I just discovered this forum, and after reading a few posts, my extreme distaste for this marketing scam boiled over.

THERE'S NO SUCH THING AS O% FINANCING.

Ask your dealer what the straight cash price is, then ask him what the price is if you finance. Guess what, it's $3000 more if you go the financing way. You just paid $3000 worth of interest on a 0% FINANCING PLAN.

This is a huge scam that the auto makers continue to get away with, it AMAZES me how many people fall for it. I can't believe that 60 Minutes or something hasn't exposed 0% financing for what it is.

Waxy

 

I've bought a Ford with 0% financing under invoice and lots of others have too. Sounds like either you have a crooked dealer, you're not negotiating hard enough, or your credit rating means you're a risk.

 

I'm not sure what you're talking about. I've signed plenty of 0% contracts where the box labeled finance charge says "ZERO." If you're referring to the fact that 0% financing is an alternative incentive to a cash rebate, how is this a scam? Everyone is told upfront that they get the rebate or the low rate, but not both. The "cash price" is lower when you deduct the rebate, but that assumes two things: (1) your cash is sitting in a mason jar in the basement, earning no interest, and (2) people never finance when they take the rebate.

As for our dealership, we always figure the payments both ways: 0%, or local bank rate with the rebate. Many times, if the customer has good credit, they'll have a lower monthly payment with the rebate. But to call it a "scam" is over-exageration when the customer has a choice.

 

Quite frankly Ken, I find that a little insulting.

I contacted almost every dealer within a 500 mile radius when I was looking to buy my truck, I bought the truck, cash sale, for well under invoice, and my credit rating sparkles.

Every dealer I contacted gave me the same story, my father got the same story when he was shopping for a Chebbie half ton, my uncle got the same story when he bough his new Grand Cherokee. I could go on citing examples, but you get the point.


Sure you bought it under invoice, but what would the price have been if you'd have paid straight cash? Maybe you lost out on $3000 worth of financing fees and you didn't even know it. Guess you should have been more informed and bargained harder.

Then again, maybe it's just a Canadian thing.

Waxy

 

1956MarkII, I was hoping you'd jump in here, I can see what your getting at, so let me try to clarify my point.

My point is this. There's no such thing as free financing, which is what I equate 0% with. You're given a choice, cash price with rebates, or higher financed price. In effect, the higher price you pay if you go the financing way is equivalent to the price you pay if pay the dealer straight cash and then finance through a bank. I think that this is the part that is misleading, people think they are borrowing the money for the vehicle at 0% aka FREE, when in fact they aren't, it's built into the purchase price of the vehicle.

Waxy

 

What did I say that was offensive? They aren't scamming anything. They clearly advertiser 0% OR x dollars cash back. If a person doesn't go into a dealership knowing exactly what vehicle should cost them with rebates, special financing, incentives, etc. then they've skipped the most crucial part of negotiating a vehicle purchase: doing your homework in advance of going into a dealer.

Go for the bottom line total price. That's the power of negotiating. Go to edmunds.com, kbb.com, etc. and find the invoice, subtract the holdback and add the destination. That's the dealer's price, not including incentives and lot fees. Research the incentives as well. Add to that what you believe is a reasonable amount for profit. Give them the price you'll pay and walk if they won't take it. Don't spend hours with a clown talking to his manager. Either he says okay or you walk out without a further word. Don't add bogus rustproofing, financing insure, fabric protection or the other scams. Don't let them charge "dealer prep" either. That's removing the plastic covers from the seats and washing it. Then figure out which costs you more, the 0%, or standard interest+rebate, or the one payment plan. Take the lowest. We bargained 4 dealers against each other for 2 weeks. We walked off the lot during the final trip. Salesmen chased us down --- the power is the consumers, not the dealers because you can buy from any dealer. After we had the price we wanted agreed to they were taken by surprise when I pulled out interest rate/payment tables I'd printed in advance (plus my calculator). I knew exactly what any given price should cost me at any given rate. With the car before that we got 0% plus a ratebate (back in 1998). So long as you don't get emotionally involved in the sale (that includes getting angry), you win. Its nothing personal..... its a business transaction.

 

I see your point now, and I'm glad you brought this up. This is a crucially-important point when buying a new vehicle, and often misunderstood. When you're negotiating the price of a vehicle, that's all you're negotiating: the price at which the dealer is selling the vehicle to you. Incentives should never be part of the negotiation; they come later, and including them in the selling price only leads to misunderstandings. Hell, I've got local dealers including the rebate in the customer's trade-in allowance to make it look like they're giving more for the trade than I am. And customers fall for it! I tell them that's fine- go back to the dealer and tell them you still want that inflated trade-in figure, but now you want the 0% financing. Then stand back and watch the little tap-dance the dealer has to perform!

Rebates and 0% financing cost the dealer nothing. It makes little difference to me whether you take the rebate or the rate. Now, I prefer that you take the rebate and finance the rest, because the local banks pay us a "finder fee" for every contract we send them, so it adds a little to my bottom line. Some banks go so far as to let the dealer mark up the rate and keep the difference, which can mean thousands of dollars in extra profit for the dealer. We don't do that, but I'm not ashamed to take $50-100 from a bank for doing the paper work. That's why it pays to shop around on the rate before going to the dealer. Let them know what rate you can get;if they can match it, why not let them do the paperwork?

As for rate vs. rebate, here are the numbers on a Taurus I'm delivering tomorrow morning. If they took the 0% for 5 years, no money down, their payment would be $355.98/ month. But, because they have reasonably good credit, a local bank is giving them 5.79% for 60 months. Again, no cash upfront, but with the $3,000 rebate as down payment , the payment is $353.13. You'd think the payment would be higher with the 5.79, but they're borrowing $3,000 less to start . Our selling price for either loan is exactly the same.

I've gone on way too long here, but I hope everyone sees my point. If your dealer appears to be playing "three-card-monte" with incentives, get up and go find another dealer.

 

I noticed a footnote on the ford website Incentives and finance page that reads something like 0% intrest costs 16.75 per thousand dollars financed for 12 mo. 26.50 per thousand for 24 mo. etcetera.... Those amounts aren't accurate I'm going by memory. Maybe this is what he's reffering to when he's stating that 0% is not free. I'm not sure either, but Credit Union rates today will tack about 7500.00 over 60 mo. so my opinion is 3000.00 is not to bad. Of course if your paying cash well 33000.00 out of pocket now in this economy?
3000.00 is cheap insurance. I'll keep my cash right where it is.
In the bag under my bed, beside the .357 full of black talons. on the other side of the door from Cleopatra APBT.
Finance my truck? Oh you betcha!
Franklin

 

There are good dealers and bad dealers. When we bought the car in 1998 it was a great experience. In 2000 when we bought another truck we had to fight tooth and nail for every penny (same dealer, new owner).

 

Now that you guys figured that out explain BANK MATH to me. 5% of $30000 to me is $1500. How does the bank come up with their figure? Maybe that's what Waxy is talking about, BANK MATH. 0% just might be $3000 over 60 months.

 

The trick with what you call Bank Math is compound interest. 5% equalling 1500 would be right if they only figured it once. But what they do is take 5%, divide it by twelve (months), and then actually figure the interest at 5/12 of a percent per month and basically refigure it monthly. Effectively then you are paying interest on interest. Another way of looking at it is they figure up the interest, and then when you make your payment you are paying that interest plus some of the balance. Since the balance doesn't go down by as much as your payment amount, you end up paying more in interest than if they figured it once a year. If that doesn't make sense, I can try again.

 

$30k @ 5% for 5 years is $3968.40 (unfortunately it's not only $1500)

the first year alone you pay $1,268.80 in interest. 2nd year will be less...and so on.

basically...you don't pay the interest just once....you keep paying interest over and over again on the balance you still owe, month after month (until you pay it in full).

does that help?

 

Zero percent is a gift, not a scam. The $3000 rebate difference pays more in interest earned over the time of the loan than anything saved in the upfront sale. Each month, I'm paying 1/36th of the price that I demanded, not what the dealer railroaded me into accepting. No more, no less than that. And the cash is still accumulating interest. A readily affordable expense each month, and I get the truck out of it, too. What a deal.

 

There's no scam involved with Ford's 3yr o% financing.

I just pulled my papers out and looked over them. The amount I financed is the total purchase price minus the amount I got from my trade-in. The tax and transfer fees were added onto this total and the monthly payment is exactly 1/36th of that total.

I bought it last August and there were no rebates for the 2003 SDs at the time. I didn't talk the dealer into lowering the sticker price, but I did get them give me a bedliner, molded mud flaps and a Ford factory tow hitch which they ordered and installed a few days later.

I may not negotiate the cheapest deal when I buy a new vehicle, but I d*mn sure know my financing and numbers. When I go to buy, I tell them what I want on my trade-in and any extras I want thrown in with the purchase. If they can't do it then I go shopping until I get it.

 

I think this kinda makes my point, though obviously not everyone sees it this way.

My point is, 0% is not FREE Financing. The price is the same, and often higher (bank rates around here are about 4.9%/60 months), if you finance it through Ford rather than negotiating a cash price and going through the banks.

Obviously everyone here is a very savvy shopper and always gets the best deal, but I don't think it's always the case. I think too many people's PERCEPTION is that they are getting the car without paying interest for 3 years. Deliberately or not, I think people are led to believe that they are buying a new vehicle without paying any financing fees, when in fact they are. Not everyone does their homework as Ken suggests, and not every dealer is as honest as 1956MarkII's is.

Statements like

Quote:

Each month, I'm paying 1/36th of the price that I demanded, not what the dealer railroaded me into accepting. No more, no less than that.

also make no sense to me. Work out your best cash price, go to the banks, shop for your best rate over 3 years, figure out the total cost of the loan if repaid according to schedule, and divide it 36. Voila! Each month you're paying 1/36th of your non-railroaded price.

1956MarkII, I'm not sure on this, so correct me if I'm wrong, but I believe that the Ford payment plan is fixed, ie you pay the financing fee (interest) up front. If so, then the banks offer you another major advantage by allowing you early, penalty free payment. For example, on the loan I negotiated, I could walk in and pay it off tomorrow if I were to win the lottery without having to pay another cent in interest or closing fees. I can also drop a $1000 on the principle anytime I want without penalty.

For the record I'm in no way associated with the banks, in fact, I have a rather large distaste for them as well, making a billion dollar profit while paying pathetic interest rates and charging insane user fees, what a great institution.

Ken, as for insulting, I probably overreacted a little, but it seemed to me that rather than address the post you attacked my dealer, my negotiating skills/knowledge, and told me I was a credit risk. I got a little peeved.

Waxy