Recently I was watching television and a car ad came on that just seemed too good to be true. “0% financing for 60 months!” “No money down! Come see us and you can be driving a new car home today.” And it really got me to thinking about advertising and how a great deal on a TV commercial may not be such a great deal after all.
Let’s take for example that 0% financing deal. Sounds great right? You don’t have to pay any interest on your loan. However, what the ad doesn’t tell you is that 9 out of 10 applicants won’t qualify for that 0% rate. Granted, in the fine print at the bottom of the ad that even the fastest speed reader in the history of the world couldn’t finish, it does say that not everyone qualifies for the 0% rate. If you have a credit score higher than the national debt you just might get the 0% rate. But even that is sometimes not such a great deal since you will just about always pay close to sticker price and forfeit any offered rebate to get the 0% rate. Plus, the term of your loan may be limited, making your payment astronomical. Usually taking the rebate and financing with your credit union is really the better deal. And don’t even think about trying to get a 0% rate on a used vehicle because it will never happen.
So what if you are one of the 90% that doesn’t qualify for the 0% financing rate? You are already at the dealership, have driven the car and are ready to buy. When the salesman says you don’t qualify for the 0% rate because your credit score is not high enough (this could never happen to you at Members Credit Union because our loan rates are not linked to credit scores) your disappointment is palpable. Although you can’t get the 0% rate the salesman promises to do everything possible to make sure you drive home in a new car. He asks how much you think you can afford per month and he goes to talk to his manager or F&I (finance and insurance) guy. Fifteen minutes later the salesman returns and miraculously, after a lot of number crunching by the F&I guy, something close to the payment you said you could afford is presented. You see the rate is closer to 12% than 0% and the term is longer than you wanted. However, the payment is only about $20 more than what you told the salesman you could afford and you really like the car so you sign the paperwork and away you go.
A week or so later, after the euphoria of driving your new car has started to wane (the technical term is post purchase dissonance), you take a look at your paperwork and see that what you thought was a great deal maybe wasn’t so great after all. You are locked into a high rate for a longer term than you wanted and you notice add-ons for a credit life insurance, an extended warranty, and GAP insurance. If you have fallen into this all too familiar trap give your local Members Credit Union loan officer a call to see how we can extricate you from your high interest loan and overpriced warranty and GAP coverage.
Remember what sounds like a great deal may not be such a great deal after all. I can speak from experience about things that look great but maybe aren’t so good. Right after the car commercial the Magic Bullet infomercial came on and I ended up buying four of them. Anybody need one? I’ll make you a great deal!