Then $11,000 in fuel to run 4,000 gallons at average cost of $2.75 per gallon. What are we up to now? Let’s see… $30K + $9K in insurance (keeping it simple) and 11K in gas… we are only at $50K so far. Not too bad, right?
Well, your property tax was $1K the first year and $800 the next, $700 the next and $600 the next, etc. This totals $4K in 6 years. So I guess now we are at $54K so far. Oh…a $3.00 “do it yourself” car wash once a week for 50 weeks times 6 years is $900. Drats, let’s make that $55K now. Bummer.
Now this next part gets a bit tricky; repairs! How much? Well, you have $500 for a set of tires every 50K miles and you have exhaust, brakes and many other break downs that will happen. You have front end alignments, etc… and you know the “stealerships” and all the mechanics get $100 to $125 per hour, right? Oh, and the oil changes are about $41 at Jiffy Lube and you need that every 3-5K miles or so, yes? OK, so 33 oil changes at $41 each. That is $1,353 and heck let’s just say that in all those years you only spent $8,647 on repairs. You got lucky… you lucky guy, you! You bought a car that was manufactured on a Wednesday. Wow, what a break; in 6 years to have just over $8K in total break downs and maintenance is practically a miracle, but let’s say that is you!
OK, so we are going to add $10K in oil changes, brakes, tires, alignments and all kinds of various things that break down, wear out and you get off super-duper easy.
Drats, I forgot to add in the plates and your driver’s license fees that you get zapped for every year. Ah, let’s just “forget” to add in those costs, OK? This is already getting expensive anyway. Notice that I did not add in customizations, window tint, air conditioning recharges or even things like $7.99 cans of tire spray. Notice I did not even add in a $100 detail job once a year. These things add up! Parking, let’s not forget parking because if you live in the city you are paying hundreds of dollars a month for this one too. Let’s not add this in; it is just too unbearable.
Congratulations! You only spent $65K in total for this car… and now it’s old. It’s time to sell and perhaps you can get $5K for a six year old car in good condition and with 100K miles on it. Your overall loss for the 6 year period is just $60K. Man oh man; you are one lucky car shopper!
Are you ready to do it again? You know you saw that ad on TV for that awesome looking Volvo/BMW thingy… and well heck, it’s only $50K and by golly, you deserve it! So what are you waiting for? Let’s upgrade and do it all over again.
Folks, I contend that this whole thing is a scam! I have had dealers scam me, mechanics scam me and I am telling you right now (I am just over 50 years old) and I have owned 50 cars in my life. I have had convertibles and race cars and very high performance vehicles, and I have spent fortunes on them all; absolute fortunes. My latest scam, where I royally screwed myself over, is a Limo; a 2006 that I have dumped $32.5K into. I restored the whole darn thing! I put in a new engine, new transmission, new drive shafts, carrier bearings, a new rear end, all new brakes and rims and tires and steering and air conditioning and front end parts galore and the list just goes on. $32.5K for a 140″ stretch that, if I might add, makes for a very attractive lawn ornament! It just sits there almost all the time and I only run it on weekends. How much is it going to cost me to tattoo “sucker” on my forehead?
OK, let’s think of a better way shall we?
1. If you live in a city and you can avoid ownership, take Uber and save yourself that $10K a year you spend on the car. Remember that car payments alone can be $500 or $600 a month and then you have to add in the insurance and fuel and a ton of other costs so… yeah; you really are spending 10K a year! Please look at the example above and check my math. I doubt highly I did anything wrong. Is Uber going to cost you $192 a week to make it worth it to own your own car? I guess if you are going to pass that high dollar mark then a car is worth it to you!
2. How about you buy a very old classic that someone else loved and put $30K into a restoration and now they are desperate and selling it for just $10K or $15K? I mean a classic that will only go up in value or at least hold its own as long as you maintain it right. This, at least, will get you out of the payment misery and the finance scam. It will lower your property tax bill tremendously and also get the insurance to fall in half. Do the math. This right here ads up to a heck of a savings.
3. How about a classic that will hold out well? Mercedes makes some very nice older cars and you really cannot tell the year all that well. Or diesels that get 30 or more MPG… and diesels don’t need tune-ups and some of them can run 500K miles.
So what if you did that? Would that help a little bit? As God is my witness, if I knew way back then what I know now… I would have selected one quality car. I would have kept it for the entire last 30 years and never sold it. The minute you sell you lock in a major loss and then “take your chances” with another vehicle. Sometimes the devil you know is better than the one you don’t! If I could do it over I would have selected a 30 MPG classic Mercedes diesel and I would have learned how to fix everything myself. I would have it rebuilt at a custom shop and just run that car forever and ever. I don’t think most folks do the math. Anytime you can get away with not spending $10,000 a year on a stupid hunk of metal, you’re doing alright!
4. Here is another possible solution. Maybe this will work for some. Buy and sell. Just get dealer plates and register as a dealer. Then buy wholesale, drive for a while, sell for retail and repeat. Always have at least 2 or 3 cars so you have one to drive should one sell out. Be always on the lookout for another “deal” and you can actually make money this way. Maybe not a ton, no, but at least you will make something to offset how horrible of a scam that cars really are. If you get good at this over the years, I bet you can buy for half price or maybe one third off and every time you sell you are actually making thousands.
All I can say is find another way. There just has to be another way than throwing $60K away and buying a new car every 6 years and repeating the whole scam with another $60K loss. To just keep doing this forever seems borderline insane.