Gerry Schram had a very good life selling cars. After four decades on dealer lots, the 65-year-old former salesman from Becker County, Minn., 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 300 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 25 to 30 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 onto his old ones.
For example, he was enjoying the '69 Dodge Super Bee coupe he bought when he was 23 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 would hold 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've even paid off the old one in full.
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 automatically is 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!'"
Read more about Gerry's story in Clark Howard's Living Large for the Long Haul.