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Study on Auto Finance, Purchase Decisions
grapevinetx
Member Posts: 89
in General
In July, Kelley Blue Book released the results of a consumer study showing that economic factors are influencing more car buyers to pay with cash. An excerpt is below, see kbb.com to read the entire article.
How does this fit with your experience or plans, from either the buying or selling perspective?
"Twenty percent of new-car shoppers and 42 percent of used-car shoppers said they plan to pay the entire cost of their next vehicle in cash. 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)."
How does this fit with your experience or plans, from either the buying or selling perspective?
"Twenty percent of new-car shoppers and 42 percent of used-car shoppers said they plan to pay the entire cost of their next vehicle in cash. 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)."
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Comments
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
VISITING HOST
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.
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.
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."
Rule #1 in business (and life) - Everything is negotiable!
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.
I like Corvettes, and a big dealer here on the East Coast is Kerbeck. Go there and you'll see multiple new Corvettes with 5-10% discounts off MSRP, then you have the choice of a $3,000 rebate or 0% financing for 72 (for qualified buyers - good credit score).
And yes there is no 1 right answer as to what is the best way to buy a vehicle. That is because the demand for a particular vehicle, the overall demand for vehicles - the overall economy, bank rates, manufacturer's offers that particular month, what you can make on cash you have - are you a good investor, all play into what the right decision is for you on that day buying that particular car.
In summary I advise - get money smart. Learn to figure it out yourself, rather than expecting that there's a Carbuying for Dummies book that can give you the answer. As the title of this forum suggest - Study. A course, or some home-schooling with an old textbook on "Managerial Finance" would help many people manage their $ better.
I agree. Incentives may not get someone to buy something they don't like or want, but only an idiot would ignore these matters and their impact on cost when purchasing a vehicle. I've decided on a vehicle from my list of finalists based on incentives whether discounts, rebates or 0% financing. However, I wouldn't pick something like a CR black dot Chrysler even if the incentive was largest.
What I find surprising sometime is how people will fight over incentives, interest rates, and even balk at doc fees, but seem ready willing and able to roll negative equity into the next deal.
It's almost as if shopping for a car is all about the monthly payments, and the actual cost is somehow lost in the clouds somewhere.
Stimulus dollars stem from taxes we've paid and/or are paying. Thus, I resent my money being used to jumpstart a laggard economy when, with patience & due suffering, Natural Economics should be applied.
sympathy for a naive and greedy homeowner
The greedy homeowner is not naive, but cunning for his own selfish purposes.
The Wall Street Wolves weren't taking the locally approved loan applications. They were being "sold" by commissioned mortage brokers right here in Hometown, USA.
"No Down = No Responsibility" = No sympathy at all for the undeserving loan applicant/homeowner.
Spending nothing during a catastrophic financial meltdown would be national collective mass suicide. I mean, even conservative economists do not take the view of non-intervention in such grave situations.
But regardless, getting back to point here---just because consumers made bonehead moves does not give dealers, or investment bankers, the right to deceive them.