Everybody has made financial mistakes, we have all done something or bought something that we later regretted when it comes to money. Looking back most people wish they would have done things differently knowing what they know now.
I’ve had my fair share of financial blunders throughout my lifetime as well, some minor but some major ones too. I went from being homeless at one point in my life to pulling myself together and becoming a financially responsible adult. Overall I’d say I’ve done a good job of learning from those mistakes however.
I would have to say that one of my biggest financial mistakes was buying a brand new car. This was the catapult, however, that pushed me into diving head first into the world of personal finance and really got me on a path to financial independence. So in actuality my biggest mistake has also been my greatest motivation and for that I am thankful.
So why was buying a brand new car such a big mistake for me? Well I’ll tell you why.
It was 2014 and I had no car payments. I was driving a super sporty white Mustang GT 5.0 with black racing stripes that I absolutely loved! That car was the first car I had paid off and owned out right. It was also the first new car I ever had, all of my other cars were used. I had paid it off earlier that year after 5 long years of car payments and was so happy with my car that I told myself that I would drive it until the wheels fell off!
We found out that same year that we were pregnant with our first child so it was an exciting time but I had no intention of getting a different car to accommodate. Our little girl was born that December.
Once she arrived I still wasn’t ready to upgrade my car, thinking that I would just make do with a two door sports car and that a baby was tiny and would be able to fit in there just fine. How naive I was. If you’ve ever been in the backseat of a Mustang you know what I’m talking about, it’s got just about enough room for a grasshopper and that’s it. After the first few attempts of getting a car seat in the back seat I told my husband that I would need to switch vehicles with him for a while, he could drive my Mustang and I would drive his big truck that had 4 doors and was much more roomy and accommodating for a car seat. So we did that for a few months but between the constant exchanging of vehicles it just wasn’t working out very well. His truck was too big for me and I couldn’t hardly park the thing without looking like Austin Powers behind the wheel of his stuck Mini Cooper.
After 6 months of this back and forth of switching vehicles and near death experiences driving his beast of a truck I decided it was time to bite the bullet and get me a new car. So the hunt was on, I began shopping around and seeing what my options were. I knew I wanted 4 doors and something with more room than my tiny Mustang. I also knew that I didn’t want to spend very much money since I loved not having a car payment. I thought with trading in my car and throwing a few thousand on top of that I could get something decent that would fit my needs with a manageable payment.
I test drove a few vehicles and then I landed at the Jeep Dealership. I was looking around and the Grand Cherokees caught my eye but once I saw the price tags I was like whoa!! No way was I going to spend that much money! They were going anywhere from $35,000-$50,000! That was way more than I had planned on spending.
Next thing I know I’m sitting in the driver’s seat of one taking it for a test spin but telling myself not to fall in love because there was no way I was going to get a car that expensive. I immediately fell in love. I wanted one and I wanted it right then!
A couple of days go by and I was trying to convince myself why I deserved that new shiny Jeep. It wasn’t hard to do. I called around and found a dealership about an hour away that had the exact one I wanted with my exact specifications. I told my husband that we were just going to go test drive that one, not buy, but just look. So we showed up at the dealership and we had already been negotiating on our drive up there how much we would be willing to trade in our Mustang for and what our bottom line price would be that we were willing to spend. We were going to stick to our guns and walk right out if they didn’t agree to our offer! We were going to play hardball and they better be ready!
Since we had our baby with us I ended up taking the Jeep for a test drive while my husband and baby stayed at the dealership. As soon as I got in I knew that was the one. I remember asking the salesman how negotiable the price was and he fed me some lines about how it’s a brand new model so it’s not really negotiable. I was offended and thought this guy must think I don’t have the money to afford this vehicle or he really isn’t interested in selling it. We pulled back into the dealership and I was thinking maybe we should just go home. My husband asked how I liked the car and I told him I loved it but I didn’t like the sales guy.
Aside from the jerk salesman I still really wanted the car and the heated seats were icing on the cake. My tough girl attitude subsided and I let my guard down. My blinders were on full blast and all I wanted was that Jeep, no matter what cost. You see to me, in that moment, I thought that I would never find another vehicle so perfect for me, or that I’d never see another one in that same color scheme or with those same options. I had lost all sense. I also had a screaming baby that made my anxiety go up as we sat in the dealership floor room trying to keep her calm and satiated while going back and forth with the sleazy salesman.
I told the salesman that I wanted a certain amount for my trade in so he started plugging in stuff on his computer and showed me that it was worth $3000 less than what I was wanting (I believe this is another one of their “tactics”). Cue crying baby. I tell him that’s unacceptable and he goes to his manager to “talk”. A few moments later I see the manager walking towards me and I’m thinking no, no, no, go away, I’m not falling for this, they always bring in the manager as if they are doing you a favor. Right at that point I should have left but I didn’t. He comes up and introduces himself and asks what he can do to make sure I get a good deal. He’s putting on the charm and being much more cordial and nicer than the salesman we had.
Of course all the salesman kept talking about was monthly payments but when I would ask to see the total pricing they pulled out all the tricks in the book. I remember one of them saying to me “nobody cares about the purchase price, all that matters is the monthly payment” and I was in a daze not knowing how to respond, another comment was “everybody has a car payment”. I kept thinking about that new car smell and those fancy control panels that did things I never knew existed. I was entranced. I was like those little bugs in A Bug’s Life that “head towards the light” of the giant bug zapper thinking it’s paradise and it turns out to be death row.
We go back and forth a bit on prices and interest rates and all that nauseating business deal talk. Cue baby screaming and crying once again. It was getting late, we had been there for what seemed like hours and our minds were frazzled and we were stressed from trying to keep our baby calm. I knew there was no way I was going to drive all the way back to this dealership to negotiate later. All I wanted at that point was to get the hell out of there so I signed on the dotted lines and that was that. I was smart enough to realize however, that the “nice” finance guy had tacked on a few thousand dollars for an extended warranty that he never even asked me if I wanted, he just slipped it in the contract. Once I pointed it out to him and told him to take it off his demeanor completely changed and he too turned into a total jerk.
As soon as we were handed the keys to our new Jeep I immediately had buyers remorse. Our entire drive home I was telling my husband what a mistake it was. We had practically sold our soul to the devil (the mean car salesmen) and had been completely taken advantage of. We had just done what we told ourselves we wouldn’t do. We had bought a brand new car for basically the sticker price and traded in our car way below value. I really did like the new car but it was painful knowing what we had just signed up for years and years of expensive car payments.
I could hardly sleep that night because I was so upset with myself for falling victim to the tricks of the trade and being easily persuaded that I deserved this vehicle. The next morning I immediately put pen to paper to figure out how we could pay off that beast of a loan as quickly as possible. That’s when I stumbled across Dave Ramsey and the envelope system. I drew up a plan and showed it to my husband. Our loan was for something ridiculous like 7 years, and originally we thought we could pay it off in 2 years by intensely paying extra money towards it but we ended up paying off the car in about 8 months with a bit more intention and focus, you can read about how we did that here.
The other kicker was that when I went to work the next week and was telling one of my coworkers how horrible my experience was at that car dealership and how I was in remorse of my purchase and how stupid I felt about letting them take advantage of me in a moment of weakness, he googled the dealership and looked up their used car page after I told him how much I traded my car in for. That’s when he showed me my pretty little Mustang, already detailed and ready to be sold…for twice the amount of what they bought it from me! I vowed then and there to never trade in a car to a dealership again.
So all in all it was the worst financial mistake with the best possible outcome. I had made a big mistake and I knew it, but I also knew I could dig myself out of it and I was going to see it through. I became determined to take a hold of our finances and get us on a plan to become debt free in more ways that just a car loan. It opened my eyes to a life of financial freedom and independence.
I still have the Jeep (completely paid off) and I really do plan on keeping it for as long as it will go. The next time I purchase a car it will be with cash only and it will not be a brand new car. The reason being is that new cars lose about 25% of their value within the first year, 10% of that being from the moment you drive it off the lot. They depreciate in value so quickly that it’s one of the worst things you can buy if you’re trying to build wealth. I’m so grateful to have found Dave Ramsey’s program at the right time in my life otherwise I would still be a slave to car payments.
So a few takeaways, never take an infant car shopping with you, and do not under any circumstances allow yourself to be taken advantage of by sleazy car salesmen and lastly sleep on it, wait at least 3 days before making a huge purchase.