The Facts about Special Financing and Rebates

After 9 years of being in the business, I can not beleive people still think that Special Financing and Rebates, either Dealer Cash or Customer Cash, is a good thing. The reality is, IT"S NOT !!!!!

Buying a vehicle that has either of both available, might look like a good idea, and it might "allow" you to "afford" a vehicle, wait to you either have to get rid of it, or you want to get rid of it. If you can't afford the car without 0.9% financing, your probably buying more than you should. If you think because you got $5,000 in rebates, plus you worked the dealer to buy it at invoice or really close to invoice, you got a deal, remember me telling you, you didn't !! Now, if you drive your vehicle into the ground, then yes, it might be good for you, but I don't see many people doing that. Must people buy a vehicle, drive it for a few years, and then they want a new one. There are several reasons for it: family got bigger/smaller, want the newest model, and the list goes on and on.

So, if you buy a $50,000 vehicle, but you reveived a $5,000 incentive on it, plus you got the dealership to discount the car another $3,000, your $50,000 now only cost you $42,000. What do you think the market for a year old, or two year old is going to be? If you got $8,000 off a brand new one, your trade-in value on it is $8,000 less right off the bat. There are certain sites that people swear up and down that are the holy bible, if it says it on the internet, it must be true!! Well it's not, they didn't take in consideration that the new version of your car is offering cash incentives, and no, your car is not in Excellent shape, most are not!!

This fire that was started by certain Automobile Companies to jump start the industry after 9/11, is a fire that they can't kill now!! And this fire is burning them not only on the profits on the new car, but it's pissing off the people that bought there car new, and no see that it's not worth what they, or the internet says it is !!!

FYI, coming from a car guy, 9 out of 10 times, your better off taking the money over the special financing. Your not going to most likely keep it till the loan is paid off, so why owe that incentive money on it?

daytonaviolet - 1/16/2009 1:04:18 PM

+2 Boost

It's so true! I worked in the car business for about 8 years. The amount of depreciation a car takes in the first 1-2 years is crazy anyway. And when there are major incentives on new cars it really kills the resale on the used ones. It's like kicking them when they're down.

Dutchman - 1/16/2009 1:20:15 PM

+2 Boost

Go to manheim dot com and look up your car under the sell tab and then internet MMR. This is what a dealer can buy "your" car for that you "stole" from the dealer because of your great negotiation skills and the fat rebate you got. How much does a 2008 Tahoe Z71 4WD sticker for new? $47K? but you stole it for 40,000 dollars. Below is the auction data for 2008 Z71 Tahoe's 4WD. Shocking huh. The sticker price doesn't mean sh_t when buying a high volume domestic car. I was in the business for years as well and all I ever bought was used cars. Why pay 40K for a Tahoe that stickered for $47 when I can pick one up at the auction for $31,000. Don"t you dare go to a dealership and accuse them of not giving you enough for your trade. Now you are the salesman selling your one year old car. Why would a dealer give you more then the auction. Drive what you can afford! If you can't take a 10,000 hit on your Tahoe then you CAN'T afford it.

10/16/08 BUTLER $32,900 4,851 Avg BLUE 8ET A Yes
12/03/08 STATESVL $33,500 79 Above BLACK 8ET A Yes
12/08/08 FAAO $31,800 18,501 Avg BLACK 8ET A Yes
12/08/08 FAAO $31,000 15,233 Avg BLACK 8ET A Yes
12/22/08 MANHEIM $34,500 321 Above BLACK 8ET O Yes
01/13/09 FAAO Regular $35,600 10,887 Above BLACK 8ET A No

autoenthusiast88 - 1/16/2009 1:23:40 PM

+1 Boost

Agreed, as a seasoned car guy myself I don't understand how any consumer could buy a vehicle with substantial rebates, then expect it to retain any resale value whatsoever. I would strongly suggest to anyone who is interested in such a vehicle, to explore the leasing option as an alternative. Of course this is only possible, if the manufacturer still offers that option. My management experience in high line automobile vehicle sales tells me that in most cases, you should also lease all vehicles which cost $50k or more. With the economy where it is today, why purchase a vehicle for the whole amount and lose a bunch of money when you trade it in, when you could have the bank do the same. No vehicle is really worth residual these days, even the high resale marks: Lexus, Acura, BMW, don't retain their values. Lease if you can, and only buy a vehicle with rebates only if necessary.

snatchandgrab - 1/16/2009 1:36:20 PM

+1 Boost

So true. Most cars depreciate 40-50% in the first 4 years.

ghosthunter - 1/16/2009 1:57:51 PM

+2 Boost

Cars that cost more, depreciate more (excpet very rare models).
just a week ago, i was in a Benz dealer, and without even asking, a dealer offered me 45K OTD price for a MSRP 55k E350. that's 15k off, or nearly 30% depreciate before the car is sold.
however, if you trying to buy a honda accord or civic, their price is pretty firm.

autoenthusiast88 - 1/16/2009 3:28:32 PM

+2 Boost

Actually most cars will depreciate 50% in the first three years or 45k miles of ownership. There are certainly exceptions to the rule, but from my experience that's almost always the case.

Ricks2Dogs - 1/16/2009 4:15:42 PM

+1 Boost

All I know is that every time during the last 10 years or so that I've been looking to buy a new car, the salesman always pushed pushed and pushed to lease, not buy. That tells any idiot that its to their advantage to lease. I leased one time and thats it for me, never again. Buy what you can afford, period. I wasn't even ready for a new car yet after only 36 months.

tundrahq - 1/23/2009 4:30:54 PM

+1 Boost

I think the best way to buy is to get something new that's as cheap as possible, then drive it until the wheels fall off. But if you can't (or won't) drive the same car for 10 years, there are only two good options left. Buy a late-model certified used or lease. Leasing is not for idiots sir, but it is a "buyer beware" situation. Leases are good because they protect you from a rapid drop in depreciation - a lease is based on a guaranteed future value. You take the present cost, subtract the future value, ad taxes, fees, and interest, and you arrive at a lease payment. If the leasing company (aka bank) under-estimates the depreciation, you don't owe them any extra. That's their loss. If the over-estimate depreciation, you have the option to buy the car at the agreed upon price and then sell it back to the dealership at the higher market price. The only downsides to leasing are 1) you have to drive the miles in your lease. Drive too many and you loose big and 2) you have to take care of the car you leased like it belonged to someone else. Often times leases are structured poorly, with "10k miles per year" leases being the worst. Very few people drive such a short distance. Still, if you understand the lease and you ask the right questions, you will do OK...but you should think about buying a cheap new car and driving it into the ground. That's the best way to go.

investor27 - 1/16/2009 5:03:40 PM

+1 Boost

Ghosthunter. You mean $10,000 off and that's around 20%. But keep in mind that the 2010 Mercedes E-Class just debut in Detroit and will go on sale in a couple of months. That's why you were offered such a deal. They are trying to get rid of the current 2009 generation before the next generation 2010 model comes. I say $20,000 off is a better deal for the E350 09 model now.

tundrahq - 1/23/2009 4:33:24 PM

+1 Boost

That's a very accurate analysis, but you'll never get that deal. $20k off is impossible - the dealership would need to loose money to make the deal. While your valuation is accurate, it doesn't reflect the market, so it's not very pertinent. It's sort of like saying we shouldn't let everybody vote - it's true, but not at all relevant.

investor27 - 1/16/2009 5:04:44 PM

+1 Boost

But if they can give me $10,000 off on the next generation 2010 E350, I'll get one for my parents.

philippz - 1/16/2009 5:08:14 PM

+3 Boost

If you're going to keep your car for less than 4 years you're stupid to finance, you should lease!

dwatson - 1/16/2009 11:31:27 PM

+1 Boost

AMiodynski-

I think you brought up some great points in your article. I'm not trying to be an a**hole but I think your typos and grammar issues make it harder to give you credibility.

I hope I'm not being ignorant since I am not sure if there is a language barrier. What I do know is that if a salesman or a financial adviser wrote me an email with grammar like that I would certainly not return.

AMiodynski - 1/17/2009 5:56:16 PM

+1 Boost

Sorry, I thought I proof read it and it was fine.

mac075 - 1/17/2009 12:56:08 AM

+1 Boost

Leasing and buying are very personal needs. Having done both, I can't say that I prefer one over the other. Either way a vehicle is a depreciating asset, but in the end it should be the car that you really like (REALISTICALLY - Not some $350,000 Maybach!!!!), that fits both your needs and your budget. Sometimes we like things we can't afford, but we don't always NEED them! I may have lost money over the years on buying and leasing cars, BUT during each experience it was the actual vehicle that fit me needs at that time, so I was happy driving to work to make money for the car payment! No matter how you slice it, it's a lose-lose situation... SO drive the car you can afford BUT that you really like and don't settle for something you'll hate driving after the new car smell disappears! This ain't no dress rehearsal!

AMiodynski - 1/17/2009 5:58:11 PM

+1 Boost

Leasing a vehicle os great for people that like to have a new vehicle ever few years. It's also good for people that drive alot of miles.
Buying a vehicle is good if you are actually going to keep it past the loan term, or you like driving them until they are useless.

dbissett - 1/17/2009 8:32:41 PM

+1 Boost

I thought leasing was a good deal for people who DON'T drive a lot of miles. So many lease deals I see are now priced for 10k miles/yr, which in Houston is nothing...for many people that barely covers commuting to/from work. When I was working out of the house I burned 20-25k/yr and I didn't think leasing was ever a good deal at that level.

tundrahq - 1/23/2009 4:41:05 PM

+1 Boost

I've actually seen leasing work for traveling salespeople, but the lease deals are nothing like what you see advertised on TV. High mileage leases are tailored for business for sure. While I don't think leasing should be outlawed (as a couple have suggested), I absolutely believe that teaser leases (super low mileage deals like 8-10k per year) should be discouraged.

tundrahq - 1/23/2009 4:37:54 PM

+2 Boost

Good for you. I'm going to guess and say that you're either 1) a very disgruntled car vet who can't stay at the same store for more than 6 months 2) a completely ridiculous greenpea or 3) a pretender who listened to the Jerky Boys. No matter which you are, I doubt you could sell p*ssy on a troop train.