7 Year Loans-Even Honda Agrees They're Stupid

Status
Not open for further replies.
Originally Posted By: Tdbo

Brave words around here. I made the same point here several times and got blasted.
Absolutely true though. Excellent way to leverage your resources for a good return.
Some people have financial discipline and impulse control.


I know; debt makes some people feel uneasy. And that's fine for them; if the choices they make work for them, then that's great.
 
Originally Posted By: Pop_Rivit
Ah-the myth of 0% financing. I would assume you'd know that when 0% financing is offered, the price of the vehicle is usually inflated to make up for the finance charges or rebates don't apply.

You didn't really think that someone was going to let you use their money for 7 years with no return on their investment-did you?

My daughter bought 2014 Accord 9-10 months ago, we negotiated the price with cash payment, but I knew Honda had 0.9% interest for up to 4 years and $500 rebate for recent college graduate before I went to dealer. When we were with finance guy we asked about 0.9% and cash rebate, we deposited $10k with the remaining financed for 4 years.

Yes, you can get the lowest possible price without 0% finance then ask for it when you meet finance person.
 
Originally Posted By: Pop_Rivit
Ah-the myth of 0% financing. I would assume you'd know that when 0% financing is offered, the price of the vehicle is usually inflated to make up for the finance charges or rebates don't apply.
You didn't really think that someone was going to let you use their money for 7 years with no return on their investment-did you?


Originally Posted By: Michael_P
You might get some loan officer who says; "The smart money is financing cars as long as they can to free up assets for investing". Ive heard that line of malarkey before. A question I have is, of all those who would fiancee a vehicle for such a long time; How many actually invest the 'freed up' assets?


I could not agree more with the above. There is no free money.
First, a very small percentage of people taking out these loans actually have any assets to be invested. The loan that long simply allows them to have a new set of wheels, loaded up with gadgets and still make the monthly payment.

Second, the idea of investing the cash on hand and taking out the loan is great on paper. But most people forget to mention the pesky little tidbit of risk when it comes to investing . It can work our extremely well, but it can also turn very sour.

To me it's a matter of balance and not putting your eggs in one basket. I will be purchasing a "lightly used" car at the end of 2015 or beginning of 2016. Part of me wants to pay cash and have no debt, but part of me wants to invest the cash. I may end up splitting the difference and paying cash for a portion of the purchase, take a loan on the remainder and invest the rest of the funds.
But I will have to sit down, crunch the numbers and not base my decision on warm and fuzzy feelings.

I may even use the loan tactic to get a better out the door price on the vehicle, and pay off the loan on the first month due (provided the loan allows it without any penalties).
 
Originally Posted By: dishdude
It all depends on what the interest rate is. I'd finance for 84 months if it was at 0%
smile.gif



I am looking for a 1200 month loan at 0%. My estate will pay if I do not live to be 100.
 
Originally Posted By: Michael_P
You might get some loan officer who says; "The smart money is financing cars as long as they can to free up assets for investing". Ive heard that line of malarkey before. A question I have is, of all those who would fiancee a vehicle for such a long time; How many actually invest the 'freed up' assets?


I did just that. Technically I suppose I would have had to remove those "freed up" assets out of where they were making money to pay the dealer. Instead I left them invested. I put I think $100 of my own money down which is what I put down to hold the car. My down payment was on GM - rebates, incentives, and $ off the list price.

Actually I just made a payment this morning and was thinking about these threads that come up - so I looked at how much I have left if I carry the loan to term - somewhere around $6 or $7 a month in interest (average) for the next 30 months.

I gather that I (and probably many on here) will probably waste that much money dumping our oil early over the life of the vehicle.
grin2.gif
 
I picked up my 2011 Camry in... 2011. 0% APR. Not bad for a Toyota. Stripper model but I'm pretty sure it wasn't price inflation, it was an attempt to get the market going again after the crash.

I've never had a loan go to full term before. Even my 0% loan will get paid off early.
 
If I have a 4% rate mortgage and someone offer me a 0% 84 months loan for the same car's purchase price, I'd take that over paying cash.

However, there are usually extra discount if you pay cash over 0% or 1% loan.
 
Originally Posted By: Hokiefyd
I can't disagree either. But I think this is Honda's true worry:

Quote:
“Something has to be done to keep the market affordable, or consumer buying is going to have to change and we’ll have to return to less frequent purchases.”


Long-term loans probably discourage those under water from selling their vehicle...they end up keeping it longer...Honda sells fewer vehicles. Honda probably knows that once many consumers pay off a car, the very next month's dinner table conversation is, "okay, what am I gonna buy next?"


Yep.

But to play devil's advocate, what happened last time that new car sales slowed down? I know it wasn't just car sales that slowed down, but the ripple effect was massive.
 
Originally Posted By: daves87rs
Has no one heard of a down payment? Or buying what they can afford?

We have to go car shopping this year, and though we get some nice loaded cute ute or family sedan, we're just sticking with a nice simple base Cruze or Focus. (Extra discount helps here too) I want something I can pay off within a few years.

The wife and I have better ideas, like more money in our savings account (and retirement) and family vacations
smile.gif
Like houses, too many people buy what they want and not what they need... If I want a cute ute', I'll just buy a 5-6 year old Escape.....


If you go towards the Cruze - you might want to check out the GM CC if you don't have one, they have sent us promo "top up" rewards the past few years that are typically valid in January and February when the rest of the rebates they typically run have all but disappeared.
 
My last new car, I financed for 3 years, .9%. I could have written a check.....But for interest that low.......Why?

Financing a car for longer than most people keep one......Well, that is just nuts.

The car I financed for 3 years will most likely last me 10, at 30k miles per year. If we start driving less, from old age, it might last even longer.
 
thumbsup2.gif

Completely agree.
Longer loans, longer ownership, fewer cars sold.
Its stupid because Honda wants to sell more cars not less.
Every company that sells something wants to sell more.
 
This is all about banks and finance organizations looking for more profit, expanding their product lines. The manufacturers benefit by having customers buy more expensive cars. People don't plan. That's why they need the loan in the first place. Giving someone extra money in the way of interest payments so you can buy something you can't afford thereby raising the price is a fool's bet against themselves.

When shopping for a car people should make out a budget. In fact they should do that long before deciding they need a new(er) car. Maybe then they would make different choices.
 
Originally Posted By: HTSS_TR
Originally Posted By: Pop_Rivit
Ah-the myth of 0% financing. I would assume you'd know that when 0% financing is offered, the price of the vehicle is usually inflated to make up for the finance charges or rebates don't apply.

You didn't really think that someone was going to let you use their money for 7 years with no return on their investment-did you?

My daughter bought 2014 Accord 9-10 months ago, we negotiated the price with cash payment, but I knew Honda had 0.9% interest for up to 4 years and $500 rebate for recent college graduate before I went to dealer. When we were with finance guy we asked about 0.9% and cash rebate, we deposited $10k with the remaining financed for 4 years.

Yes, you can get the lowest possible price without 0% finance then ask for it when you meet finance person.



The exact same thing happened to me when I bought my Accord new.
After haggling the price to the bare minimum, they offered me .9% up to 60 months at no additional cash discount.
Since I was receiving a good return on investments, and could conserve capital as well; I accepted the offer.
Since I put down about a 33% downstroke, I have been able to cover the payments with cash flow.
Seeing whereas I had an 800+ FICO, bought a car within my means, took a reasonable finance term (48 mos.)and could afford to pay cash as well, I figured that I would do just fine. I have done just fine.
 
Originally Posted By: Hokiefyd
Originally Posted By: Miller88
It's great for the banks!


Banks generally don't play any part in 0% loans; there is no interest on a 0% loan, by definition, so there's no money to be made. Automakers offer 0% loans through their own financial institutions to drive sales. Banks are really not involved here.


Exactly, yet if they want to make a sale the dealership usually has ties to local bank with better, unpublished rates for those with good credit. My Nissan dealer did this in 2010. Not many Armada's were rolling and Nissan was offering somewhere around 4%. Told them no way 4% and they got me Chase for 1.9% 6 year. Obvious it was a pre-arrangement as I did not have to go to the bank nor did I have to wait for the papers. Dealer had the papers on hand.
 
Originally Posted By: zzyzzx
If I were dictator, there would be no such thing as an auto loan. Cash only!


I'm glad that those of us who know how to handle money would not be forced to endure a reign stifled under your expert tutelage.
 
I have been vehicle shopping and almost every salesman ask how much can you afford in monthly payments. I tell them I can't afford any monthly payments I deal in cash.
 
Originally Posted By: Hokiefyd
Originally Posted By: daves87rs
Originally Posted By: dishdude
It all depends on what the interest rate is. I'd finance for 84 months if it was at 0%
smile.gif



Sounds great until you realize you'll be making payments for 7 years though....
eek.gif



I'm all about making same-as-cash-payments for 7 years rather than dropping it down all at once. Invest the $25,000 and collect dividends off of it and make your payments as you go. In the end, you'll have more left than if you paid cash up front.

Debt can be a good tool, but only if it's used intelligently.


Yep, only problem is that some people go to Honda dealership looking to buy a $20,000 Civic...

But they drive away with a fully loaded Pilot due too the super low interest rate making the Pilot 'within their budget'
 
Originally Posted By: CT8
I have been vehicle shopping and almost every salesman ask how much can you afford in monthly payments. I tell them I can't afford any monthly payments I deal in cash.


Always get the best sale price cemented from the dealer first without discussing financing or trade in, if you have one. Discuss these as separate issues. It doesn't let the dealer use them as tools to think you are getting a "great deal". With financing I've found that in my case the dealer's dealings with local banks have been better than even my bank would offer. But this was discussed AFTER the sale price was agreed upon.

Whimsey
 
Status
Not open for further replies.

Similar threads

S
  • Locked
Next-Gen Ford Focus unveiled! U.S. and Euro models
2 3
Replies
48
Views
28K
mareakin
A
  • Locked
"Saudi cant pump enough oil to keep prices down"
2
Replies
22
Views
14K
Trvlr500
Back
Top