Last post on Oct 05, 2010 at 4:50 PM
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#2 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [grapevinetx]
by MrShift@Edmunds HOST
Sep 15, 2010 (10:26 am)
Seems to me that a person refusing a 0% financing plan over 72 months would be somewhat foolish to pay cash, given that that same cash could be invested, even quite conservatively, to pay more than 0%.
That "cash" sale immediately deteriorates due to depreciation when the "new" car is registered, and becomes "used".
So it's like:
$30000 cash deal becomes $27000 the day after you buy the car
$30000 invested at 3% over 72 months becomes 35,821.57
#4 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [Mr_Shiftright]
Sep 15, 2010 (11:37 am)
If given a scenario like that, I'd definitely take the 0% financing, for as long of a term as possible, and just let my money work for me. FWIW, even if you paid that $30K in cash for the car, but then took what would have been the monthly payment and invested it back into an account averaging 3%, at the end of 72 months you'd only end up with $32,825.
A lot of people like having the peace-of-mind of a paid off car, but personally, I'd rather have the increased freedom of the cash, plus a low monthly payment. I could always pay it down quicker if I wanted to, but if money got tight, I can just make the regular payment, rather than getting locked into the higher payment of a shorter term.
#5 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [andre1969]
Sep 15, 2010 (12:03 pm)
That's kind of the approach I take. When I have more money I pay ahead. When times get tight, I just make the regularly scheduled payment. I'll take a car loan out for five years but try to pay it off in three or less.
#6 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [grapevinetx]
Sep 15, 2010 (12:22 pm)
Fifty-one percent of new-car shoppers said that incentive offers have no effect on the timing of their next vehicle purchase. Forty-eight percent of new-car shoppers said that the availability of incentives have no effect on their specific vehicle choice (make / model)."
I'd bet that if we looked at the way the questions were worded in the study and the answers given, we'd find the study was flawed. Why? Because it makes no sense to say that if the MSRP is $25K, and there is no incentives, that that vehicle would sell just as well as if it had a $5,000 rebate or if it offered 72 month 0% financing. There are not that many people out there buying a new vehicle who say a big rebate will not influence them to buy Brand A or Brand B if the cars are fairly equivalent.
#7 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [Mr_Shiftright]
Sep 15, 2010 (12:30 pm)
Isn't there usually a significant lower price if the buyer elects to pay cash? Does not the 0% financing only apply to the MSRP?
#8 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [euphonium]
by MrShift@Edmunds HOST
Sep 15, 2010 (1:45 pm)
I think it's all up for grabs, depending on the terms of the incentive. The only thing I can say with assurance is that *normally* a cash buy does not bring a better price, because the dealer is deprived of making money on financing---his little kickbacks from the lending institution. But no doubt he's getting holdback or something else even on 0% deals, so there has to be some give there I would think.
But again, I'm not sure.
Here's what Mazda says about it's 0% deal: (and other lease deals, etc). I'm not sure what the first sentence refers to exactly:
"60 MONTHS PARTICIPATING LENDER FINANCING AT $16.67 PER MONTH PER $1,000 FINANCED. 0.0% APR ONLY FOR WELL QUALIFIED BUYERS. NOT ALL BUYERS WILL QUALIFY. AMOUNT OF DOWNPAYMENT AND OTHER FACTORS MAY AFFECT QUALIFICATION. Applicable customer cash to qualified buyers when financed through participating lender. Take new retail delivery from dealer stock by 9/30/2010. See dealer for complete details. Excludes MAZDASPEED3."
#9 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [euphonium]
Sep 15, 2010 (3:09 pm)
From personal experience, you certainly can negotiate whatever you can from MSRP, and then get the 0% financing. The usual thing is that the customer usually gets a choice between 0% financing or a rebate; though in this slow selling environment I've seen both offered + the dealer discount.
Rule #1 in business (and life) - Everything is negotiable!
#10 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [euphonium]
Sep 15, 2010 (4:14 pm)
Back when I bought my 2000 Intrepid, they were offering $1500 cash back or 0.9% financing. But that was off of the negotiated price, not MSRP. Back then, new car rates were running around 6.75-7%, so I figured the 0.9% financing was the better route.
Now, fairly recently, I think some of the makers were offering some really fat incentives, such as "$8,000 off MSRP" or whatever. So maybe some of the extra-generous sounding ones were only for MSRP.
#11 of 21 Re: Article Comments - Study on Auto Finance, Purchase Decisions [kernick]
by MrShift@Edmunds HOST
Sep 15, 2010 (4:15 pm)
Probably these days the difference between MSRP and invoice is not nearly as big as in the past.