CONFESSIONS OF A RETIRED AUTO SALESMAN

Gerry sold new cars for forty years but drove one that cost him $300

GERRY SCHRAM HAD A VERY GOOD LIFE selling cars. After four decades on dealer lots, the sixty-five-year-old former salesman from Becker County, Minnesota, was able to retire in 2006 with no debt at all.

He did that, in part, by owning his cars for a long time, unlike many of his customers who would get eaten alive by the cost of continually buying a new car every few years.

In some of his best times as an auto salesman, Gerry sold three hundred or more cars a year. “I had so many good years: ’75 was a good year, ’86 [too], and there were so many more,” Gerry recalls. “In my early days, we sold the car and filled out the contracts by hand, so it took longer. But there were lots of twenty-five-to-thirty-car months.”

Many of the sales were to customers trading in cars just a couple of years old. While they opted for new wheels, Gerry was holding on to his old ones.

For example, he enjoys the ’69 Dodge Super Bee coupe he bought when he was twenty-three and still has to this day. Or the Dodge Power Wagon that he purchased in 1974—the same year he put a $10,000 down payment on his $28,000 home. Gerry held on to the Power Wagon for eight years before selling it at a modest profit, right around the same time he paid off his mortgage in full.

Early in his career, the salesman saw the folly of people getting into a new car every few years, often before they’d even paid off the old one.

When you roll the outstanding balance on an original loan into a new vehicle loan, you create a much higher monthly payment for yourself than if you’d just waited until the original note was paid off.

It’s like “paying for July’s hamburger in January,” Gerry says, sounding like a modern-day version of the Wimpy character from Popeye.

“It is automatically a warning signal about your finances. It tells you you’re using the car up faster than you can pay for it and you are using too long of a term on the contract,” Gerry says. “Sometimes, two or three financial institutions turn down a contract, however [another one] may take it. This is a signal to the consumer not to be buying. The financiers are telling the consumer, ‘Whoa there, big boy. Think it over!’”

In one extreme example of the mistakes people make, Gerry had one repeat customer with a constant case of new car-itis. In fact, the man bought from him so much over the years that he eventually became Gerry’s friend.

Let’s call him “John” because that’s what Gerry used for a pseudonym when discussing his friend’s incurable new-car fever.

By Gerry’s telling, John typically went through one truck a year. During one particular year, though, he bought and traded no less than two Dodge trucks and two Ford trucks in rapid succession.

“When John’s coworkers or pals traded, he was also knocking on the showroom window. Somewhere along the line he went on his own as a plumber and bankruptcy ensued,” Gerry says. “He always told me he got stiffed on a plumbing construction job, but I think his foolishness caught up with him or was a contributing factor.

“[Another time] I sold John’s wife a new 2000 Buick [Regal] she loved. He tried to trade that, but she put her foot down. Yay for her! Well [in 2010], he traded that Regal for a Subaru Impreza and she is not happy one bit about that,” Gerry told me. “As a young person, I remember guys who had a nice car, married, [and] then would come to ‘trade down’ or sell. Now it’s spend till the well is dry.”

But you’d be wrong if you think Gerry never let passion sway his usually cool-headed approach to buying and owning cars. During the golden era of American muscle cars, Gerry was guilty of at least one self-confessed “frivolous” car buy. Yet he still found a way to make it work financially.

“As a young fellow, I ordered a new ’69 Dodge Super Bee coupe . . . and saved every last cent to pay for it. This meant frugally selecting options right down to the last penny; I even had to order it without a radio to make the car meet [my] money,” Gerry says. “The car was probably a frivolous expenditure. But at twenty-three, things appear differently. I was never in over my head, [and] I could have sold my Super Bee easily, but I suppose it was a statement of who I was.”

Muscle car purchases aside, living within his budget and making sensible car purchases go hand-in-hand in the Schram home.

“My wife drives a very rusty ’88 Olds I bought five or six years ago for $300. I drive a ’97 Dodge Ram Laramie 1500 with 214,000 miles. These cars just go down the road, never ever leaving us stranded.”

That ’88 Oldsmobile had 140,000 miles on it when Gerry bought it from a friend, and he put less than $100 into it to replace a water pump.

“This was not a glamorous car but did have a ‘like new’ interior. Some relatives and friends said, ‘Why don’t you get your wife a decent car?’” he says. “Well, my wife is not a princess; she just appreciates dependability as well as affordability. Many folks in any income bracket would not consider this car!”

My favorite part of the Olds story? After putting about 20,000 miles on it, Gerry later sold the car to his cousin for $388—so he pretty much broke even!

“Upon making a one-hundred-eighty-mile trip at thirty-one miles per gallon, [my cousin] told me it was apparently quieter than his 2008 Chrysler Pacifica. Go figure!” Gerry says. “He now wants to find two blue doors to replace the rusty ones.”

Meanwhile, Gerry’s wife is now driving a ’94 Pontiac Bonneville with 197,000 miles and a 2004 Ford Taurus with 130,000 miles.

The message of Gerry’s story is to hold on to your cars until the wheels fall off or risk the undesirable financial consequences—if not now, then later in life.

“I had supper with a fellow recently who paid $10,000 for a ten-year-old Toyota van,” Gerry told me. “He probably could have bought a [used Dodge] Caravan for half the price. But maybe that’s why my friend is still making house payments at sixty-five. My wife and I have everything paid for and have for years.”

What else do you need to know if you’re going to hold on to your car like Gerry?

Independent car repair shops are preferable to dealers.

• Developing a relationship with a mechanic is one of those important intangibles of car ownership. I like single-brand shops that only service one brand of car because they have in-depth experience and are usually familiar with older out-of-warranty cars. Contrast that with the experience of bringing your car to a traditional dealer’s service facility: You typically don’t get to see the mechanic who works on your car and instead have to deal with a commissioned service representative.
• Yet not all single-brand shops are good. You need to get referrals from trusted friends and family. The time to find an independent mechanic is not when your car is broken down on the side of road, either. If you’re new to an area, use an online review site like Yelp.com to vet shops or use an AAA-approved shop. Then build a relationship with one by first trying them out for routine maintenance.

Keep up with routine maintenance.

• Following the factory-scheduled maintenance gives your vehicle a longer life span and eliminates problems that could otherwise occur. The most basic thing to do is change your oil as often as recommended in the owner’s manual. There is, however, one caveat: If you’re having the work done at a dealership, the dealer will often run up your bill by doing unscheduled work. Make sure you authorize only the scheduled work that’s required at the time you have your vehicle in the shop.

Beware of auto repair service plans for older vehicles.

• Auto repair service plans can be enticing in an era when the average car on the road is now eleven years old. But I say they’re a waste of your money. These third-party extended warranties cost up to $3,000, according to Real Simple magazine. Worse still, the contract for that supposedly “bumper to bumper” coverage is so riddled with holes you can drive a couple of ten-year-old minivans through it. If you are worried about extreme out-of-pocket expenses from repair bills for old cars, I recommend you buy the auto manufacturer’s own extended warranty.
• When you have an older vehicle, you’ve got to know when it runs out of useful life and be wary of the point at which the cost of repairs outpaces the value of the car itself. I’ve long said that when the annual cost of repairs exceeds 50 percent of your old car’s value, then that’s the time to get rid of it. But Consumer Reports says it’s OK for repairs to equal an older car’s value dollar for dollar at 100 percent each year. So we’re of two different minds, but the point is: Don’t hang on just to hang on.

Beware of bandit tow scams.

• If you’re stranded on the side of the road, be careful which repair shop your tow truck driver steers you to. The shop might overinflate its prices and give the driver a cut for each stranded motorist they bring them. Allstate cites one example of somebody being charged $1,600 for a flat tire in a bandit tow scam—$1,600 for a flat tire! That’s an extreme scenario just to get your attention, but it actually happened.
• If you’re out of town and don’t know where to go or what to do, find the closest AAA-approved repair facility and request to be towed there. Have AAA do the tow if you are a member. And if you break down near home, it’s often better to be towed to your home and then pay a second fee to be towed again to a repair shop after you’ve had a chance to do some research about which ones won’t rip you off.