Wednesday, December 31, 2008

The Joys of Special Finance




The ads are everywhere, and they seem to promise you a brand new car for a little bit of money down. Most people can probably walk in and buy one. But is it worth it? Let's take a look at what you get for $199 down...

2008, pretty much last year's model
Kia Spectra, a great car but horrible resale value
5-speed transmission, hope you can shift for yourself
Several hundred miles from tons of test drives because some people DON'T qualify after all

OK, so maybe it's not the best car in the world. I'm sure Hyundai has similar deals on Elantras, Toyota might sell you a Yaris for that, and Mitsubishi has some basic Lancers they could toss your way. But let's see what this deal ends up costing you in the long run.

$199 down payment
MSRP of $16,790, you pay full retail
72 month note, you get 6 years of high interest
Payment isn't very low either, try $400-$450 a month!

That's $30,000 or more for a $17,000 car. OUCH!!!

A better bet would be to find a ten-year old economy car for cash. 1998-2002 Chevrolet Prizms and Toyota Corollas come to mind, as well as 1996-2000 model Honda Civics. The 1996-2002 Mitsubishi Mirage is also an excellent deal for what they sell for these days. You can spend $1500-$3500 in cash and not have to think about car payments, interest, resale value, or full coverage insurance premiums. When you're done with the car, it'll still be worth most of what you paid.

I imagine at the end of that 6-year note, the Kia wouldn't even be worth $3500. That's a lot of depreciation, plus all the interest you pay.

Caveat Emptor!!!

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