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Thread: The truth about financing

  1. #1
    Senior Member AlphaMicra's Avatar
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    The truth about financing

    We've been reading a lot lately about financing. I'll start by summarizing the truth: Financing is for people who don't need it. And now, if you'll indulge me, I'll quantify that statement.

    When I was a young adult, I bought into the myth that financing was to help a person get started in life. You know the old story; you need a car to get the job, but you need a job to get the car, so you get the job and finance the car so you can keep the job. Unaware that the Micra existed, I settled on a very base model Mazda 323. A rather ugly looking hatchback, it was stick shift and no air (nor any other option for that matter). I had a job with a promise of full time hours if I had reliable transportation. Unfortunately, as some members have already discovered, I did not qualify for the regular finance rate. This was the reason why I bought my Micra, a 1990 model, in 1995; I could manage to buy a car worth $2500, and, for that money, the Micra was a safe bet for something that was reliable, not worn out, and inexpensive to run.

    Fast forward almost two decades. Thanks to that Micra, I had been able to build a career, get married, buy a house, have a kid...you know, live the Canadian dream. I'm in a position where I could, if I wanted to, buy the new sub-$10k Micra for cash. In fact, my credit limit on one of my credit cards would buy a base model Micra, with taxes, delivery, and PDI, two times over. I would never be so foolish as to indebt myself to an evil credit card company that much, so as a rule, I never carry a balance. I use my cards like cash, and reap the benefits of points and cashback at no additional expense to me, but probably at the expense of poor suckers who do carry a balance. I digress.

    1.9% is very cheap money. So cheap, I was suspicious at first, so I walked in with my chequebook, and I asked what the cash purchase price of a Micra SV, with convenience package and brilliant silver paint, would be. When I learned that the price at 1.9% was the cash purchase price, I immediately understood its true purpose: If a person has a good enough credit rating to qualify for a Micra SV at 1.9%, that person could afford a more expensive (and more profitable to Nissan) vehicle.

    And that, my friends, is the true purpose of the 1.9% financing on the Micra. It's set up so you need to be able to afford the payments over a period of, at most, 4 years; after that, it goes up. Such payments could be used to sell more profitable vehicles for longer terms; after all, what's another two more years of payments for a "Nicer" car? Thing is, for the same reason credit card companies have to award points or cashback to people who never pay a cent in interest charges nor a dime for the use of their card, so does a car company that offers a low purchase price or low finance rate have to make good on their promise designed to fleece customers for more.

    You want to know what's funny? Midway Nissan sold two Micras. One was a base model for cash, the other was mine. Do you think it's coincidence that they only got one Micra, and not one that was sold? I'll bet that the base model and mine will be last on the train from Mexico.

    That 0% financing on Hyundai's? The financing is rolled into the price of the car, so you're spending more on the car than what it's actually worth. Again, it may still be a good deal on a bottom end car (like Nissan's 1.9%), for the purposes of luring buyers to upsell them to more profitable vehicles or, for a desparate car company, just to get market share.

    It's an insane game, but once you've figured out the rules, you can make it work in your favour. At the end of the day, the Micra SV is a very good car for its price at 1.9%. Then again, a 2009 Hyundai Accent is also very good car for its price. Back when I bought my Micra, it was the car people loved to hate because of its apparent cheapness. Today, the Hyundai Accent is the car people love to hate for the same reason. The difference today is the fact that even a modern Hyundai Accent is many times the car my Micra was for the same price, accounting for inflation.

    Nostalgia is a powerful thing. While I might justify my purchase by reasons of price and economy, the real reason why I must have a silver Micra is the same reason why I still own a Commodore 64. I am a self-confessed Micra nut, as well as a Commodore nut. It's also probably the reason why I own a Pentax DSLR, as I started photography with a metal K1000 at around the same time I got my first Commodore 64.

    You need to do what's right for you, and if you don't qualify for the great financing offers, it's because it's not meant for you; it's meant to try to fleece sheep with a thicker coat. Look out for number one.



    In our culture obsessed with absurd excess, the Nissan Micra is my counterculture car of choice.
    Be sure to visit my blog at mymicra.com!

        __________________________________________

        click to view fuel log View my fuel log 2015 Micra SV manual: 6.4 L/100 km ... 44.3 mpg (Imp) ... 15.7 km/L ... 36.9 mpg (US) ...


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    I gotta say, the amount of people who don't qualify for financing on a Versa note at the advertised rate is Abysmally low. Nissan is extremely accepting of their entry level finance offers. If you have a pulse, you can get the advertised rate.

    Almost every time you see a car with 0% financing, it has a cash rebate. The Micra is a situation of having very low financing with no cash incentive to offset it. If people are having troubles wrapping their mind around the 5.9 rate on the 9998 model, consider it this way. They're not offering any special rate on the base model, instead they already applied their own rebate of $1500 but you have to arrange your own finance, or take the 5.9. (avg used car rate)

    Hopefully that should help you wrap your mind around whats going on here. Cars that have 0% or 0.9% financing also have cash rebates for cash buyers. In other words. It depreciated on the lot. A car with msrp of 20,000 is now worth 18 on the market. If you pay cash or do your own financing, they will sell it for 18. If you're financing it all, they will do that for you, but not at what the car is actually worth. They're charging you 2 grand more than everyone else to finance it at 0%. Just pay the interest up front and they can extend that.

    Why doesn't the base model have 1.9% as well? It's not taking advantage of you for wanting a simpler car, it's just that they already applied an internal cost adjustment to it so it's MEGA INEXPENSIVE. (Other words, a rebate)

    I have even crazier news for people as well. 5.9% is a better option! Why?

    It's better to buy the car cheaper and pay a higher interest! Why? If you pay the loan off early, you end up paying less interest. Whereas if you took the 0%, you already paid the full interest up front! No cost advantage.

    Furthermore, if you have a trade or 5 grand down, then the amount of interest you pay is further reduced. Again, an advantage you DONT GET with 0% offers.

    Practically speaking, it's almost always more advantageous to take the cash discount than taking 0% financing.
    For the Micra, think of it as a secret cash rebate already applied that gives you the freedom to
    A) Pay off early and save money. An option the 1.9'ers get less advantage out of.
    B) Trade or large down payment = more equitable.
    or C), Arrange your own financing through a mortgage, line of credit or bank financing at <4.9%.

    Since you've already benefitted from taking the internal non-optional cash rebate of a 9998 car, any savings you add now is advantage you have over the 0, 0.9 or 1.9 percenters out there.

    So everyone should stop complaining that that they're getting much more value than a Hyundai, and with more flexible payment options.

  3. #3
    Senior Member AlphaMicra's Avatar
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    Quote Originally Posted by nintu View Post
    I gotta say, the amount of people who don't qualify for financing on a Versa note at the advertised rate is Abysmally low. Nissan is extremely accepting of their entry level finance offers. If you have a pulse, you can get the advertised rate.
    A young adult starting out with their own life with a brand new job and brand new apartment will never qualify for the advertised rate at any car dealership, and Nissan is no different. They will be told they need to "Establish" credit first. I'm just saying they can do it in a better way than paying over 9% on a new car.

    In our culture obsessed with absurd excess, the Nissan Micra is my counterculture car of choice.
    Be sure to visit my blog at mymicra.com!

        __________________________________________

        click to view fuel log View my fuel log 2015 Micra SV manual: 6.4 L/100 km ... 44.3 mpg (Imp) ... 15.7 km/L ... 36.9 mpg (US) ...


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    Senior Member aftica's Avatar
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    Something very, VERY slimy is going on here. Did I just read that correctly that the base model financing rate is 5.9%?

    I know a higher rate on the lower priced model is just a bait and switch marketing technique...they lure people into the dealership with the low price and without having to advertise it as ''CASH ONLY'' price. (which would then be ''so, like whatever, yawn'' because it doesn't apply to most buyers.

    BUT 5.9%? seriously? I was not told that just yesterday. I was told 4.9% (while I hold a bill of sale @ 1.9%)

    At 5.9% over even just 4yrs your elcheapo Ten Grand Tin Can just cost you close to 15K (14,720) LOL!!!!!!

    Luckily for Nissan and all car dealers (retailers, stores or even studios! lol, love how they try to white wash their slime these days) most buyers just go gaga for shiny paint and a low ''payment number''

    Nothing ever changes with car sales. What a joke.
    Ten Grand Tin Can

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        click to view fuel log View my fuel log 2015 Micra S manual: 5.3 L/100 km ... 53.2 mpg (Imp) ... 18.8 km/L ... 44.3 mpg (US) ...


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    With all due respect, read the thread. I feel like you either didn't read, or fail to comprehend what was already mentioned regarding this.

    The cost of borrowing along the term you described is 1604.04. That's what interest is charging you. If you add 1604 to the base model, you're at 12,904. (These numbers include freight as all my numbers always do)
    12,904 vs
    SV @ 15,233 + Interest at 1.9 598 = $15,831

    So there you go slugger.
    12,904 for Base model
    15,831 for SV.

    Difference between the 2 packages is $2,927.

    In other words, EXACTLY what I was saying in my previous post. 3,000 for Air, power options, etc..

    Once again, I hate it when people moan about interest rates like this. We will be glad to give you 0% financing for 12,904.

    Or, the BETTER(read, BETTER) option is to buy the car for 1500$ less, and pay a higher interest so you have more payment flexibility.

    It is MORE BENEFICIAL to take the 1500 and finance at 5.9 then the option you're obsessed over. It's not skanky marketing. It's actually literally better for you, the customer to market and sell the car this way then to have originally priced the car 1500 more, and offer 0%.

    2 more things.
    A lot of people are capable of getting 4.9% through the bank and are more than welcome to at this price. So really, it's a fall back rate incase you cant get it through the bank.
    And Regarding eligibility, I've financed people through Nissan Canada who have been working at mcdonalds for 9 months, had 1 credit card with $1000 limit, and no cosigner. As I said, Nissan Canada is very good with their financing towards new credit customers or low credit customers.

    (my prices didn't include tax on either sv or Base model since it varies from province to province and to keep things simple)

    Quote Originally Posted by aftica View Post
    Nothing ever changes with car sales. What a joke.
    You're the reason. You're the reason nothing "ever changes with car sales" and marketing. Because you didn't take the time to read threads

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    Senior Member aftica's Avatar
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    Quote Originally Posted by nintu View Post
    With all due respect, read the thread. I feel like you either didn't read, or fail to comprehend what was already mentioned regarding this.
    I love it when a guy starts off ''with all due respect'', because you know immediately that he figures his subject is due none.

    My numbers are not wrong. A $9998 with zero down @ 5.9% over 4 yrs will cost in total $14,720 give or take a couple bucks.

    It slimy when they don't mention the higher interest rate on the base price car until you're in the dealership. I'm not saying that Nissan is the only one to do it. I know this is a Nissan friendly site, but I have absolutely NO brand loyalties, so I won't be blowing the FanBoy sunshine up anyone's arse.

    My post is aimed solely at the $9998 price they are trumpeting, while not mentioning that it is a de facto cash deal only, due to the much higher interest rate for this model.

    The whole thing clearly stinks. Whether or not they get called on it, (beyond the odd guy like me) I don't know.
    Ten Grand Tin Can

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        click to view fuel log View my fuel log 2015 Micra S manual: 5.3 L/100 km ... 53.2 mpg (Imp) ... 18.8 km/L ... 44.3 mpg (US) ...


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    Quote Originally Posted by aftica View Post
    I love it when a guy starts off ''with all due respect'', because you know immediately that he figures his subject is due none.

    My numbers are not wrong. A $9998 with zero down @ 5.9% over 4 yrs will cost in total $14,720 give or take a couple bucks.

    It slimy when they don't mention the higher interest rate on the base price car until you're in the dealership. I'm not saying that Nissan is the only one to do it. I know this is a Nissan friendly site, but I have absolutely NO brand loyalties, so I won't be blowing the FanBoy sunshine up anyone's arse.

    My post is aimed solely at the $9998 price they are trumpeting, while not mentioning that it is a de facto cash deal only, due to the much higher interest rate for this model.

    The whole thing clearly stinks. Whether or not they get called on it, (beyond the odd guy like me) I don't know.
    Yes, but that 14,720 is including tax. It's not 4700 in interest, it's about 1,500 in interest. And once again, it's not slimy to lead with the most cost beneficial offer to the customers. It would be weird as hell for them to advertise

    11,500 at 0% financing!!?@#!@?#!@#?hyundai!?@#!?@#1231231i23812 u83 Yay!
    or 9993 if you pay cash or want the better, most cost efficient option.

    Which is what you're advocating. I don't understand the entitlement of people to get free money from a company that isn't a bank. They're OFFERING you money at a bank competitive rate. Do you have to take it? Not in the least.
    Scary thing? Even if you take it, it saves you more money than the 11,500 @ 0%.

    "Why can't you finance me at 0%?! Hyundai can! My credit is Great!"
    Oh god... Oh god you really thin--- Oh god...

    Again, you understand that concept right? Car companies aren't banks. They build cars. Their interest rates are ways to confuse you into paying more for the car.

    To clarify. 0% financing is worse for you in almost all cases. Do you understand?

  8. #8
    Senior Member aftica's Avatar
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    Quote Originally Posted by nintu View Post
    Yes, but that 14,720 is including tax. It's not 4700 in interest, it's about 1,500 in interest. And once again, it's not slimy to lead with the most cost beneficial offer to the customers. It would be weird as hell for them to advertise

    11,500 at 0% financing!!?@#!@?#!@#?hyundai!?@#!?@#1231231i23812 u83 Yay!
    or 9993 if you pay cash or want the better, most cost efficient option.

    Which is what you're advocating. I don't understand the entitlement of people to get free money from a company that isn't a bank. They're OFFERING you money at a bank competitive rate. Do you have to take it? Not in the least.
    Scary thing? Even if you take it, it saves you more money than the 11,500 @ 0%.

    "Why can't you finance me at 0%?! Hyundai can! My credit is Great!"
    Oh god... Oh god you really thin--- Oh god...

    Again, you understand that concept right? Car companies aren't banks. They build cars. Their interest rates are ways to confuse you into paying more for the car.

    To clarify. 0% financing is worse for you in almost all cases. Do you understand?
    Again, I get it. Companies do it all the time: Advertise 0% and then a lower ''cash'' price.

    In this case it is not so. People who truly need a cheap car will be drawn in by this clever (but slimy) campaign. Because the car, like you said, is not really 9998 it is much more due to the unadvertisedhigher interest rate at this particular price.
    Ten Grand Tin Can

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        click to view fuel log View my fuel log 2015 Micra S manual: 5.3 L/100 km ... 53.2 mpg (Imp) ... 18.8 km/L ... 44.3 mpg (US) ...


  9. #9
    Senior Member AlphaMicra's Avatar
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    Quote Originally Posted by aftica View Post
    Again, I get it. Companies do it all the time: Advertise 0% and then a lower ''cash'' price.

    In this case it is not so. People who truly need a cheap car will be drawn in by this clever (but slimy) campaign. Because the car, like you said, is not really 9998 it is much more due to the unadvertisedhigher interest rate at this particular price.
    However, if you're in a position to be able to shell out $10k for a car, it represents incredible value. But then again, you wouldn't need financing, would you?

    FWIW, all car companies are slimy, at least Nissan is more up front than the likes of Hyundai that bury it with the mythical 0% financing. Any time I see 0% financing advertised, the level of sliminess multiplies tenfold.

    In our culture obsessed with absurd excess, the Nissan Micra is my counterculture car of choice.
    Be sure to visit my blog at mymicra.com!

        __________________________________________

        click to view fuel log View my fuel log 2015 Micra SV manual: 6.4 L/100 km ... 44.3 mpg (Imp) ... 15.7 km/L ... 36.9 mpg (US) ...


  10. #10
    Senior Member aftica's Avatar
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    Quote Originally Posted by AlphaMicra View Post
    However, if you're in a position to be able to shell out $10k for a car, it represents incredible value. But then again, you wouldn't need financing, would you?

    FWIW, all car companies are slimy, at least Nissan is more up front than the likes of Hyundai that bury it with the mythical 0% financing. Any time I see 0% financing advertised, the level of sliminess multiplies tenfold.
    Agree 100%. Don't know about Hyundai but have seen others advertise 0% and in the same ad, the lower cash price. So st least you know up front that you are being slimed!

    With this 9998 campaign all anyone is talking about in the open is that price. So it is a clever campaign. Just kinda sleazy IMO.


    Ten Grand Tin Can

        __________________________________________

        click to view fuel log View my fuel log 2015 Micra S manual: 5.3 L/100 km ... 53.2 mpg (Imp) ... 18.8 km/L ... 44.3 mpg (US) ...


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