Friday Financial Foul Ups: Buying a Car on the GM “Smart Buy Program” with a Balloon Payment at the End

This week’s Financial Foul up is written by Jason who blogs over at Redeeming Riches.  He is a financial planner by day and a blogger by night.  He ties his career, personal and faith experiences into his blogging to help Restore Your Money & Renew Your Mind.  Follow him on Twitter (@RedeemingRiches) or subscribe to his posts here.  Enjoy his foul up!


During college, I took a part-time job that was flexible enough for me to work around my full load of classes.  The job paid decent money (at the time) and allowed me to afford books and have a little cash for play.

Unfortunately, I started thinking that the little bit of money I was making was enough to sustain a new car.

The Situation

My current car was getting older and approaching the 100,000 mile mark.  I rationalized that I should get rid of it and buy a brand new car so I wouldn’t have to worry about maintenance – even though mine was running fine.

So, here I was, 21 years old and wanting a new car on a part-time salary.

Where I Fouled Up

My first mistake was discontentment.  I had a perfectly fine-running car that could’ve gotten me to and from where I needed to go, but I just had to have a brand new one.  I wanted a sportier car with tinted windows and a sun-roof!  And I wasn’t about to let anything stop me.

My second mistake was when I walked into the dealer, sat down with the saleswoman after looking at a shiny, black Grand Am GT with a sun roof (the car I’d been wanting) and said these awful words:

I’d like to have a payment of $250 per month.

You should’ve seen the saleswoman’s eyes light up! She didn’t even have to ask and I walked right into her trap.  Don’t ever tell a salesperson what payment you want on a car.

“Oh, no problem – we can get you to $250 per month!”

The saleswoman went on to describe a “great new program” they have with me in mind.  It’s basically a lease, but you own it and you can sell it whenever you want or just turn it in for a new car at the end of four years.

“With your trade in, we can get you into this brand new car you’ve always wanted for $254 per month!  Let me tell you about the GM Smart Buy…”

Basically, this program was a way for me to buy a car I couldn’t afford and then after four years have a balloon payment. I had to come up with that amount, refinance for another four years or trade it in on another new car.

So, not only did I negotiate my trade-in at the same time as the new car (a big no-no), I allowed myself to be suckered into a deferment plan with a giant payment at the end! This is how they got the payment so low.

What I Learned

Four years went by, and sure enough the balloon payment was knocking on my door.  I had been in two accidents with this car (thankfully I didn’t get hurt or hurt anyone else) and the car was not worth what I owed.   I certainly didn’t want to refinance, but I didn’t know what to do.

Thankfully GM was struggling at the time and they came out with an incentive program.  Trade in your car for a brand new one and we’ll wipe out your Smart Buy!

So, I went online to find the cheapest GM possible, went to the dealer, didn’t negotiate payment, handed over my keys and purchased a new one.  I was out of the Smart Buy!!

I paid the new car off early and 136,000 miles later I’m still driving the same little car!


Do you like this series? Check Out The Previous Foul Ups:

Foul Up #8 – David (Money Under 30) – Being Too Eager to “Move Out” and “Move Up”
Foul Up #7 – Matt (Debt Free Adventure) – Upside Down and Paying The Price
Foul Up #6 – Brian (MyNextBuck) – Overdue Books Prevent Me From Renting an Apt
Foul Up #5 – Kelly Whalen (The Centsible Life) – Poorly Planned Vehicle Purchase Costs $24,000
Foul Up #4 – Stephanie (Poorer Than You) – Signed My Life Away at Age 17
Foul Up #3 – Deliver Away Debt – How I Wasted Over $10K and 11 Months
Foul Up #2 – Brian (MyNextBuck) – Quick Fixes to Weight Loss
Foul Up #1 – Brian (MyNextBuck) – How I Didn’t Earn $3000 in Free Money

41 Responses to Friday Financial Foul Ups: Buying a Car on the GM “Smart Buy Program” with a Balloon Payment at the End
  1. Craig
    November 13, 2009 | 9:37 am

    Good story, glad I did not go through that procedure when I bought my car, ha. I’m sure it will help you out the next time though.

  2. Jason @ Redeeming Riches
    November 13, 2009 | 8:02 pm

    Brian, thanks for letting me be a part of this and share my foul up! Be aware of the big bad balloon payment!

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