← Earn Your Leisure
Earn Your Leisure
Car Buying SECRETS You NEED to Know! Buy vs. Lease, Tips for Best Deals, & Hidden Dealer Hacks
01:16:30
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- [00:00]
Host 1
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- [04:16]
Host 2
Yeah. Yeah. We are back, man. Happy Thursday. Happy Thursday. How y'all feeling?
- [04:20]
Host 3
It's a fact. Welcome back. New addition to the the how to series that we've been doing. This one's a big one as far as how to shop for cars. Everything you need to know is leasing, financing, interest rates, you know, used cars, new cars. All that stuff has been a lot that's happened in the car market over the last five years, from COVID to post covet and so much stuff it's been like a rocky road. And you know, car purchase is one of the biggest purchases that people make several different times throughout the course of their life. Most places in the country, a car is a necessity to be able to function. And it's something that, you know, once again, you never really get educated on. Just kind of like, you know, let's ask your dad some questions or your uncle or something and you know, hopefully, you know, make the right decision. You don't really know how to go about it. There's no like education on car buying process. But it is a big thing. It's one of the biggest expenses that most Americans have. So we are bringing an expert on. Talk about the car business and everything that you need to know as far as buying a car, leasing a car, all the stuff that I just talked about. Somebody that's been in the car business for over 20 years, from salesman to managing dealerships, to having his own brokerage, we're clients of his. Yes, we actually purchased cars from him, and he's actually the first person that spoke about cars on Earn your leisure about five years ago. So fitting that we bring him back. So, without further ado, Chris Chavez.
- [06:05]
Chris Chavez
What's going on, Chris?
- [06:06]
Host 2
What's going on, my brother?
- [06:07]
Chris Chavez
What's going on?
- [06:08]
Host 2
Everything is good, man. Some of the day ones might recognize Chris, he was part of that, that green wall brigade. Our early days in the dining room came and shared a lot of information, man. And obviously, as Shoddy said, man, we are clients. So those nice cars that you see us in, you can thank Christopher.
- [06:24]
Chris Chavez
Well, I appreciate you guys trusting me with that, with your car buying process. You know, I'm honored to be able to help you guys out and look forward to continuing to do more cars in the future, too, for sure.
- [06:37]
Host 3
So can you just run down your resume? I talked about it, but I think it'd probably be better if it came from you.
- [06:43]
Chris Chavez
Yeah. So I've been in the automotive space for over 20 years, like you said. Started out, you know, actually started out washing cars early on in the car business, then moved on into sales, into management. And I was fortunate enough to work with some really, really cool people, really talented sales people and leaders that I had that helped me grow in the automotive industry. And, you know, it's. The car business is not something that people grow up, you know, saying, hey, I want to be a car salesman, right? It's kind of one of those things that you end up doing. And I've been fortunate to have a really cool career. I built my business on being knowledgeable, being upfront, and being honest with customers, and that's it. I think if you do business that way, you can really create a really cool client base and a career for yourself. And so, you know, again, things have changed drastically in the last couple of years, especially with the pandemic with pricing going through the roof. There was inventory shortages. So we had to do some stuff during that time where we had to pivot and kind of structure business differently. So I ended up opening my own brokerage, helping customers buy cars. Along with starting a training company for dealerships to help them be able to deliver a higher level of service and being able to connect with their clients and ultimately create a better experience for people when buying a car. So what I wanted to be able to do is help people understand and the people who follow. Earn your leisure, understand how to navigate the process. It is scary. It's challenging. If you go in and like you said, most people get the information from someone they know or a friend that maybe bought a couple of cars or say, hey, I'll go with you to the dealership, I'll help you do it. But we want to give you some inside information as far as how to make sure you have a smooth, seamless process when you do go buy a car.
- [08:31]
Host 2
Yeah, man, we greatly appreciate you for that. Not only have we become clients, but some of our close friends have become clients as well. And it's one of those things, right? When we see interest rates, rates changing, we see incentives changing, we don't really get the full scope of it. Right. A lot of times we don't read the fine line. And so this is one of those times where it's like, we're going to unpack all that so you can make the right decision when you walk inside that dealership.
- [08:53]
Chris Chavez
Absolutely, absolutely.
- [08:55]
Host 3
So let's get into it. Let's, let's, let's talk about how to shop for cars and go down the whole gambit.
- [09:06]
Chris Chavez
Okay? So yeah, like we said, you know, buying cars is scary, right? So we want to make sure that one, we create an environment that is where people are informed when going in to buy a vehicle. And this is not just going to help the consumer, but it helps the dealership in the process also. So this is not like trying to put, you know, one against the other, right? That's, that's a big mistake I think people make when they go into a dealership. They go in with their guard up, right? They have that conversation in the car like, hey, listen, we're going only going into look, right? We're not going to buy anything today. And they kind of like gear up for, for doing battle. And I think sometime that can create a pretty challenging experience for both the salesperson and the consumer.
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Guest 1
Right?
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Chris Chavez
So one thing I tell people all the time is be open minded, right? Years ago things were different and unfortunately in some stores they haven't changed in the sense that salespeople kind of do things like they used to do and they're looking to get over on people. But for the most part that's not the case.
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Guest 1
Right.
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Chris Chavez
People want to help you buy a car and you're there to buy one.
- [10:08]
Guest 1
Right.
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Chris Chavez
But unfortunately, if we set the tone and. And we go in aggressively and like, you know, be confrontational, then what does the salesperson do? He becomes confrontational back or sometimes the salesperson's confrontational and you become confrontational. What I would recommend is if you are in a situation where you're at a dealership and for some reason you're not clicking or vibing with the salesperson, listen, you're in control, right? You're the sales, you're the customer. You're there to buy the product. If you're not happy with the experience, feel free to say, hey, listen, you know what? This isn't really, you know, I don't think we're connecting. We're vibing at this time. Can I speak to somebody else? Maybe ask to speak to a manager and ask for another salesperson. Not in a confrontational manager, but listen, trust your gut. If you feel you're not having the best experience with the dealership or the salesperson, be comfortable asking for someone else to help you out. Does that make sense?
- [10:56]
Host 2
Yeah, it makes a lot of sense. I've walked in plenty of dealerships, and I actually haven't done that. I've actually just left the dealership because I didn't like the way that the person I first got introduced to inside of the space was conducting business. So, yeah, that. That is. That is true.
- [11:10]
Chris Chavez
So again, that hurts you and the dealership, right? So nobody benefits from that. So I think being, you know, if you're in a restaurant and you're not happy with food, right, you're going to be like, hey, you know what? Just send it back or whatever. Ask for something else, right? So same thing in a car dealership. Understand that's not a bad thing to do. That.
- [11:28]
Host 3
Okay. All right, so I know you're big on, you know, being prepared when you walk into the dealership, right? So what does that mean?
- [11:38]
Chris Chavez
So you got to do your research going into a dealership and you're not familiar with, let's say, the product or the. Or the programs that they have or what a car may go for, right? I have a lot of people that call up for a vehicle and they'll say, hey, I'm looking for this particular car. And then when they get a payment, they're like, whoa, like, I had no idea it was going to be that much money.
- [11:59]
Guest 1
Right?
- [11:59]
Chris Chavez
Cars have gone up in. In price, right? Whether you're leasing or financing. Interest rates are really high right now. So you want to do some research before you go to the dealership, right? Make sure that you're. There's so many websites, you know, CarGurus, there's CarMax, all these different places where you can get information nowadays about vehicles. So do your research, you know, compare different vehicles if you're in, in the, in the market for, let's say an suv. Listen, everyone makes a great car nowadays. That's one of the things I think the pandemic did was it opened the mind of the consumer where, let's just say, you know, I've always purchased whatever Mercedes Benz vehicles, right? And during the pandemic, all of a sudden you saw these crazy increases in prices and people said, wait a minute, let me see what my options are. And then they realized that, hey, there are other brands out there that make great products. So do the research. If you're looking for an suv, be open minded to other options. Like I said, be prepared. Read the reviews, you know, check out the quality ratings and things of that nature before going into the dealership.
- [13:06]
Host 2
How important is it to number one, check retail value before you're going into this process of saying I'm going to buy or lease a vehicle.
- [13:15]
Chris Chavez
So that, that's a huge factor right now. That depends if you're going to be leasing or buying the vehicle. Now on a lease, the resale value is important because the leases are based. So you, on a lease you pay the depreciation, right? Whatever the vehicle loses in value. So if the vehicle has a higher resale value, typically has a higher resale value, that's going to shrink your monthly payment. So that's important. Now if you're going to be financing a vehicle, same thing, you want to make sure that vehicle holds value. So I tell this story all the time to people. If you're buying two cars, right, There is no right or wrong as far as leasing. Some people ask me all the time what's better, leasing or financing. To me it's all based on personal preference. What are you using the vehicle for? How long do you keep the vehicle? Those things play a part. Are you driving a lot of mileage, things like that. So making sure you understand what the resale value of the vehicle is key. Because if you're going to make this long term investment in financing a vehicle, you want to make sure that's going to hold its value.
- [14:16]
Host 2
Now this is important, Chris, because we talked about preparation and this is coming off the heels of our last how to which was understanding your credit score. A lot of people don't realize how important credit is in trying to get a car. So talk about that, like the importance of it. What numbers do you. Are the dealerships looking for how that impacts your interest rates, things like that.
- [14:38]
Chris Chavez
Okay, big conversation we have with a lot of clients right now about their interest rates. Some people use like, let's say Credit Karma or, you know, these different apps to kind of see what their interest or, sorry, what their credit score is. I typically find if you go to Experian, TransUnion, Equifax, you can get a more accurate score than using these other companies.
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Guest 1
Right.
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Chris Chavez
So how that works. So the bank looks at it as, all right, I'm going to be lending this person money for a vehicle that essentially the bank is buying.
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Guest 1
Right?
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Chris Chavez
The bank is going to buy the vehicle from the dealership, they're going to loan you money and you're going to be paying off that loan to them. So think about it this way. If someone was borrowing money from you and you looked at their credit score, that would kind of give you an indication of how likely they are to pay back that loan. Okay. So now if somebody has a lower credit score, has a payment history that's not, you know, they see they've missed some payments, you may still lend them the money for that car, but you have more risk in the game.
- [15:43]
Guest 1
Right.
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Chris Chavez
There's a chance, you can see by their history, they may not be after paying it back or paying it back on time. So I might give them a higher interest rate now that's going to increase their monthly payment. So now I'll tell you, during the pandemic, things changed drastically, but you're starting to see it kind of settle itself out now where used car rates right now are anywhere between 7 and 14%. Okay. New car rates I've seen as low as, you know, 3.9, 4.9. Last year, Ford had a 0% interest for 36 months on a new car. So that was unheard of, you know, three or four years ago.
- [16:22]
Guest 1
Right.
- [16:22]
Chris Chavez
So you're starting to see it come back a little bit. So you again, doing your research, very important. You can go online. If there's a particular vehicle you're looking at, you can go online to that company's website, let's say it is Ford, and you can see what specials they have available and they'll show you the interest rates. Now remember, you have to qualify for that. So if you have the credit score needed, then obviously that applies to you. If not, you'll have different tiers that will bring your credit score up.
- [16:48]
Host 3
So before we go to the leasing and financing deep dive, you mentioned used cars and new cars, right? So can you go down that rabbit hole as far as like, what's the benefits of having a used car versus a new car or a new car versus a used car?
- [17:11]
Chris Chavez
All right, so there's a lot of. This is, this is a, a huge question that we get. Should I buy new or should I buy used one? I'll tell you something, you got to take your ego out of this, okay? This is a financial decision. I tell people all the time, if you're going to keep a car, let's just say you're going to drive a lot of mileage. When I say a lot of miles, I'm talking about over 20,000 miles a year. And you plan on keeping this car, you know, for a certain amount of time, for let's say, an extended period of time, it makes sense to buy used. Now when you are buying used, I recommend that you buy it from the authorized dealer. And here's the reason why. When you're buying the car from an authorized dealer, these vehicles have gone through an inspection. So that dealership, meaning, let's just say you're buying a pre owned Honda, okay, yes, I can go buy a pre owned Honda on a side lot, you know, of a neighbor or whatever the case may be, and I may pay a little bit less. But when you're buying it from the dealership, remember this is a long term investment. Investment's a tricky word to say when it comes to this. But when you're buying the car from the dealership, now you have the backing, let's say you're buying it from a Honda dealership, you have the backing of Honda and that dealership to make sure that vehicle has gone through a rigorous inspection, making sure that everything's working properly. You want to make sure the vehicle's certified. So that has a certified warranty on it. Normally that's an extension of the manufacturer's warranty. And in case something goes wrong in the first three or four months of you driving the vehicle, you can go back to the dealership and say, hey, wait a minute, I just picked up this vehicle, you know, two, three months ago, and this is what's wrong with it. And you have that warranty there. When you do buy these cars from these secondhand lots or, you know, from the person down the street or, or your, or your gas station guy, whatever, you, you lose out on that. So even though you might be saving a little bit money up front. You're probably gonna, and I, I say probably more than likely you're gonna pay that money back in repairs and things of that nature. So I always recommend if you are buying used, buy certified, pre owned and buy from the authorized dealer. Now why would you buy a used vehicle? Like I said, if you're using the vehicle, you're putting a lot of miles on the vehicle. That's to me, the most important factor in buying a used vehicle. Now the problem right now and what we saw during the pandemic is used cars. Used car pricing went through the roof, right? So just to give you an idea, in 2020, the average used car price was around $20,000. In 2022, it was over $30,000 for the same car, same, same type of vehicle. So prices jumped drastically. You're starting to see that come down a little bit, but it's still much higher than what it was back then. During the pandemic. Right before the pandemic, 2019, cars were depreciating of about 3%, right? And, and in 2021 and 2022, they jumped up 32 to 36%. So it was a very difficult time. This is when people were saying, hey, you know what, I have a lease. And they were selling their leases or they were getting money back for their cars. But it made it very difficult to, to buy a vehicle. Believe it or not, some people were actually buying used cars for more than the original price that someone paid for it as a new vehicle. So the market was crazy. But it's starting to settle, settle out a little bit. I think by the end of 2025, you'll see numbers start to come back down, mainly because the new car inventory is starting to come back.
- [20:49]
Host 2
I'm just thinking in my head, you get the used car, you're getting a double at 30, 000 at the minimum double digit interest rate. That's a hefty payment, man. That's a lot.
- [20:59]
Chris Chavez
That's what people don't understand. The interest rate is so important, right? And, and when you do get a certified vehicle from the dealership, normally that'll come attached with, with a better interest rate. But used car interest rates right now are in the sevens. You know, seven to 14 is what I'm seeing. So people don't realize this is very important. When you're shopping for a vehicle, you have to do the big math, right? Not just a little math. When the dealership tells you, oh, it's, you know, 80 to 90 or a hundred dollars more in the monthly payment. If you're doing a 72 month loan.
- [21:31]
Guest 1
Right.
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Chris Chavez
Or a six year finance, that's $7,200 that you're adding in finance charges. Right. Depending on what your interest rate is to the price of the car.
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Guest 1
Right.
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Chris Chavez
So make sure you're aware of what the interest rate is. Don't just buy based on payment. Does that make sense? Because if the higher the interest rate on a simple interest loan. Okay, let's get into math.
- [21:53]
Guest 1
Right.
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Chris Chavez
On a simple interest loan, which was what every car loan is, Right. The bank collects their money first. So you're paying back the interest first. The, the money that you're making on your payment. Let's just say you have a $500 payment. The majority of that payment in the beginning is going towards interest. Very little of that money is going towards your principal. So what's happening is your vehicle is losing value and you're not even touching the principal yet. You're paying all the, the bank wants their money back first.
- [22:21]
Guest 1
Right.
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Chris Chavez
They're not worried about you paying off the car yet. Give me my money. So you're paying off the, the interest and then you're starting to hit that principal. Around the halfway mark is now when you start to cut into the principal. But what happens is that vehicle is depreciating in value. Not to mention, let's say that vehicle was in an accident. If that car got hit and now you have a bad carfax that dropped the value of the vehicle also. So you're accelerating the depreciation while you're still paying all of this interest. That makes sense.
- [22:49]
Host 2
Yeah, yeah, yeah.
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Host 3
Before the, the used car, what about a warranty that comes with the.
- [22:58]
Chris Chavez
So when you get a certified, when you get a certified vehicle, those, those normally come with an extension of the manufacturer's warranty. That's if the vehicle's, you know, still a fairly new car. Right. Let's say it's a two or three year old vehicle. Now you can buy extended warranties and a lot of these secondhand lots, they will send you an extended warranty, but you got to redefine print. Some of them have deductibles, high deductibles, or they're certain, they're. That only cover certain aspects of the vehicle. So you got to be very careful with those, you know, secondhand warranties. Some of them are great, don't get me wrong, some of them are great. But you want, you have to do the, like I said, you have to do the Research, you got to redefine print whenever you're signing these contracts. Going back what I was talking about with the interest rate, when you're paying that interest and let's. The, the vehicle is depreciating. That's how you end up what's called upside down, where you owe more than it's worth. Right. You go to the dealership, you go to trade it in, and they go, well, you owe 15,000, but the car is only worth 10. So what happens is people take that $5,000, roll it into their next car, and essentially they're paying for that old car in the price of the new car. Not to mention they're paying interest on that also. So you have to be very careful with that. You can get into a really bad cycle of rolling negative equity into the next car and the next car and the next car. What I tell people who are in that situation is your best option to end that cycle is to lease a vehicle. Now what you're going to be paying more because you're going to have to roll that negative equity into the vehicle. You may even have to put some money down on the lease so the bank can look at it as a favorable purchase.
- [24:35]
Guest 1
Right.
- [24:35]
Chris Chavez
Meaning why would the bank give you $40,000 for a vehicle that's only worth 30,000?
- [24:43]
Guest 1
Right.
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Chris Chavez
They're going to want to see some money down. But at the end of three years, and you've made that, those payments on time at the end of three years, you walk away that now you're out of that negative equity cycle and your payment's going to be much lower.
- [24:56]
Host 2
Yeah, I'm glad you brought up that and the warranty piece because that can get tricky a lot of times it'll be 50,000. You buy a used car, it already has 36,000. That means you're only 14,000 miles before having to get it extended. Then you have it for six years, and that extended might go to a hundred thousand, but by the time you finish paying the six years, you've passed a hundred thousand. And so those are the type of payments that you can't account for that will come up inside of that deal.
- [25:20]
Host 1
But I'm walking.
- [25:22]
Chris Chavez
Warranties work. Warranties work in two ways. Keep in mind, it's mileage and time. So there's a thing a lot of people don't know this. There's a thing called data first use. It's called the dofu, right, Data first use. So your warranty starts from the data first use. Let's say you have a four year warranty and you buy the vehicle in November of 2023, right? So that, that's when your warranty starts. So you, let's say you have a four year warranty. November of 2027 is when your warranty expires. If you come back and say, hey, you know what? Or let's just say you bought a 2024 in 2023, right? Because cars come out early, right? They come out for the pre, the, the next model year. You don't, you don't have a 2020 till 2028. Let's say you bought a 2024 and as a four year warranty, but you bought it in 2023. Your warranty expires November 2027, not in 2028. So you have to keep in mind it's mileage or time, whichever one comes first. You can say, hey, listen, I have a 48,000 mile warranty and I only had my vehicle for, you know, three years. If you hit that, that time, I'm sorry, I've had my vehicle for past the time that the warranty is allowed. You're out of warranty. It doesn't matter if you're under on your mileage.
- [26:34]
Host 2
So I'm walking in the dealership, Chris, right? I prepared myself. I know my credit score. I've been pre approved for a certain amount. I've done the research on the vehicle. One, I set a budget. But there's a part that doesn't get talked about and that's finding deals and incentives, right? Incentives are important. A lot of people will see commercials and they're like zero. And it's like no way. You'll read something in the newsprint and you're like, there's no way. And you walk into the dealership and all those things that you heard may not be true. How do we know what's real? How do we know what's not real when trying to filing deals and incentives? And who are some of the makers that you've seen that had pretty good ones?
- [27:10]
Chris Chavez
So when you see these ads, you got to read the fine print.
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Guest 1
All right?
- [27:14]
Chris Chavez
There's some terminology that we want to look at. That's one of the slides I think we were talking about was money down, all right, or cap cost reduction. All right, so let's say you're leasing the vehicle and you see this ad that says 399amonth and then the guy talks really fast or there's like fine print, right? You'll find out later that that's 39.9, 9 down plus taxes and fees. That's what it says in that fine print. So there's a cap cost reduction. That means that's, that's an investment from you to bring that payment down. You don't have to do that if your credit qualifies, you don't have to put that money down. Again if your credit qualifies, truthfully speaking, you don't have to put any money down on the lease if your credit qualifies for it. Now, I don't recommend putting 0, 0 like rolling your first month's payment into the lease. A lot of people will come in and say, oh, I don't want to give anything. I want to do zero duet signing. Zero Duet signing means plus your taxes and fees. That means you're still paying your first month's payment, your bank fee. Now your bank fees, what's called, or another term is acquisition fee, your taxes, your first month's payment, your bank fee, your plates and registration. Okay, so that's if you literally gave like first month's payment, bank fee, plates, taxes and registration, that's a zero down lease. Which kind of people kind of have trouble understanding that because you're not putting money down on top of it. Now, if you want to roll your taxes into the lease, you can do that, but it's going to increase your monthly payment. So you have to make a decision, hey, am I okay with putting this money up front or, or am I okay with the higher monthly payment? Okay, now getting back to what you asked. How do I know what rebates are. Are available to you? You have to ask your dealership and you have to do the research. Now, very important with the rebates a lot. They are disclosed in your contract. When you go in to sign your contract with the, with the. Normally it's a finance manager or somebody at the dealership. You want to make sure you go over it. Don't let them just say, all right, this is your name, that's your payment, that's your money down. Sign right here. You want to go over line by line. There's a, there's a paragraph. It's a truth in lending paragraph, will actually explain to you what the rebates are. It'll tell you what the selling price of the vehicle is, how the amount Duet signing came up with if on. On a lease, and if there's any rebates that'll be broken out on that line. So you want to make sure you look at that on your, On a finance, it's a little Bit more difficult because it's, it's just a lump sum that you'll see on the, on the, on the contract. But you, again, want to do the research, want to go online. The information is easily accessible when you go online and just search what rebates are available and you have to make sure you qualify. Things like people who are first responders qualify for a lot of rebates. If the vehicle is a, let's say a hybrid or an electric vehicle. Those are getting big rebates right now. So those, again, got to do your research. Search online and you can, can access that information.
- [30:10]
Host 2
Chris, really quick, before we go to the next thing, what's the credit score that banks are looking for? We talked about mortgages. We know like it's a 680. What, what's the credit score that a good dealership is looking for?
- [30:20]
Chris Chavez
All right, so for now, different brands have different tiers, right? So some tiers, some, some banks will have like a tier A1 plus, right? That's normally like 750 or 740 or better for A, like a tier 1 credit. Normally you want to be over 700 for tier 1 credit. Some banks are 719, depending on the brand. But different, again, different brands have different criteria. So like some dealer, some brands will actually buy like a656,660 score, but they'll give you a much higher tier. So that's going to increase your monthly payment. Okay, all right, got it.
- [31:00]
Host 3
So let's, let's go into big question, how to get a good deal. You know, that's something that people always ask, right? They want to make sure that they are not getting ripped off and they actually, you know, are winning in this situation. So how do you, how do you get a good deal?
- [31:16]
Chris Chavez
So it's, it's going to be a combination of all the things we talked about, right? Going in with the right attitude, right? Being going in there, you know, prepared, making sure that, you know, you know which vehicle you're looking at and doing the research, shopping around. I'll be honest with you if I don't. Some people may like, not like this in the automotive industry, but I'm not afraid of customers shopping around. I'll be honest with you. It to me, a customer who comes in, knowing the market, it's an easier customer, customer for me, because they're educated, right? They know what they're looking for. They're realistic as far as the numbers. You just have to understand how to connect to that person. And that's where I think people fail in the automotive industry. The salespeople fail when they, when a customer comes in, says, hey, listen, I've been shopping around, they're like, oh, you know, their shoulders go down, they get frustrated to me, I get excited. That means this person is ready to buy the car. They've done all the research. Now I just gotta connect my product to their problem. That's it. And if I can do that and build a relationship with my client, they're gonna choose me every time. I'm not afraid of customers shopping around. So if you have the opportunity, shop around, make some phone calls, visit dealerships. Unfortunately, some dealerships still do business in a way where they're like, oh, you have to come into the dealership in order for me to give you a number. That to me is silly. I can buy, I can buy, you know, something on my phone. You can buy a car on your phone. Let's be honest. So I think the dealerships that understand that, that the, the speed of the transaction is key, they're going to be more successful in this time with these customers. Customers, right. So, hey, give the number up front. Unfortunately, some dealerships will say, hey, this is the price. And then when you get into the dealership, they change the numbers. It's something that, again, it's, it's unfortunate in the industry, but you have to be willing to go into a dealership and if it's not what they said it was, you have to be open to walking away. That's it.
- [33:10]
Host 2
Yeah.
- [33:11]
Chris Chavez
Don't fall for the pressure of like, oh, you have to do this now. Or, you know, I had a customer the day that she said she went to a dealership and this is a family friend and she said, she's like calling me in a panic. She's like, they're telling me if I don't do it today, I'm going to lose out on these incentives. I'm going to lose out on this. And I understand the dealerships trying to sell the urgency, but there's a way to go about that and you don't have to be that type of person where you're, you know, jamming somebody up or you're like, you know, high pressure sales tactics. I don't like that. I've never done it. I've never done business like that. Now it's important to know a good deal when you have it in front of. I tell people all the time it's important to negotiate a good deal. It's important, it's more important to know when you have a good deal because believe it or not, as a, as a customer, you can out negotiate yourself. Meaning, hey, sometimes you may be at the bottom and you just keep going, keep going, keep going. And the dealership says, hey, look, at this point there's nothing more we can do. You know, we're going to move on from this. And then you feel like, oh, they're going to, they're going to come get me, like they're going to come grab me or you know, and sometimes they do, believe it or not, but sometimes they don't. And you, there is a chance that you can miss out on an incentive that goes away because programs change on a month to month basis. The car business is a month to month industry where incentives and programs come out. Normally it's every month. Sometimes some brands will change mid month and put an incentive out there. So it's, again, it's tricky. It's, I understand why it could be overwhelming for some people. So that's why we kind of do what we do in helping navigate customers through the process.
- [34:42]
Host 2
Yeah, it's good to have somebody like you because a lot of us, we don't have the greatest negotiating skills. And so for the most part, you know, this is even an investing, like we, we know, hey, I don't want to pay the MSRP or the, the sticker price per se. So.
- [34:58]
Chris Chavez
Well, during the pandemic, people dying to play pay msrp during, during the pandemic, like if you can get a car msrp, you were good. Like that's the only time that customers were coming into the dealership saying I don't want to pay over MSRP, I'll pay MSRP. When cars were going at 50, $100,000 over MSRP for some vehicles.
- [35:15]
Host 2
So, so what, what are some things that the average person should know when trying to negotiate against the dealership? I know it feels overwhelming, right? Like you guys have all the numbers, you know, the cars, you know, you know, the hidden fees which we'll get into. What should we know? What are the things that we should be asking as the everyday common folk coming in to the dealership?
- [35:36]
Chris Chavez
So a couple of things. Let's talk about your trade. Okay, this is one tip that I give consumers whenever they have a trade in vehicle or family member whenever they have a trade in vehicle. Now, dealerships may not like this, but again, if you're doing business up front and you're being honest with customers and you're doing business the right way, you shouldn't have an issue with this. The Dealerships who are not going to like this are the dealerships that are playing that shady business game, right? When you go into a dealership and you have a trade in and the dealership tells you, hey, your car is worth $20,000, whatever, whatever the number is, the next question you should ask is, will you give me that price if I don't buy a car here? Okay? Now what that does is that keeps the dealership honest. There's a thing, what's called over allowing, right? Let's just say I have room on my new car price, right? Like, I can come down 3 or $4,000 on a vehicle, but right now I'm at sticker price. And I tell you the car is, you know, I look at the vehicle's value and it's worth 18, but I know you want 20 for it. I say, listen, okay, I'll give you $20,000 for your vehicle if we can do a deal today. And you may say, you know what, Done, let's do it. Now, the truth is, did you get a really good deal in a new car or did you get the right number on your trade in?
- [36:49]
Guest 1
Right?
- [36:50]
Chris Chavez
You didn't get either of them. The real number on your car is the $18,000. I tell people all the time, don't be emotionally attached to your trade in. And I ask customers all the time, you know, are you emotionally attached to your car? And they're like, yeah, I'll be honest with you, I am. Because the value of the value, the value of the vehicle is the value of the vehicle, plain and simple. It goes. It's not. We don't look at it as like, hey, you raised your kids in that family. We don't look at it like that. We look at it as, hey, there's a value based on your VIN number, the mileage, the condition of your car. And the system's gonna put a number on that car based on what they're selling for at this time. That's it. It's nothing personal. Like I said, more information you have. You can go online, you can go to sites like CarMax or Carvana and punch in your. Your information and they will give you a number on your car. They'll give you a value of your vehicle. Now everybody's gonna look at your vehicle a little bit differently, right? It's like, If I have 10 of those cars on my lot, I may look at it as like, all right, I may have to give them a little bit less so I can help move this vehicle. So those are things you have to factor into the equation. But be open minded when you're looking. When you're going into a dealership to buy a car, you want to have a budget in mind, right? Where you need to be like your comfort zone where your, you know what the max is, you're willing to go. But keep that information in your pocket, right in your back pocket. Don't rush to tell the dealership. When a salesperson asks you, well, what's your budget? I don't know yet. I want to, I want to see the car. I want to see if it's the right fit for me, my family, and I'd like to get some information. That's the answer. When you come out and you say my budget's, you know, $500 a month, guess what you did. You just set either the ceiling or the floor for the negotiation, right? So one, I tell salespeople all the time, don't ask that question. Don't ask customers what their budget is. There's no reason to do that. The truth is you want to give your number up front, right? The dealership should be giving you the first number and telling you what the vehicle is going for. And then you start the negotiation, plain and simple.
- [38:51]
Host 3
What's some tactics that dealerships use to upsell buyers?
- [38:57]
Chris Chavez
Tactics is a tricky word, strategies. So you know, listen, it's the dealership is there to make, to do business, right? I don't believe in, you know, the dealership is not there to rip you off. And I don't think for the most part, most dealerships are there to rip you off. They're there to sell you a product. Now whether the product makes sense to you or not, that's the decision you have to make, right? Like rim and tire protection. You guys have cars and that some of them may need rim and tire protection, some of them may not. You have to determine if it makes sense. Let's say, you know, on, on certain vehicles, let's say you have a, a vehicle that has a nicer rim or more expensive rim and tire, the rim and tire insurance is going to be higher. Let's just say it's, you know, two to $3,000 for it. You have to ask yourself, well, wait a minute, if I get, if the tire is 18, the rim and tires, you know, $1800 for a rim and tire, how many flat tires am I going to have before this kind of pays off? It may be just two. And you know that based on where you live and how you drive, you've had 12 flat tires. In the last year. Tire insurance is a great investment. Ding and den protection are things that you know can be sold. These are aftermarket items, right, that the dealership may sell you. If you're someone who, you know, your car gets beat up during your lease and at the end of the lease, you don't want to have that big bill, that may be something you want to consider. The warranty. If you plan on keeping this car a long time, you may want to buy that additional warranty up front. Now, again, doing your research, finding out what those warranties should be selling for, maybe even if you can get them outside sometimes you can get them outside or after the fact. You can, you can look into that, but the dealership is not there. And I should say shouldn't be there to rip you off. I'll be honest with you. I can't stand when dealerships do that because it gives me a bad rap, right? That's the industry I'm in. So when people or dealerships are taking advantage of consumers, that really aggravates me. There's no reason to do that. If you do business, like I said, if you're honest, you're upfront and you're knowledgeable, you can make plenty of money in the industry. Because if you take care of people, they'll send them to you. They'll send their friends and family to you, as you guys have, right? You guys, I've sold cars to multiple family members of yours because I think you know that, hey, one, I'm knowledgeable and I'm not gonna. I've never had to hide my face in a restaurant because I saw a customer that I took advantage of. I don't have to do that. On the contrary, I have customers send me over a bottle of wine when I'm sitting in a restaurant because they saw me and they're like, oh, that's the guy who hooked me up in my car, right? So do business the right way. It's a long term business. This. I would put this out there for any young salespeople who are in the industry. This is a long term career, all right? The industry can create you an incredible life. I have wife, beautiful kids, and it's all because of the carbis. You guys know I'm a GED student, right? We're gonna get off the topic a little bit. I'm a GED student. I grew up East New York, Brooklyn, Queens area, and immigrant parents, worked hard my whole life. Had a kid when I was found. I was having a baby at 19 years old, 20 years old, had a baby, and I got into the car business. And when I did, I said, you know what? I'm going to be honest, be upfront and be knowledgeable, take care of my clients. And the first customer I ever sold a car to, he still buys cars for me today, 20 something years ago. You know, some of my best friends in this world are people that I met through selling them cars. And it's a great career if you do it the right way. So that's why I say when these, some of these dealerships that do underhanded business or sleazy business, shame on them because they make it bad for everybody else. And this is why we have to have these kind of calls. So.
- [42:46]
Host 2
Now you're speaking the language, man. I've. I've sat in that finance manager's office a few times after you've signed your lease, and then it's like, wait, you know, here comes the dink and duck insurance and the windshield protector insurance and the rim insurance and then your power mats. And I'm like, yo, do we really need all this? And you end up using none of it. And you're like, why did I do that?
- [43:06]
Host 1
Next time.
- [43:06]
Host 2
I'm not going to. Next time happens and you do it again.
- [43:09]
Chris Chavez
So that's just. It is when I talk about being prepared and going in there, you know, and checking your ego, right? Be your, your emotions. Also, like it's a car. Okay? Like it's a car. So listen, all weather mats. Yeah, get the all weather mats. Especially if your car gets dirty, getting in and out of the car. Get the all weather mats. Makes sense. Now, you know, as far as other items. Don't feel like you're being jammed up. And the biggest thing is don't be afraid to get up and walk away. Don't feel like, hey, I've already sat here for six hours. You know, it's only 20 bucks a month. More like if it's something you don't need, don't be afraid to say, hey, listen, you know what? This is now getting a little bit overwhelming. I think I'm gonna go, I'll come back in another time and see how the situation changes. So, again, some dealerships are not going to like this conversation, but I'll be honest with you. I think it's necessary for the, for them and for the consumer.
- [44:01]
Host 2
You talked about some of the hidden fees that, that'll sneak up on us. One of the things in the lease is the, there's an early termination fee and then there's a fee at the end. At the end of your lease.
- [44:11]
Host 1
Talk about that.
- [44:12]
Host 2
Because I don't think people go into it. They say, I'm going to do this lease. I'm going to do it for 36 months, 39 months. And they don't take into account for some of the other things that they're going to pay when the lease is over.
- [44:21]
Chris Chavez
So it's not a hidden fee. It's actually on your contract. The disposition fee is on the contract. The disposition fee is a fee to turn the vehicle back in. It's basically for processing the. The end of your lease termination.
- [44:33]
Guest 1
Right?
- [44:33]
Chris Chavez
They have to close out the account. They have to pick up the vehicle, things of the nature.
- [44:36]
Guest 1
Right?
- [44:37]
Chris Chavez
So. And it's spelled out, it's anywhere between $395 to $595, but there's a box on the top of the. Of the contract that will say disposition fee. Again, this is why I said it's important to not just have the person who's signing you out to say, hey, this is your payment. That's your VIN number. Sign right here. That's not how it works. I want to go over the contract. Now, you don't have to read the back of it. Those are typical. I mean, those contracts are basically the same for every lease. But as long as you're going over the numbers, like, what's. How many miles per year am I getting? That's huge. I can't. I can't tell you how many people have told me, well, the dealership told me I was getting 12,000 miles a year, but my contract says 10. Well, did you, did you ask them when you signed it? Well, no, I didn't. I just signed. Stop it. This is a big purchase. Take the time to read the contract, make sure it's exactly what you expected. Okay? And again, don't be afraid to get up and say, hey, listen, you know what? This is not what we talked about. I'm gonna go. I'm gonna. You know, maybe I'll come back, if that makes sense. Sorry.
- [45:39]
Host 3
All right, so let's, let's. All right, so let's. Let's have this deep dive into this conversation about leasing and financing. I know we talked about it briefly, but, yeah, that's, That's. That's a question that people always ask all the time.
- [45:52]
Chris Chavez
So again, personal preference. This is all based on your personal experience and what you need the vehicle for.
- [45:58]
Guest 1
All right?
- [45:58]
Chris Chavez
There is no right or wrong leasing or financing. You know, some people, I get a lot of people that say, well, I drive too many miles a year to lease. I personally think that if you are doing more mileage, let's say 15, 18, 000 miles a year, you are better off and you want a new car.
- [46:17]
Guest 1
Right?
- [46:17]
Chris Chavez
You are better off leasing the vehicle. I know this is contrary to what most people will tell you. Now you can do leases that are, some banks even offer 7, 500 miles a year, 10,000, 12,000, 15, 18, 20,000 mile a year leases. Once you get into that 20,000 mile a year lease or over that, normally the residual value so the estimated value of the vehicle at the end of that lease drops significantly.
- [46:47]
Guest 1
Right?
- [46:47]
Chris Chavez
Because the vehicle is going to have a lot of mileage and the bank understands, hey, this car is not going to be worth much when it comes back. So they're going to drop that residual value. And remember, you're paying on the depreciation, the difference between the selling price and the residual. So your payments are going to be higher but you're using the car more. And yes, it is like renting a car. Okay. People say, oh, it's Lisa. It's like, it's like renting a car. Never own it. Well, you don't own, we talked about this last time. You don't own the car when you finance it, right? When you have a 72 month finance, you don't own that car until you make that last payment. And guess what? Most people never get to that point where they make the last payment. Either they trade it in early or they, you know, they sell the vehicle or the vehicle's totaled. So the truth is you never own the car anyway on a lease when you are doing that high mileage. So I asked this question. If you were doing your mortgage, would you want an adjustable rate mortgage or a fixed rate mortgage?
- [47:38]
Host 2
Mortgage, fixed rate.
- [47:41]
Chris Chavez
Why?
- [47:42]
Host 2
Because I know it's going to be the same payment consistently throughout the term of the lease.
- [47:46]
Chris Chavez
Same thing on the lease, right? On the lease. It's like having a fixed rate mortgage. I know what my true cost of ownership is. Meaning if I'm putting 15,000 miles a year on my lease and my friend is putting 15,000 miles a year on their finance, the, the, the depreciation, the depreciation of that vehicle is going to be accelerated because I'm, we're driving the cars more, right? I don't really care that it's being accelerated because I just know what my payments are going to be every month. I know I'm going to have X amount of services due between those three years. Or however long I lease my car, this person, my friend, has to worry about, hey, what is my car worth now? And you really never know. It's all a guess, right? Especially if something happens with the vehicle, a new model comes out, maybe the technologies is improved in the vehicle, right? So their value of the vehicle, that's something they have to be concerned with. I don't have to be concerned with that because I know at the end of my three years, I'm just going to give the car back and get another one. And not to mention, when you're financing the vehicle, you're financing the entire price of the car, okay? Plus tax on the entire price of the car. On a lease, you're only paying the depreciation and you're only paying tax on the lease portion. Now, this varies from state to state. Some states will have you pay taxes on the whole vehicle. Some states, like New York, it's based on the monthly payment times the term. So let's say it's 36 months. So let's just say the payment is 500 times 36 months, times whatever your tax rate is in that state. That's how much you pay in taxes. So there are benefits to leasing when you are doing a lot of mileage. The other thing is if you are using it for business purposes, people don't understand that you don't necessarily have to put the vehicle in your name, in your, in your company name. If you are, let's say the vehicle is under £6,000, you can still write that vehicle off, but you're writing it off differently. You're writing it off, you're writing off your mileage, usage, things of the nature. So you got to be very careful with that. You have to track it, you have to be accurate with it. Because last thing you want to do is if you get audited, they will come check, hey, what are you using it? You know, where's your logs as far as your mileage? Where were you going that you're tracking this? If some, if you're going to deduct 100% of your mileage, you got to be able to show that that's what you use the vehicle for. A lot of people don't know that. You have to be very careful with the new laws. I know that's something you want to talk about. The new laws, as far as tax incentives, those have changed drastically. So, yeah, again, financing is great for some people. If you plan on keeping the car, you know, seven, eight, nine, 10 years, and, you know, historically, you drive the car and you, you know, you run it into the ground or you give it to your kids or whoever it is. If, if you do buy the car and they do have really good interest rates, I would say that's a good, that's a good reason to do it. But if you're looking, if you normally ask people how often do you change cars and like, oh, every three to four years. But I don't like the lease. I'm like, well, you kind of are leasing but, you know, you're financing and then just, you know, rolling negative equity into the new car. So you're better off leasing up front.
- [50:50]
Host 2
Yeah, Chris, let's talk about that. And I think probably 2021 and shout out to Ms. Business. We talked about the 6,000 pound rule and how you can write off 100% towards if it's in your business name. But that's changed and this is something that I discovered when we were trying to get a car maybe a year ago. And I was looking for that, that same 6,000 pound rule, it went from 101 year, I know in 2026 it goes down to 80% and then by 2020, is it 2029, it phases out like you won't be able to use that same tax incentive. So we actually did a different strategy this, this year with, with the car and said, all right, we're going to lease it and we're going to go ev talk about the differences incentives of using your business for the tax incentive and use and getting a vehicle.
- [51:37]
Chris Chavez
So let's be clear, I'm not a tax attorney or an accountant. So you definitely want to speak to whoever your accountant is and you did this too, speak to your accountant before. If this is, you know, one of the factors in you buying a car, make sure you speak to your accountant, look up the information and like I said, be prepared when you are doing this because what I'm seeing and I looked on the IRS website, I looked on, there's another website called section179.org and they talk about it where vehicles, from my understanding now they've dropped it to the amount that you can write off is also based on your usage. So the vehicle has to be used for 50%. I'm sorry, over 50% of the usage has to be for business in order for you to write it off. And again this, if you get audited, they're going to come, they're going to, they want to see those logs as far as how you're using that vehicle.
- [52:27]
Guest 1
Right.
- [52:28]
Chris Chavez
And from my understanding the limit now for 2025 is the section 179 deduction is $31,300 for vehicles that are over 75,000 and, and greater than 6,000 pounds. Okay, so now here's how it works. If you're only using that vehicle for 40% of the usage is being used for business, then you can only write off that 40%. It's not the whole vehicle anymore like it used to be. So again, very important that you're looking at that vehicles under £6,000. So let's say your personal vehicle, if you're, you know, you're not using a heavy duty vehicle, you're not using those big SUVs, you can still write them off, but that number changed for 2025 to 20,000 4, 400. As long as the vehicle is being used for, primarily for business users. Again, not a tax attorney, not an accountant. Definitely want to speak to your accountant and to make sure you're, you're, you're in line because this is one thing you don't want to mess with when it comes to the irs. You know, to go buy a Bentley. Another thing that I found out as a factor is your, your company has to show the, at least the income, the taxable income for that year has to be over the amount of the vehicle. So you have to keep that in mind. These are a lot of factors, you know, to buy a Bentley because you have a company and you're showing on your tax returns that you only made 60, $70,000. You know, it's not going to work out that way. It's not going to work out well for you.
- [53:53]
Host 2
Talk about the EV incentive.
- [53:55]
Chris Chavez
Yeah, EVs are great opportunities for incentives for people who are looking for tax savings. You know, in New York there was a 7, 500 rebate. Again, that's starting to change based on the, on the supply and demand of EV vehicles in New Jersey. At one point, if you registered an electric vehicle in the state of New Jersey, it was, you didn't pay tax at all. Sales tax on the vehicle. Now that's changed. Now I think it's about, it's, it's a, I think about 50% you would pay of your tax revenue. I think it's up to 3, $500. But again, this is a moving target. This is something that continues to, to change. So you, you have to do the research.
- [54:34]
Host 3
All right, let's, let's go to the trade in value of cars.
- [54:41]
Chris Chavez
Again. When it comes to trade ins, I recommend do your research online. Don't one, don't be emotionally attached to your car, okay? If you are emotionally attached to your car, keep it or give it to somebody in the family who can use it and benefit from it. Especially if it's. There's not a lot of value in it. But if it is something you want to trade in, do your research first. Go on carb, carmax, carfax, I mean Carvana, these websites, and they'll actually, if you punch in your license plate, your VIN number, your mileage, and be honest about the condition of the vehicle. Right? Don't, don't put on there that your vehicle is, you know, excellent condition when it's, you know, had some accidents or you smoke cigarettes in the car, or you know, your dog is ripped up the back seat. I've seen crazy things and people like, oh, no, no, that's nothing. Okay, yeah, it is. Your dog ripped up the back seat of the car. So be honest on these things. And that's going to give you an idea as far as what the value of your car is. Don't go by what they're selling for because a lot of customers will do that. They're like, well, I see that they're selling for X amount of dollars at other dealerships. That is totally irrelevant to you, okay? Because one, you don't know what the dealership one had to pay for that car. Meaning if they bought the car and it's been sitting on their lot, maybe they bought it when the values were higher and now the values have come down. So even though the customer may be asking for a certain amount for a car, that doesn't mean they're going to get that value for the car.
- [56:01]
Guest 1
Right?
- [56:01]
Chris Chavez
The customer is going to come in and want to negotiate it. And maybe after, you know, the couple months of that car sitting a lot, they may take a loss in that vehicle. Believe it or not, dealerships do take losses. For some reason, people don't want to believe that a dealership is ever going to take a loss. It does happen. But don't go by what the cars are listed for online. That is not the value of your vehicle. Now, if you want to go and sell the car to somebody and, you know, have people come into your house and test driving the car and waiting for people to come bring a check for the car, then you can try to list it for that price online. But truth be told, if a customer is going to be spending that amount of money for a vehicle, they're probably more likely to go to a dealership where the dealership can offer them financing, warranties and things of that nature. So again, don't be emotionally attached to your car. Do the research online. When you go to the dealership, remember that, that very important question. Once you do mention that you have a trade and the dealership does give you a number. So important to ask the question. Hey, quick question. If I don't buy a car here, will you still give me that number for my car? Like, will you write me a check for that car? If the dealership says no, say, okay, how much will you write me a check for? If I give you that car right now and I don't buy another car from you today, that's the real number for your car?
- [57:20]
Host 3
What, what's the cars that depreciate the fastest and what's the cars that hold their value the most?
- [57:26]
Chris Chavez
So cars that depreciate very quickly, cars with accidents, carfax, things of that nature. That's the first one. Right now there's different brands that don't hold value or, and cars that do hold value, right? Believe it or not, Toyotas, Hondas, those hold incredible value. Even now we're seeing it where the value of those vehicles don't, don't just think it's just Mercedes Benz. Some of the Mercedes Benz vehicles drop in value very quickly. But typically those, you know, again, this is something you can do research on. Lexus vehicles hold great value. Mercedes Benz does. BMWs do. Again, you want to do the research and, and kind of check into what the vehicles are selling for compared to what. This is very easy to access this information you can Google like, you know, highest value vehicles or, or vehicles that hold their value. So it's, it's a, it's a tricky situation. Porsche holds incredible value. Like I recommend some, some of my big clients to, you know, that are looking for cars. If you're looking for something that's going to hold value and you're going to keep it for a while, some Porsches, you can actually, you know, buy them and then they'll actually increase in value. So yeah, that's what you want to do. You want to do the research, look online, see which, what cars like Nissans are dropping in value. Some other cars, you know, the Volkswagens typically hold good value. But yeah, again we want to do the research and check online because I've.
- [58:45]
Host 2
Always wondered this, right, like we don't want to get lowballed if we're doing a trade in, but what, what happens with when, what does the dealership do, right, like let's Just hypothetically, I have a 2016 BMW I'm trading in because I'm getting a new car. They're not going to put that on their lot. It's kind of outdated for their certified pre owned situation. So where does that model go? Where does my car go?
- [59:07]
Chris Chavez
So great, great question. So a lot of these dealerships will work with wholesalers who they, who will buy the cars from them. Okay, so that's where those cars will end up. Or they, you know, maybe they have a, a dealership in their group that sells used cars, believe it or not, sometimes a dealership. And I always recommend this to the dealerships. If you have a nice car, even if it's, you know, a car that's not in my lineup, right, I'd say, hey, listen, hold on to it. Put on the lot. If it's a clean car, it's a nice car. You may have a, a client who may be looking for a second vehicle or a vehicle for their kids. So they may hold onto it. But normally it goes to wholesalers who are willing to write the check for the car.
- [59:47]
Host 2
Here's another sneaky one. And this is kind of like the exit row, right? Like I know Shy talks about when we couldn't get first class. You sit in the exit row because you know you got some leg room. Talk about the people who actually buy the test drive cars because they have been used, it's relatively new and in great condition.
- [60:06]
Host 1
Is that a strategy that you can.
- [60:07]
Host 2
Use going into a dealership?
- [60:09]
Chris Chavez
I'm going to tell you something. So those are called demos, right? I bought demos, my cars, whenever I leased a car for me or my wife, I, I took demos because those cars are a lot of times they're written down, meaning every month when they put a car into, let's say demo status or loaner service or one of the managers is driving the car. Normally those cars are written down. So there's a cost factor to having that done and you own the car for a little bit less. So you can take advantage of some savings. If you're not particular, as far as like, hey, I want this car with this feature and this color and this interior. If you're open to it and you want to deal once you've negotiated, say, hey, listen, let me ask you a question. Do you have any demos that can help me save some money? Dealerships want to move those cars, right? So that's definitely a great way to save money. The cars you still have. Now, mind you, going back to what I said as far as Data first use. This is great for leasing if you're buying it. Remember, the data first use is when that car went into service. So when that car started being used, and let's say the dealership registered it as a loaner vehicle that data first used so that the time, the clock on that warranty may have already started. So you want to ask this question, hey, how much time do I have left on that car? Because if that car has been in service for over a year, you may be losing out on a year of warranty the vehicle. And again, monetarily, it may make, it still may make sense to take it, especially if you're leasing the vehicle. But that's a great option. I recommend that all the time. Again, a lot of my cars, if I could save some money, I'm, I'm. Listen, I've drove, I've driven all kinds of cars in my life. So at this point, I want something that's reliable, safe for me, my family, and drives nice. I don't want to have to worry about it. So if I can save some money and, and get the exit row instead of first class, then I guess I'll be in the exit row.
- [61:59]
Host 2
We're going to the same place.
- [62:01]
Chris Chavez
You know, the whole plane is going the same place. But first class is nice. I'm not gonna lie.
- [62:06]
Host 3
What about dealership language?
- [62:08]
Chris Chavez
Say again?
- [62:10]
Host 3
Dealership language.
- [62:12]
Chris Chavez
So terminology, terminology in the dealership, things like when I mentioned earlier, over allowing, right. Residual value, the estimated value of the vehicle, end of the lease, cap cost reduction. The cap cost reduction. You'll see that it actually says capitalized cost on your contract. That is what the vehicle is being sold for. The cap cost of the vehicle. A cap cost reduction is money to reduce that cap cost.
- [62:41]
Guest 1
Right.
- [62:41]
Chris Chavez
So these are things you want to look at when you're inside the dealership. Over allowance, when they're over allowing for your trade, meaning maybe there's money in the new car that they're using to, to show you a higher value for your, your trade in vehicle. Things like that, you want to make sure you're mindful of. I, I'm hearing a lot of people use the term smart lease. Smart leases are, you know, I had two customers last month that called up and they, they said, my lease is up. And come to find out they had what's called a balloon, a balloon loan. So a balloon loan, I guess somebody pitched it as a lease. It's not technically a lease, it's a finance of the vehicle. But at the end of that finance, there's this balloon payment, like a lump sum payment that you have to make. Or you can give the car back, but you won't. You're, again, you're buying the whole vehicle. You're paying tax on the whole vehicle. It's just you have to be very careful with the terminology the dealership's using. Make sure you read your contracts. If there's a, if there's a something you don't understand, don't be afraid to stop and say, hey, what is that? And then open up your phone and Google it. Like it's just search the information. You're in control as the consumer.
- [63:55]
Guest 1
Right.
- [63:56]
Chris Chavez
And you have to make sure that again, not to be confrontational, you know, it. It. But you have to let people know, hey, wait a second, I don't understand that. I need, you know, better clarity on that.
- [64:10]
Host 2
Yeah, there was used. I mean, obviously I've gotten the last few calls from you, but there were some dealerships and I don't know if they still use this, the otd, the, the out the door price. Can you talk about what that is, man?
- [64:22]
Chris Chavez
Because that's your tool.
- [64:23]
Host 2
Like, they know that and I don't know that, but I need to know that that's what.
- [64:27]
Chris Chavez
Dealerships shouldn't be using this term. It's, it's. I don't know. This is one of the things we teach in our training is speak the customer's language, right? Not the internal language that we use.
- [64:35]
Guest 1
Right.
- [64:36]
Chris Chavez
Like if I said to you, you know, that's tissue on the car. I've heard salespeople say to customers and dealerships are going to hear this. If they hear this, and they'll be like, yeah, we do that. If a dealership said, hey, well listen, I'm selling you the car at tissue, would you know what that means?
- [64:48]
Host 2
No.
- [64:49]
Chris Chavez
Okay, so why use that terminology? Tissue is like the cost of the vehicle, right? That's like what their invoice is on the vehicle.
- [64:55]
Guest 1
Right.
- [64:55]
Chris Chavez
Or their cost. But why use that terminology, OTD or out the door price. That means including and it should mean because you don't want to come back. And then it changes. The out the door price is the price of the vehicle plus any taxes, fees, motor vehicle. That's. That's the total amount. And this is what I tell people all the time. Make sure you say when. If you're leaving a dealership. And you know, they tell you, all right, you're giving $5,000 down. I say, hey, quick question. Is that the total amount that I have to give you? At signing. Okay, that's the out the door price. Is that the total number that I will be writing a check for? Let's say I'm paying the cash. Is that the total amount that I have to bring you a check for or are there any additional fees? They say no, that's the out the door price. That's the out the door price. All right.
- [65:45]
Host 2
This is a term. Unfortunately, one of our, my close friends and you, you know this person as well, got into an accident.
- [65:53]
Guest 1
Right?
- [65:53]
Host 2
But they had what they call gap insurance. Can, can you talk about that?
- [65:57]
Chris Chavez
Huge, very important. Now gap insurance is very. I can't tell you how important it is to have in your vehicle. Most New York State leases have gap insurance. You. So it's, it's part of the, the acquisition fees normally factored into that. The acquisition fee, which is the, the bank fee, you pay up front. Now let's say your vehicle, you buy your car is $35,000 or you lease your vehicle is $35,000 and halfway through the lease the vehicle gets totaled and you owe the bank, let's say $20,000, but the book value has dropped and the book value is now $17,000. The insurance company will pay the $17,000 because that's the value of the vehicle. What you need is gap, the gap insurance to kick in and pay the, the difference.
- [66:47]
Guest 1
All right?
- [66:49]
Chris Chavez
Any, any money owed on top is covered on top of what the insurance company deems the vehicles valued at is gap insurance should cover. Now, very important when you're financing a car.
- [67:00]
Guest 1
All right?
- [67:01]
Chris Chavez
Dealerships will ask you if you want to purchase gap insurance. Gap insurance can range, you know, roughly in that 500 range and you know, depending on how much they're selling it for. But if you're buying a vehicle and you're not putting any money down, it is, I can't tell you how important it is to make sure you get gap insurance because if that vehicle is totaled or stolen and not recovered, the insurance company is going to pay the bank what the value of the vehicle is, not what you owe. Okay, I want to be clear with that. They will pay the value of the vehicle, not what you owe. If you don't have gap insurance, you're on that hook, on the hook for that negative equity. And trust me, you're not going to want to pay money for a car that you don't have anymore. Nobody does. But you're on the hook for it and it'll be on your credit if you don't pay it.
- [67:47]
Host 3
Is it better to Finance through a dealership or a third party.
- [67:51]
Chris Chavez
Great question. So I encourage people like. So a lot of people, if they're members of federal credit unions or, you know, let's say they're a teacher or something like that, check what their interest rates are. Check what their interest rates are. See what you qualify for. Make sure you know the parameters. Because some credit unions will tell you, hey, we'll finance you up to X amount of dollars. But let's say the car you're actually buying is a couple dollars over that, then you want to. You're gonna have to come up with money out of pocket for that, right? Sometimes credit unions have great interest rates, especially if you're an employee. You know, if they're taking the funds right out of your paycheck, right. They may give you a better interest rate, but find out what the interest rate is. A lot of dealerships are actually set up with credit unions, so they have that option as a bank to use and go to and say. And process the loan through them. And it's the same as going through the. Through the credit union, right? They're set up with them to do the loan directly with them. So have that information, have all the parameters in place, and then you can go to the dealership, say, hey, listen, you know, what's your best rate that you can give me on this loan? Keep that information in your back pocket. And if they say, well, I can get you 6.49%, okay, my bank got me 5%. Do you want to try to match it? Beat it. How do you want to work it out? Sometimes they're willing to say, hey, you know what, maybe we're set up with that bank, or maybe, let me see if there's another bank that can give me a better rate. So like I said, keep the information in your back pocket. When you are negotiating, when you are in that office, that finance office, and you're going over interest rate, things of that nature, that's when you want to bring that information up and say, hey, listen, this is the rate that I have for my credit union. What can you do again, get their rate first, right? Get the array first from the dealership, and then, yeah, hey, this is what I've got.
- [69:33]
Host 2
I actually did that with, I think, my second car. It was a used car. And so I got the price for it. I was like, okay, I'm not going to use you to try to buy this car. I actually had the credit union purchase it. They had a lower interest rate. And obviously, when you work with a Credit union. It could come directly out of your paycheck, could come out monthly or bi weekly. So you're not even thinking about it. It almost became like another bill that was coming out of your paycheck. But I got a lower interest rate for a longer term. So that's a good strategy.
- [70:03]
Chris Chavez
Yeah, if you can, it could definitely save you some money.
- [70:06]
Host 2
Yeah, we, we talked about if we're going to lease the car and potentially, you know, you hear zero down. This feels almost like the home buying process in a sense where like what is the amount or down payment that I should have or think about allocating if I'm going to finance the vehicle? Like is it 10, is it 20? Like traditionally what puts me in the best shape? Or is this conditional?
- [70:28]
Chris Chavez
So I always Recommend at least 10 down on the vehicle. Just your, just your taxes alone.
- [70:35]
Guest 1
Right.
- [70:35]
Chris Chavez
Are, let's say you're in New York eight and a half percent. Right. 8.875% is your taxes right on the vehicle. So at least want to cover your taxes and the motor vehicle fees. Again, the people don't realize that. Now if you have it available to you, right. If you can put the money down and get yourself a lower interest rate. Because sometimes the bank will, if you're financing a certain amount, they may give you a lower interest rate. Or if you're financing for a shorter term, people don't realize that you get a better interest rate if you do a 36 month finance opposed to a 48 or 60 month or 72 month finance. So. Because there's less risk to the bank.
- [71:12]
Guest 1
Right.
- [71:13]
Chris Chavez
So that I mentioned earlier, that 0% interest rate with Ford, that was for 36 months. So the client that, that, that was working with me, they're like, yeah, you know, instead of writing a check, they were actually first thinking about buying the car cash and writing a check. And they're like, wait a minute, I can get 0%? Yeah, I'll just do 0% for 36 months, keep the money in my pocket and make the monthly payments and pay it off early. So keep that in mind. But yeah, it's, it's. I, I recommend 10. The more money you could put down, the lower your monthly payments are going to be on a finance, on a lease. A little bit different. I don't believe in putting a lot of money down on a lease during the pandemic when prices are really high. I did my taxes and fees up front.
- [71:55]
Guest 1
All right.
- [71:56]
Chris Chavez
Now if you're working within a certain budget and you want a particular car that's the car you want, then you may want to put a couple of dollars down on the lease in order to bring your payment down. People like, oh, well, you lose that money. Well, no, you're kind of getting it back in the sense that the payment is lower.
- [72:12]
Guest 1
Right.
- [72:13]
Chris Chavez
So you're not technically losing the money.
- [72:16]
Host 3
So before we wrap, first time home buyer, any, any, I mean, first time car buy, car buyer, any. Any info for the first people that's, you know, just buying a car, young people.
- [72:31]
Chris Chavez
So it, it's, it's a, it's an exciting time. Enjoy it, right? Again, be prepared, get your information and don't make it an emotional purchase. It let it be emotional after you buy the car. Does that make sense, right? Like enjoy and, and do the whole celebrating after you buy the car but while you're in the process. So I, I see a lot of, you know, younger folks that are coming in to buy a cars, they're so excited about the car is they lose sight of the finances, the financial side of it, and then they make a bad decision. Okay? And that's how they get hurt. Don't be afraid just because you love the car. I've seen people crying in dealerships because they, you know, it was too much or, you know, whatever the case, they didn't have the money down or they didn't get approved for the car. It's a car, okay, Stop it, all right? It just slow things down. It, it's still going to get you where you want to be. You don't want to, you know, strap yourself into a payment that maybe you're going to have a hard time paying and then you're affecting your credit down the line. There's more important things to do with your credit than, you know, worrying about what your, what your car is. So don't be emotional. In the process, be okay with walking away. There will be another car that, that maybe works for you or works within the budget before the first time buyer test drive vehicles go out, look at different cars. Everybody makes a great car nowadays, nowadays. So if you see a car on the road that you're absolutely in love with and you're like mom and dad or whoever it is, I want to get that car. Be okay with maybe waiting a little while for that vehicle and maybe getting something else. Now that is maybe more reasonable as far as monthly payment, more comfortable as far as monthly payment. Hey, listen, if you can afford that car, if it's well within the budget, go for it. But don't be afraid to say, hey, let Me take a step back and look at the bigger picture and make the right decision for myself financially. I see a lot of younger people or first time buyers getting into vehicles because they're, they're buying with their eyes instead of with their wallet, if that makes sense.
- [74:36]
Host 2
All right, our last thing here is the end of the lease guide. So we talked about some of those fees that might, that come inside the contract for the lease. But this has happened a few times, right? Let's, let's say I have a three year, a 36 month lease. I have 12,000 miles. I'm about to turn the car back in, but I've only driven 18,000 or 20,000. Is there any type of incentive that I get paid back or what, what happens with the mileage I don't use? A lot of people run into this issue and it's like, well, what do I do now? I kind of overshot it. Is it just, hey, get less next time? Or are dealerships offering things to two customers who actually go under the value of mileage that they paid for?
- [75:13]
Chris Chavez
Okay, so very few. I know BMW, I think used to do this a while back where they would give you some money back for unused mileage. I don't know if they do it anymore. This will all be in the contract. Definitely a question you can ask the dealership upfront. Now there are some brands I know Infiniti does it now where if you start to do more mileage than you thought you were going to do, let's say you do the 10,000 mile a year lease and you realize, wait, I'm way over. You can buy additional mileage at the same price as you would have purchased it up front during the lease. So again, I know Infinity does it right now. This doesn't mean they have to continue to do it. If you go on the website, you can see I actually have an Infinity now. And I, I realized that we were going to go over miles and I looked at it and on their website it says you can buy the mileage up front. You can buy the mileage during the lease up until I think it's 30 days before the lease expires. So you have to buy, be careful of when you do it. Don't do it like the day before you give your car back. It's not going to work. So what I tell people all the time is look at what your driving habits are, right? Look at your, your current car, what you've been driving it over the last three years. How many miles have you put on the vehicle. If you anticipate your mileage is going to stay the same, then that's what you should base it off of, okay? I tell people all the time it's better to do a 10,000 mile a year lease if you're going to. If you think you may do 11,000 miles a year, if you think you may do 11,000 miles a Year, than to do a 12,000 mile a year lease. Because you're definitely paying for 12,000 miles a year, right? It to me, I'd rather save the money, keep it in my pocket and maybe I get out of my car three to six months early, right? Let's say, say your 36 month lease. You have a 36 month lease and you have 12,000 miles a year. That's a thousand miles a month or 12,000 miles a year. Now remember, it's not, you're not allowed 12,000 miles per year. You're allowed 36,000 total miles in the vehicle when you return it. Now if I return my car in 30 months with 36,000 miles, there is no penalty to me, okay? So I'm not over mileage. I'm not supposed to be at 30,000 miles because I get my car in early. I'm allowed the 36,000 miles even if I give the car back early. So that's a lot of times a dealership would do that. If you see you're about to go over mileage, contact the dealership. Some brands, like right now, Mercedes Benz has what's called a pull ahead. They, if you're going into another Mercedes, they will waive. I think it's anywhere from three to five remaining payments on your car.
- [77:41]
Guest 1
Right.
- [77:41]
Chris Chavez
You don't want to have to roll those payments into the, into the next car. So you want to, you know, kind of ask the dealership the question like do you guys have a pull out? I don't want to roll that negative, those other payments into my next car. But I always say do if, if you think you may go over, do the lower mileage amount because it's better to maybe have to pay it than to definitely have to pay and not have used it.
- [78:07]
Host 3
No valuable information.
- [78:08]
Host 2
Appreciate that. Appreciate that.
- [78:10]
Host 3
Before we wrap, tell the people what you, what you have going on as far as your, your company and service and contact information and all that type stuff.
- [78:20]
Chris Chavez
So like I said during the pandemic, when I left the retail side of it, when we first did the call, I was working at Mercedes Benz. I left the industry to start a training company for the automotive, automotive sales People to help them better connect with clients and make the process easier for not just for them, but for the client as well and to build that long term career. Obviously the pandemic hit. Nobody was investing in training at that time. So I kind of had a pivot and it's kind of, it goes to what I teach, right? The clients who I sold cars to started reaching out to me for cars. So I just basically help customers buy vehicles. So we started a company that basically help customers navigate the process of buying up the vehicle, make the process super easy. But we still do, we still have our training company which is obviously picking up and doing very well, thank God. But I will tell you this, if you do have questions. My company's automotive mentorship, we do sales training and job placement for people in the industry. We do leadership training, every aspect of the automotive industry, which has done very well. What I am going to do for the members of eyl, I'm going to add an email to our website and it's going to be dealsautomotivementorship.com so if you have questions about buying a vehicle, they'll be able to contact us, send us an email. We'll do our best. Obviously, depending on the amount of emails we get, we will do our best. Me and my team will do our best to get back to everybody and answer as many questions as we can. Obviously, if, when you guys post this, if there's questions even on the last video, I make sure I still go back. When people do have questions, I try to answer as many questions as I can on that video.
- [79:57]
Host 3
Appreciate it. Appreciate it, man.
- [79:59]
Chris Chavez
Thank you.
- [79:59]
Host 2
My God, I said always a wealth.
- [80:01]
Host 3
Of information and it definitely is another option as far as buying a car to use a broker as opposed to a dealership. We didn't, you, we didn't talk about that. But that's something that you might want to consider if you're in the car buying process. As far as, you know, not having to go to 10 different dealerships, just having a broker that can actually service all types of cars. And Chris, that's what, you know, kind of what he does. But make sure you guys email that email address. What's the email again? Deals Automotive Mentorship.com deals Automotive Mentorship.com. all right, Chris, thank you. Appreciate it.
- [80:39]
Host 2
My God, appreciate you as always.
- [80:41]
Chris Chavez
Thank you, guys.
- [80:43]
Host 3
All right, guys, that's it. Take care.
- [80:45]
Host 2
Peace.
- [80:46]
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- [81:02]
Chris Chavez
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Chris Chavez
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