The Stous family is now an official family. We bought a minivan.

A minivan with one kid? Really? Why? That’s almost immediately what my sister asked, and you might be wondering the same thing. There are a few reasons, and I’d love to share some of them with you. But mostly, I want to share the buying experience with you, because there are some great lessons embedded in my experience!

My wife and I have been looking at the Chrysler Pacifica Hybrid for years. I’m an avid reader of Car and Driver, and I also enjoy reading the car reviews in Motor Trend and the Wall Street Journal. Most critics agreed that after being cursed for decades with poor transmissions on the old Town and Country minivans, Chrysler got it right with the new generation of Pacificas. And in an age when minivans are unapologetically style-less in the name of practicality, the folks at Chrysler decided to actually give a care when it came to styling. It looks halfway decent (for a minivan) and makes the ego wound of owing a minivan just a bit less painful.

We knew that when my wife’s car was about to give out, we would consider the Pacifica Hybrid. We wanted to buy a vehicle that we’d own for hopefully 10+ years, so we wanted something we weren’t going to outgrow if we add members to our family. We also wanted something with the latest safety features and powertrain options (i.e. Hybrid) that would at least somewhat exemplify advances in auto technology. Perhaps most notably, we knew that Chrysler hasn’t used up its allotment of federal tax incentives for selling low-emissions vehicles. Purchasers of new Chrysler Pacifica Hybrids are eligible for a $7,500 tax credit, which almost completely makes up for the depreciation you experience in the early years of owning a new vehicle. What we didn’t know is that COVID-19 would accelerate manufacture incentives that were meant to offset the reduction in demand for new vehicles. Chrysler was offering employee pricing on Pacifica Hybrids, as well as $2,000 cash back (or 0% financing).

So while we still only have one child, and while my wife’s 14-year-old vehicle is still perfectly drivable, we didn’t know how long the deals would last. We decided it was time.

In my opinion, some of the Pacificas are still…well…not for me. Gold or maroon exterior aren’t my thing. But with the right combination of trim packages and exterior colors, they look pretty good – again, for a minivan. We had a specific combination of options in mind, so long story short, we had to deal with an out-of-town dealership that had what we wanted in their inventory.

The salesman was polite and friendly. However, he wasn’t super transparent. I caught him in a sales gimmick. I had asked about whether there was room for price negotiation, and he said “we’ll check your credit first, and then we can talk about pricing”. Okay, fair enough. When he came back, he said “In addition to the $2,000 cash back, I’d like to help you out even more. I have a limited number of buyers I can help each year by offering employee pricing, and since you asked about room to negotiate, I’d like to give you employee pricing. It’s another $2,500 in savings”.

Employee pricing was not a secret offering that the salesman was “blessing” me with. It was advertised all over the Internet, and was offered by Chrysler, not the salesman! It was one of the main reasons we were purchasing the vehicle last month, and I had even talked to the salesman about it a few days before. Apparently, he had forgotten. So, I called him out on it in a polite way, and he admitted that yes, it was a Chrysler incentive for qualified buyers. This wasn’t off to a good start, but they had the exact vehicle I wanted so I couldn’t just walk away. Thankfully, the advertised price was so good that I didn’t really need to negotiate to get a good price. It was already well below invoice.

The real meat of this story is in my experience with the finance manager. As expected, one of the first things she told me about was the opportunity to purchase an extended warranty. There were the typical “good, better, best” options. The best option was very expensive –over $4,000 – and included not just a vehicle warranty, but other add-ons like windshield protection (something that is cheaper through my auto insurer), key fob replacement insurance, GAP insurance, and more.

Offering me GAP insurance was ignoring my unique circumstances. GAP is a product that is meant to help if you total your vehicle when you owe more than it’s worth. It insures the “gap” between the balance of the loan and the value of the vehicle. In some cases, it makes sense. For example, if you have a small down payment of $2,000 and purchase a new $30,000 vehicle, six months from now you might still owe $27,500 on the loan, but your car might only be worth $25,000. You owe more than the car is worth, and if you total it, your insurer will probably only pay you $25,000. You’ll be stuck with a $2,500 loan. GAP insurance would pay off that $2,500 for you. But, we’ll never be upside-down on the van loan! We had a decent-sized down payment on the van, so GAP insurance would have been a waste of money.

The main product she was trying to sell me, though, was the extended warranty. Extended warranties are typically more money than they’re worth. Often times, you’re paying for a product you will rarely – if ever – use. For example, the warranty she was trying to sell me was bumper to bumper for 5 years. Well, the manufacturer warranty covers everything for the first three years, covers the powertrain for 5 years, and the electric components of the powertrain (i.e. the hybrid stuff) for 10 years.

Statistically speaking, you’re likely to lose money on an extended warranty. Instead of buying a warranty for $4,000, you could set aside $4,000 for car repairs in an interest-bearing account, only use that money for repairs that would have been covered by that warranty, and by the time the warranty would have otherwise expired, you’d probably have money left in that account. If that wasn’t the case, warranty companies wouldn’t be in existence. They make money because that $4,000 that you paid to them will probably not be paid out in the form of claims!

Now, there are certain scenarios where extended warranties make more sense. For someone who can’t afford a $2,000 repair, maybe it makes sense to purchase a stripped-down warranty that only covers the most expensive repairs, because that person can pay for their warranty on a monthly basis. For that person, a $2,000 repair is financially debilitating. I think you’d be better off by slowing building up your emergency fund instead of putting money towards an extended warranty, and ideally you’d have an emergency fund built up before you purchase a vehicle. If you don’t, I don’t think you can afford to buy the vehicle. But if you must buy, purchasing a stripped-down extended warranty that only covers the most expensive repairs is not as bad as purchasing a super expensive warranty that will likely never be used.

After we spent nearly 10 minutes going back and forth about the warranty, she gave up…or so I thought. A few minutes later, she offered me a less expensive warranty. I declined again.

A few minutes after that, she brought up the warranty a third time and told me if I purchased it, they would reduce the rate on the loan (the next day as I read some of the fine print in the documents, I discovered a document that said the purchase of a warranty was not required to negotiate interest rates). I told her I was planning to refinance the loan locally, and the rate I would get would still be lower than the rate she proposed, so the lower proposed rate wasn’t appealing to me. I also declined the cheaper warranty. She moved on.

But wait, there’s more! In another few minutes, she said “Oh I forgot, we’re doing this thing where we refund your warranty if you don’t use it during the five years you have it!”. She gave me a printout that showed the details of that policy and told me it made the warranty risk-free. The problem with that is that if I used the warranty even once to cover a small repair, I couldn’t get the refund. I’d still lose money. She told me that if I had a $700 repair (for example) and paid $4,000 for the warranty, then I could just pay for the $700 repair on my own so that I could preserve the refund option. In other words, they were giving me incentive to not use the warranty. And yet, I was assured that the warranty was worth the money, because I would certainly use it. I declined a fourth and final time.

I eventually did purchase the vehicle, although I wished it wouldn’t have taken so much time and mental energy to argue with the finance manager. I had lunch while the van was being detailed, and when I returned, the salesman told me that while I was away, the finance manager decided to match the rate that I told her I would get locally when I refinanced. I can see why she did that. If I were to refinance that loan when I got home, they’d effectively lose money on that loan because they’d only collect interest for about 30 days – however long it took me to refinance.

Here’s the problem with that. As you know, I was buying the vehicle out-of-town. Originally, the dealership said I’d sign my portion of the documents, and then they’d send the documents to our house to have my wife sign so that she’d be on the title and on the loan. When I told the salesman right off the bat that I would refinance the loan, he said that in order to make it easier, they could put all of the paperwork in just my name. When we refinance back home with a new lender, we could add my wife to the title and the loan. That made sense. However, after the finance manager matched the rate, we no longer needed to refinance to get a lower rate – but I’m the only person on the documents! So we’re still planning to refinance the loan just to get everything titled properly. If the finance manager had been up-front with me about offering a lower rate, I could have made sure my wife would be on the documents. The dealership would have a loan that wouldn’t be refinanced within weeks of originating the loan, and we wouldn’t have to go through the hassle of refinancing to get everything properly titled.

That was the big lesson for me – when you have a good credit score, ask for what you want. Don’t just assume they can’t give it to you. Rather than just saying I would refinance because I knew of a lower advertised rate, I should have asked if they could match it.

The lessons I already knew was that car dealerships can be pushy with extended warranties and a variety of other add-on products. Remember that you usually lose money on those deals. If the salesperson is being super pushy, and you know you don’t need that vehicle that’s sitting on their lot, walk away! I didn’t have that luxury because I was picky with the type of vehicle I wanted, but you might save yourself some time and money if you remind the dealer you can go somewhere else to buy your vehicle. For more tips on purchasing a new or used vehicle, Consumer Reports has some good content. And don’t forget – when you purchase that new vehicle, take it for joyrides! Research shows that you can increase your happiness when you take time specifically to enjoy your purchases. Time to take that van downtown, roll down the windows, and make all the cool kids jealous of my new whip.