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I Need Help Understanding Car Financing Before I Sign Anything at the Dealership · Becoming Financially Confident

• 0:00
  The finance manager slides the paperwork across the desk and says, just sign here.
• 0:04
  But before you do, there are four numbers on that page that actually matter.
• 0:09
  If you miss them, then that exact same car loan can cost you thousands more than the person who knew where to look.
• 0:16
  That's what I'm going to talk about on today's show.
• 0:17
  And don't forget to stick around to the end.
• 0:19
  I've got a special announcement to make.
• 0:31
  Hey, friend.
• 0:32
  Ralph Estep Jr.
• 0:33
  Here.
• 0:33
  Welcome to Financially Confident Christian, where every day we try to break that cycle of financial shame and do it with confidence.
• 0:41
  And today's one of those shows I get excited about.
• 0:43
  We're going to talk about car financing and exactly what to read before you sign anything at the car dealership.
• 0:50
  And I'm going to start by telling you this.
• 0:51
  Nobody's born with this information.
• 0:53
  It's not taught anywhere.
• 0:55
  And the people across the desk know that.
• 0:57
  So I've got some tips for you today to help you beat the car dealership at their own game.
• 1:02
  Now, if you got a question for this show, I would love to hear your question.
• 1:05
  You can go to financiallyconfidentchristian.com/question Again, that's financiallyconfidentchristian.com/question.
• 1:15
  Well, let's get right into today's listener question.
• 1:17
  Listener wrote this.
• 1:19
  I'm about to buy my first car from a dealership and I have zero experience with financing.
• 1:25
  The finance manager is going to hand me paperwork with a bunch of numbers I don't fully understand.
• 1:30
  And, and I'm scared I'm going to agree to something that costs me way more than I realize.
• 1:35
  What do I actually need to look at before I sign anything?
• 1:39
  What a great question.
• 1:40
  This is one of those ones that stymies people all the time.
• 1:44
  I don't know how many times I've worked with clients.
• 1:46
  I've worked with people that have gone into that dealership and they got taken to the cleaners.
• 1:52
  And here's the big problem.
• 1:53
  The dealership knows their game very well.
• 1:56
  They sell you a monthly payment, but the contract is four numbers.
• 2:00
  It's the out the door price, the apr, the term and the total of payments.
• 2:05
  And if you know those four, that room stops belonging to them and you start to own the deal.
• 2:11
  So I'm going to give you five moves starting before you even walk in the dealership.
• 2:15
  Are you ready?
• 2:16
  Let's get started.
• 2:17
  Here's number one.
• 2:18
  And most people don't do this one, get pre approved for a loan before you even walk in the door of the car dealership.
• 2:27
  Go to your own bank, go to a local credit union and get pre approved for a car loan before you even start shopping.
• 2:35
  This way you're going to know your real rate, you're going to know what you can afford.
• 2:38
  And then you walk into the car dealership from a place of power.
• 2:42
  You've already got the financing already in hand.
• 2:45
  Now that doesn't mean the dealer can't try to beat it.
• 2:47
  That's great.
• 2:48
  Let them compete for the business.
• 2:51
  I've mentioned on the show many times I used to run a credit union.
• 2:54
  Credit unions are often the better rate, especially for first time buyers.
• 2:58
  A lot of us have plans that we can do that.
• 3:01
  This one step, listen to me.
• 3:02
  This one step can turn you from someone asking for approval into someone who already has it.
• 3:09
  So that's number one.
• 3:10
  Walk into with financing already in a pocket and let them try to beat it.
• 3:15
  Here's number two.
• 3:16
  Negotiate the price, never the monthly payment.
• 3:20
  Here's what most car dealers, most sales guys are going to say to you.
• 3:23
  As soon as you walk in the door, they're going to see you looking at that car.
• 3:26
  Oh, you really like that car, huh?
• 3:28
  Yes.
• 3:28
  Then the next thing they're going to say to you, what payment are you looking for?
• 3:32
  And I want you to picture an analogy of your phishing.
• 3:35
  That salesperson is phishing.
• 3:36
  And when they say that, they're setting the hook, that's the most expensive question in the building.
• 3:42
  Because once they know that they've got you.
• 3:45
  Because a payment can be made to look small by stretching the term, they can raise the rate or they can add extra products on the loan.
• 3:52
  A lot of people don't think about this.
• 3:54
  Your monthly payment could be a lot less than you think it's going to be.
• 3:57
  But if you tell the dealer, here's what I'm comfortable with, I guess I'm going to tell you right now, they're not going to give you a lower one.
• 4:03
  And then negotiate one thing only.
• 4:05
  Don't negotiate how much you want to pay.
• 4:08
  Don't negotiate any of the.
• 4:09
  Negotiate one thing and it's the out the door price.
• 4:14
  That includes all the fees, the taxes, the dealer add ons.
• 4:17
  And there's a bunch of those.
• 4:19
  And here's a little trade secret.
• 4:21
  Keep your trade in and your financing as separate conversations from the price.
• 4:25
  Just negotiate that out the door price.
• 4:28
  The price first.
• 4:30
  Everything else after the monthly payment is their number.
• 4:33
  The price is yours.
• 4:35
  Don't trade one for the other.
• 4:37
  Here's the third thing.
• 4:38
  Read the apr, that's the annual Percentage rate and the term together.
• 4:43
  That APR that I've mentioned a couple times is the real cost of borrowing.
• 4:48
  And the rate offered isn't always the best rate you qualified for.
• 4:52
  This is a little game the finance managers can play.
• 4:55
  The term is how many months you'll be paying.
• 4:58
  What we're seeing right now is 72 months.
• 5:01
  And 84 months are everywhere.
• 5:03
  Now, here's the thing you need to understand.
• 5:05
  A longer term makes the payments look better and makes the car cost more because you're financing it over a longer period of time.
• 5:14
  Long loans mean owing more than the car is worth.
• 5:17
  Four years, that's a trap.
• 5:19
  And it gets.
• 5:20
  If the car gets wrecked, you got a problem.
• 5:23
  So one of the things you want to have a mindset before you even do this, the shortest term you can comfortably carry.
• 5:28
  That's the goal.
• 5:29
  That lower payment stretched over more years isn't a discount.
• 5:32
  People think, well, but yes, Ralph, with my payment, so much less, that's not a discount.
• 5:36
  It's a longer bill.
• 5:39
  So then when you mentioned at the beginning, when you get that paperwork slid across the desk, and they're slick about this, right?
• 5:44
  You gotta find the box that says total of payments.
• 5:48
  U.S.
• 5:49
  federal law requires the contract to disclose the amount financed, the finance charged, the apr, and the total of payments.
• 5:57
  That total of payments is something a lot of people don't look at, but that's what the car is actually going to cost you by the time it's paid off.
• 6:05
  And here's one of the things I tell people to do.
• 6:07
  Say it out loud in the room.
• 6:09
  Maybe say the car is $30,000, but the total cost of payment could be $50,000.
• 6:16
  Say it out loud in the room.
• 6:18
  Compare that sticker to the number that's actually saying it.
• 6:21
  Because.
• 6:22
  And if you get uncomfortable with that, when you say, wait a minute, I'm paying $50,000 for a $30,000 car, that's going to tell you something.
• 6:29
  You're worth knowing those four numbers in one place on one page.
• 6:34
  So find that box that says total of payments.
• 6:38
  That's what the car really costs you.
• 6:41
  And here's step number five, my little trade secret.
• 6:45
  Know what happens in the finance office?
• 6:47
  And I gotta be honest with you.
• 6:48
  I bought a lot of cars over my life.
• 6:50
  And I just love this game because to me, it's like a jousting match, and I love to play it.
• 6:55
  The finance office.
• 6:56
  And hear me on this.
• 6:57
  The finance office in the dealership is where dealership makes their money.
• 7:02
  This is the profit center of the dealership One could argue services, but the other side of this is finance.
• 7:08
  It's not in selling cars.
• 7:09
  Hear me on this.
• 7:11
  The selling of the car isn't where the money's made.
• 7:13
  It's made in the finance office.
• 7:15
  The person who is the finance manager is the best salesman in the building because they know how to extend.
• 7:21
  They sell extended warranties.
• 7:23
  They sell gap coverage.
• 7:24
  They sell paint and fabric protection and prepaid maintenance.
• 7:28
  And hear me on this.
• 7:30
  All of these things are optional, and all of them are negotiable.
• 7:34
  I'll give you a great example.
• 7:35
  I just bought a new truck a couple weeks ago when I went into the finance manager's office.
• 7:39
  There's a guy I know, actually, he already knows.
• 7:41
  He gonna play games with me because I've been.
• 7:42
  I've sat where he sat.
• 7:44
  But most of the time, what happens is they roll all these other things in, and you don't realize it because when your price going up a little bit, your monthly payment went up a little bit.
• 7:52
  And some people think, well, if I don't get this, they're gonna turn down the loan.
• 7:56
  No, they're not.
• 7:57
  All they've done is increased your costs.
• 8:00
  It's okay to say, no, thank you.
• 8:02
  That's a complete sentence.
• 8:03
  And you know what they'll probably say is, well, Ralph, I still got to read these things.
• 8:06
  Like, the last guy, he sat there and he read, like a list of things.
• 8:09
  I'm like, dude, you can keep reading till the cows come home.
• 8:11
  I'm not buying any of this stuff.
• 8:14
  Don't sign anything with blank spaces.
• 8:16
  And take the contract home to read.
• 8:18
  If you want to take it home, read.
• 8:20
  Here's another secret.
• 8:22
  Don't drive off until the financing is finalized in writing.
• 8:25
  A lot of people get themselves in trouble with that.
• 8:28
  You might say.
• 8:29
  The finance manager might say, well, we're still negotiating with the bank, but go ahead and sign here.
• 8:32
  Take the car with you.
• 8:33
  That's what they want you to do.
• 8:35
  But what happens if they call you the next day and say, well, you know what, Mr.
• 8:38
  Jones, the rate we thought we were going to get is not going to work.
• 8:42
  So your payments are going to be this.
• 8:45
  Wait until it's completely done in writing, all the numbers on the paper.
• 8:49
  Don't sign anything blank.
• 8:51
  And hear me on this.
• 8:52
  Every single product in that office is optional.
• 8:56
  You're allowed to say no, and you're allowed to negotiate.
• 8:59
  A lot of people don't know this.
• 9:00
  You can negotiate every piece of that.
• 9:02
  I'm one of these people that buys gap coverage.
• 9:05
  We could probably do a whole other show on that, but I always negotiate it.
• 9:08
  The last time I got it for 50% of what he was asking me to do.
• 9:12
  So again, you're allowed to say no and you're allowed to walk away, but I want to go a little deeper because there's a specific kind of pressure in being the youngest, least experienced person in a full room of
• 9:24
  people who do this every single day, because that's where you are.
• 9:26
  You're going into their realm and you feel like asking too many questions will make you look foolish.
• 9:33
  So so many people just nod along and, oh, I think, hope it's going to become fine.
• 9:38
  That feeling is honest, but it's backwards.
• 9:43
  The person asking questions is never the fool in the room.
• 9:46
  The fool is the person that doesn't ask questions.
• 9:49
  And fate doesn't promise us that everyone across the desk has your best interests at heart.
• 9:54
  I'm not saying that car dealers are bad, I'm not saying that finance managers are bad, but they don't always have your best interest at heart.
• 10:02
  And it doesn't promise the right car appears at the right price on the day that you need it.
• 10:07
  Proverbs 22, verses 26 and 27 is a warning.
• 10:11
  It's not against buying a car.
• 10:13
  We're going to talk about that in a second.
• 10:14
  It's against pledging yourself to terms you don't understand.
• 10:18
  This is a time to slow down, ask questions, ask them five times.
• 10:23
  If you have to walk out and think about it, that's wisdom.
• 10:27
  That's not weakness.
• 10:28
  No one who generally wants to help you will be bothered by your questions.
• 10:33
  Remember, God gives us wisdom to anyone who asks for it, and he never shames the person who asked twice.
• 10:40
  So take your time.
• 10:42
  Read the page.
• 10:43
  You're allowed to understand what you're signing.
• 10:46
  And not knowing this doesn't make you a mark.
• 10:49
  Asking first is what protects you.
• 10:51
  The most powerful thing in that building is your willingness to walk out that door and come back tomorrow.
• 10:57
  And I've done that myself many times.
• 10:58
  I've said to the sales guy, you know what?
• 11:00
  I'm going to see you tomorrow.
• 11:03
  And a car you understand the terms on will serve you far better than the one you just got approved for.
• 11:09
  So here's your win for today.
• 11:10
  Before visiting a single dealership, apply for that pre approval at your own bank or local credit union.
• 11:17
  Then you'll know what's going on.
• 11:19
  Then at the desk, ask one question out loud.
• 11:22
  When you get to the point of, here's the car I like.
• 11:25
  What's the total of payments on this contract.
• 11:29
  And then stop being someone hoping for approval and become a buyer with terms of your own.
• 11:34
  Which leads me to today's Bible verse.
• 11:36
  It comes to us from the book of Proverbs, chapter 22, verses 26 and 27.
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  It says, do not be one who shakes his hand in pledge or puts up security for debts.
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  If you lack the means to pay, your very bed will be snatched from under you.
• 11:51
  Now, I know that's a harsh one.
• 11:53
  And this one isn't against buying a car.
• 11:56
  It's a warning about signing financing terms you don't fully understand, which is exactly where you're at right now.
• 12:05
  So understand these terms.
• 12:06
  Ask 20 questions.
• 12:07
  If you have to ask 10 people, it's okay.
• 12:10
  Let's pray together.
• 12:11
  Heavenly Father, I want to thank you for this listener and I want to thank you for the work and the savings that brought him to this point.
• 12:18
  Lord Give him clarity and calm in a room built to move fast.
• 12:22
  Give him courage to ask his questions out loud and ask again if the answer isn't clear.
• 12:28
  Protect him from terms that would quietly cost him years or thousands of dollars.
• 12:32
  And protect him with honest people on the other side of the desk because there are honest people that are doing this work, Lord.
• 12:38
  And give him peace to walk away if the deal isn't right.
• 12:40
  Right.
• 12:41
  And confidence to sign it if he is.
• 12:43
  This is going to be one of the most best decisions of their life, Lord and provide all of us with reliable transportation that fits what you've given each of us.
• 12:52
  And I assist in Jesus.
• 12:53
  Name Amen friend.
• 12:56
  Remember this.
• 12:58
  The dealership sells a payment.
• 13:00
  The contract is four numbers, price, apr, term and total of payments.
• 13:05
  Get that pre approval before you shop because it changes the whole conversation before it starts.
• 13:10
  And remember the finance office is optional.
• 13:12
  Optional from top to bottom.
• 13:14
  And read every single page before you sign it.
• 13:17
  Now maybe you're thinking about making a big decision or you've got a thing in front of you.
• 13:21
  Got a financial decision to make.
• 13:23
  I would love to help you navigate that decision.
• 13:25
  You can reach me by going to financiallyconfidentchristian.com/voicemail.
• 13:31
  Again, that's financiallyconfidentchristian.com/voicemail.
• 13:35
  We'll put a link in the show notes, but I would love to hear from you.
• 13:38
  Now I promised you an announcement at the beginning, so before you go, I've got something new to tell you about.
• 13:43
  This show is changing names and starting on August 31st we're gonna have a brand new live show and it's gonna be called Becoming Financially Confident.
• 13:51
  I just love the ring of that.
• 13:53
  Becoming financially confident.
• 13:56
  It's gonna be a live show every weekday at 11:30am Eastern, and it's gonna be a full hour.
• 14:01
  I'm bringing in a co host.
• 14:03
  You're going to love her.
• 14:04
  Two voices, not some lecture.
• 14:06
  We're going to talk about real bills, real numbers, no jargon, and of course, no shame.
• 14:12
  And my favorite part is live chat is going to be part of the show every single day so you can get your questions answered right live on the air.
• 14:20
  Now, this podcast isn't going anywhere.
• 14:21
  The live show is where we're going to go deeper in real time.
• 14:25
  Now, maybe you're saying Ralph, but wait a minute.
• 14:26
  11:30 doesn't work for me.
• 14:28
  Don't worry about it.
• 14:29
  We're going to go live at 11:30 Eastern, but then the whole show is going to get released as a podcast episode later that same day.
• 14:36
  So you can be there with us live.
• 14:37
  And I'd love for you to be there live.
• 14:39
  Or you can catch it on your drive home.
• 14:40
  And it all starts on Monday, August 31st at 11:30am Eastern Time.
• 14:45
  So come join us at becomingfinanciallyconfident.com again.
• 14:50
  That's becoming financially confident.com.
• 14:53
  I would love to see you there.
• 14:55
  You're going to love what we're doing.
• 14:56
  Thank you so much for joining me today.
• 14:58
  I want to encourage you, as I always do, stay financially savvy.
• 15:02
  May God bless you, and you have a truly great day.