No Tricks, Just Truth: The Fall Edition
Buying a car shouldn't feel like walking through a haunted house. In this fall edition of Long Lewis Unfiltered, our team plays trick or treat with common car-buying habits, buries a few myths, and answers your questions about leasing, trade-ins, pre-approval and down payments.
Our goal is simple: help you be your own best advocate before you ever step on a car lot. Below is what we covered, what it means for your next deal, and the questions to ask before you sign.
Meet the panel
- Emily (host)
- Sean
- Brian
- Jacob
- Eddie, who brings a real estate professional's perspective
Chapters
- 0:14 - Welcome to Long Lewis Unfiltered
- 0:38 - Trick or treat: car-buying habits
- 9:07 - Leasing, explained
- 17:53 - Bury it or keep it alive: car-buying myths
- 26:49 - Trade-ins and equity
- 38:25 - Ask Long Lewis: your questions
- 47:06 - Wrap-up
Trick or treat: 5 car-buying habits
We opened with a rapid-fire round. Pumpkin spice and full-size candy bars split the room, but the panel agreed on these:
- Buying on the monthly payment alone: Trick. The payment hides the price, the interest rate and how much you're financing. A low payment can mean a high rate or a very long loan.
- GAP coverage: Treat. Guaranteed asset protection covers the difference between what you owe and what insurance pays if your car is totaled. Unless you're putting a lot of money down, especially if you're rolling in negative equity, the panel calls it a no-brainer.
- Leasing: Treat. You pay for the part of the vehicle you use, and at the end you have options instead of negative equity. More on that below.
- Skipping the test drive: Trick. A car is a big, emotional purchase, so drive it, make sure it fits your family, and test the stereo. The exception is out-of-state buyers, who often buy from home.
- Shopping around: Treat. Comparing deals and dealerships is your due diligence. We give our best price up front, so we welcome it.
Leasing, explained
Today's leases aren't the ones your parents warned you about. Most are closed-end leases, which means the vehicle's value at the end of the lease is set the day you sign.
Older open-ended leases left you on the hook if the car sold for less than expected at auction. With a closed-end lease, if the vehicle is worth more than that set value, you can put the equity toward your next vehicle or keep it. If it's worth less, you can turn it in and walk away, minus any excess mileage or wear charges.
Who it fits: Lower-mileage drivers usually get the best lease deals. High-mileage drivers aren't ruled out, though. You can often choose a higher mileage allowance or prepay for extra miles, and because miles drive depreciation, a lease can keep you from ending up upside down.
Why our team leases: You're usually covered by the factory warranty the whole time, payments tend to be lower, and you don't need a big down payment. Some leases are "sign and drive," with just the first payment due at signing. You can also buy the vehicle at the end for the price set in your contract, or trade it in early.
Ask: "What's the payment if I lease this vehicle versus finance it?" Then weigh both against how many miles you really drive in a year.
Bury it or keep it alive: 5 car-buying myths
"Dealers make more if you finance with them." Keep it alive.
It's true. Dealers partner with lenders and earn a little more when you finance through them, and some even take away rebates if you don't. At Long Lewis, your price is the same whether you lease, finance or pay cash.
"Always put a huge down payment on a car." Bury it.
Each $1,000 down only lowers a typical payment by about $15 to $20 a month, so many buyers would rather keep the cash. A common rule of thumb is about 20% down with a four- or five-year loan, so the car is paid off around the time the factory warranty ends. More on this in "Do I have to put money down?" below.
"Never buy the first car you test drive." Bury it.
Most of our customers research online and know what they want before they arrive, so the test drive often just settles the color. If you've done your homework and you love it, there's no reason to wait.
"The longer you negotiate, the better your deal." Bury it.
Long negotiations mostly mean a longer day and hard feelings. We give our best price up front, and all we add is tax and title, so there's nothing to battle over.
"Salespeople want you to buy the most expensive car." Bury it.
Our salespeople aren't paid on commission, so they earn the same whether you buy a $5,000 car or a $100,000 truck. Their job is finding the vehicle that fits your needs.
Trade-ins and equity
What sets your trade's value: It's more than miles and condition. Dealers look at recent auction prices (the Manheim Market Report, or MMR), how many similar vehicles are for sale and how fast they sell, and what it will cost to recondition yours.
Positive vs. negative equity: If your car is worth $20,000 and you owe $10,000, you have $10,000 in positive equity to put toward your next vehicle or take as cash. Flip those numbers and you have $10,000 in negative equity, also called being upside down. Roll that into a $50,000 vehicle and your new loan is $60,000.
Is rolling over negative equity ever worth it? Sometimes. Rolling it into a lease means you can turn the vehicle in at the end and start fresh. A low promotional rate also helps, because more of each payment goes to the balance, so you may be only a few thousand upside down when you trade again.
A bigger trade number isn't always a better deal. Some dealers show more for your trade, then make it back with fees, add-ons, a higher price or a higher rate. Test it by asking that dealer whether they'll buy your car outright for that number. We make a real cash offer for your car.
Ask: When comparing two offers, line up the vehicle price, the interest rate and the fees, not just the trade value.
Rebates or a special rate? Run it both ways.
Manufacturers often make you choose between cash rebates and a low promotional rate, like 0% or 2.9%, through their own lender. The low rate grabs attention, but it isn't always the better deal.
Ask to see both: the price with every rebate applied, and the payment at the special rate. Also ask which rebates you qualify for and which can be combined, including military and first responder rebates that aren't as widely advertised.
If a salesperson gets flustered or frustrated when you ask, that's a red flag. You may be at the wrong dealership.
Ask Long Lewis: your questions
Should I get pre-approved before I shop?
Most of our panel says yes. A pre-approval tells you what price range to shop in and gives the dealer a rate to beat, and because of how many cars our group sells, we can often beat it. The CFPB's auto loan guide explains how pre-approval works, or you can apply for financing with us.
Keep in mind that a pre-approval isn't a final approval. The vehicle you pick, like a high-mileage used car, can change the terms. Either way, check your credit before you go.
Do I need insurance on my new vehicle before I drive off?
It depends on your lender. Some credit unions and lenders require full coverage on the new vehicle before you leave. If you already carry full coverage, many policies cover a newly bought vehicle for a short grace period, often around 10 days, but confirm with your insurer.
Closing late, after your agent's office has closed? We can use a drive-out form, which works like a 24-hour test drive under your current full-coverage policy, so you can still take your vehicle home that night.
Do I have to put money down?
Not always. It depends on your credit, your debt compared to your income, and the vehicle. Buyers with top-tier credit can often finance with nothing down, while others may need some money down, say $1,500, to get approved.
Two people with the same credit score can get different answers based on their income, debt and credit history. Even when it isn't required, several of our team put 10% to 20% down so they start out with positive equity.
Know before you go: 6 questions to ask
- What's the total price, not just the monthly payment?
- Does the price change if I pay cash or use my own financing?
- What would this cost to lease versus finance, at the miles I actually drive?
- Which rebates do I qualify for, and do they beat the special rate?
- Would you buy my car outright for the trade value you're showing me?
- What does my lender need, including insurance, before I drive off?
Got a question for Ask Long Lewis?
Our Ask Long Lewis questions come from you. Message us on Facebook, Instagram or TikTok, and we may answer it in a future episode.
When you're ready to shop, browse our inventory. The price you see is the price you pay, plus tax and title.
We're car people, not attorneys or financial advisors. Nothing in this episode or summary is legal or financial advice.