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Automobile companies have discovered that 0% financing promotions are one of their most effective sales tools. Print ads and television commercials abound with offers of “0% APR” on new models. The idea is to attract buyers for new cars by making it appear that compared to used cars, they will save money on financing.
If you are considering a car with a $15,000 price tag and are told that you will get $2,000 back if you pay cash, that car costs $13,000. If you are told that the car cost $15,000 and instead of the cash back they will finance it at 0% for three years, the car still costs $13,000 and you are being asked to pay a $2000 financing charge up front.
Car dealerships go through an elaborate charade to make the car appear to cost $15,000, but the bottom line is once all the money has changed hands, the net cost to you is $13,000.
Dinero, we all know that the car companies aren't giving the cars away for with no profit for them.
If you want a good deal on a car, wait until it's 3 years old and try to buy one with less then 30,000 miles on it so the majority of the depreciation has occurred.
Dinero, we all know that the car companies aren't giving the cars away for with no profit for them.
If you want a good deal on a car, wait until it's 3 years old and try to buy one with less then 30,000 miles on it so the majority of the depreciation has occurred.
You'd be hard pressed to find a car that's three years old with low miles that's depreciated by 50%. You can do it, but it's going to be mostly limited to the very, very high end. Good deal is then relative. Yeah, you're getting an SL63 for around half of what it sold for 3-4 years ago but you're still paying $70,000, likely more. Personally, I'd lean towards a brand-new Corvette 'vert, either a 2LT or 3LT with Z51 would be in that price range. While the the SL63 is more luxurious, the cost of owning a Corvette would be far more reasonable than a used SL63. If you're just talking more generally about a good deal on something that's A to B but fairly nice, there's veritable laundry list of new cars that are a better deal. Few will be as nice but you pay out the nose for something as nice as an SL63 even if you're only paying about 50% of the original price both upfront and in operating costs.
How can it be a scam when they disclose everything?
Be a responsible person and do the math.
You mean things like personal responsibility and accountability? If that were the case, I doubt the op would have subprime credit and be nominally employed.
You can shop using whatever tactics you want. The thing is a car dealers sell cars every day, so it's hundreds or thousands a month. You as a consumer may buy a new car every 6-7+ years. I don't care how low a price you negotiate, the dealer is still making money. And they can pretty much peg you as what type of buyer you are when you walk on the lot.
I for the most part use my own financing on purchases and negotiate a out the door price. I do work one dealer against the other. Back when I leased my work trucks I negotiated the payment because I needed a fixed cost for spending projection.
People need to stop thinking they're getting scammed. I hear that all the time. I bought a new car and got scammed. No you got buyers remorse. If you thought the price was too high why did you agree to the contract?
Dealers do occasionally lose money on deals.
If a dealer has a monthly, or annual incentive quota, and your car is one of the final few they'll take a few hundred dollar hit to make tens of thousands for making goal (I think planet money just did a report on this).
If a dealer has a monthly, or annual incentive quota, and your car is one of the final few they'll take a few hundred dollar hit to make tens of thousands for making goal (I think planet money just did a report on this).
While the dealership that recently sold us our Subaru did make some money on the process, we did end up getting a screaming deal on the car compared to what they usually go for- Subaru USA has 11-14 days of inventory in an industry where 60 is considered to be normal and they rely heavily on last quarter's dealer sales numbers to assign vehicle allotments and quotas for the next shipment out of Indiana. So we bought from a dealer willing to give us a price break on one car when it increases the odds of them getting a few more cars that are popular enough that they'll sell within a day of showing up as 'in transit' on the dealership web site. (Outbacks with MSRPs under $30K often sell like that down here.)
It's a scam in the sense that many people don't understand that the financing is not truly free; it's built into the price of the car.
Right, and its also worth noting that its built into the manufacturers cost, not the dealerships cost. The manufacturer sells the car to the dealership. The manufacturer offers the financing incentives and factory rebates. None of it touches the dealer.
So, you can't negotiate the price lower (beyond the rebate alternative for the financing). The $25,000 car cost the dealership $24K whether or not you finance.
Quote:
Originally Posted by GeoffD
Yep. And they land at the buy-here/pay-here lot buying that used beater that had the odometer rolled back. There's a GPS tracker in the car and a remote ignition shutoff. Oh yeah, and they're paying 18% interest. I'm always blown away at the percentage of use car loans written that are sub-prime. You are F'ed if you don't have a 640 FICO score.
Well, the worst of the worst credit scenarios do. I've seen scores in the low 500's drive out in a new car in the right scenario. They didn't have 0% financing, but they didn't have a remote shutdown or GPS on the car either.
I thought 0% was incentive for end of year clearance. With the vehicles in question already having some sort of markdown from MSRP. I seem to recall dealers receive additional discounts from the manufacturer to move older stock.
I would be surprised if they lose money. Otherwise does not the unsold vehicle go out for auction?
Well I shop new once every fifteen years. Current car may last 20years.
I am thinking the zero percent financing comes from the auto maker and not the dealership. Manufacturer would probably have more margin to play with and wants to move cars.
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