So, do you take the 0.0 per cent financing - the free money - or the cash-back rebate?
Let's run some numbers. Say Manufacturer "A" is offering 0.0 per cent financing for 36 months or a $3,000 rebate on a $24,000 vehicle. For the buyer with cash on hand to pay for the car, the answer is easy - take the cash. It's the simplest solution.
But for buyers who must finance, the question is whether it's better to take the cash rebate and then negotiate a separate car loan, or simply stick with the 0.0 per cent factory deal.
Let's crunch. A $24,000 loan at 0.0 per cent creates a monthly payment of $666.67. To chop down that payment, let's say the buyer takes the $3,000 rebate, applies it towards reducing the overall price of the car, and then goes out and negotiates a separate three-year car loan for $21,000. At 6.0 per cent, the monthly payment is a more manageable $638.86 for 36 months.
So by using the $3,000 to reduce the cost of the vehicle, the buyer saves $27.81 a month in payments. That may not sound like much - an entrée at a nice restaurant - but over the life of a three-year loan that $27.81 a month adds up to $1,001.16 in total savings. Here, the smart choice is to take the cash and find a separate loan even with free money on the table.
Deals could endlessly play with figures, but the real point is this: every buyer should crunch the numbers to determine how best to structure a deal based on individual circumstances. The payback for doing so can be substantial.
Speaking of crunching numbers, we've done it on these four cars, using pricing information supplied by www.carcostcanada.com.
2010 BMW 528i: The 2011 version, all-new, is in the wings and waiting to flood dealer lots. So BMW Canada is making a last push to clear out the old 2010s.
- MSRP: $56,100
- Freight, dealer prep, air conditioning tax: $2,095
- Dealer discount (estimated): $2,500
- Factory discount: $4,000 (Factory to dealer rebate)
- Taxable subtotal: $51,695
- Total price with 8 per cent PST and 5 per cent GST: $58,415.35
2010 Ford Explorer XLT AWD: In a few months a car-based Explorer arrives. The employee pricing is attractive, but before the end of the year look for a final Explorer clear-out.
- MSRP: $34,564 (employee pricing)
- Freight, dealer prep: $1,500
- Dealer discount (estimated): $0
- Taxable subtotal: $36,064
- Total price with 8 per cent PST and 5 per cent GST: $40,752.32
- Factory discount: $2,000 (Recycle Your Ride
- Government discount: $300 (Retire Your Ride)
- Factory discount: $500 (Targeted Loyalty)
- Final price: $37,952.32
2010 Honda Pilot LX 2WD: Not to put too fine a point on it, but this boxy Pilot is a huge disappointment. Honda decided to make its own version of the Hummer just as Hummers were going out of style and Hummer the brand was going out of business. The deals here may get richer, yet.
- MSRP: $36,820
- Freight, dealer prep and air conditioning tax: $1,690
- Dealer discount (estimated): $1,400
- Factory discount: $5,000 (Trading Dollars factory-to-dealer rebate)
- Taxable subtotal: $32,110
- Total price with 8 per cent PST and 5 per cent GST: $36,284.30
2010 Nissan 370Z Touring Coupe: In a recession, even in a recovery from one, sexy sports cars are a hard sell. So that explains the discounting.
- MSRP: $40,498
- Freight, dealer prep and air conditioning tax: $1,650
- Dealer discount (estimated): $1,500
- Factory discount: $2,000 (Trading Dollars factory-to-dealer rebate)
- Taxable subtotal: $38,648
- Total price with 8 per cent PST and 5 per cent GST: $43,672.24
Pricing information source: www.carcostcanada.com. Calculations based on Ontario customers. Please note that while the information above is accurate at the time of publication, incentives are given at the discretion of individual dealers, and may be changed or discontinued at any time. Dealer discounts are negotiated with the customer on a case-by-case basis.