So now we are hearing ads on TV for payments with “NO MONEY OUT OF YOUR POCKET”. You have to admit its as confusing as hell.
One dealer’s lease is $299 with “no money out of your pocket", another is at $249 with “no money out of your pocket".
A 50 DOLLAR difference? I taught you by now that all of us dealers buy our cars from the factory for the same price so how can there be a $50 difference?
Is the lower price for people without pockets?
Nope, the trick is……………
That is right, the dealer will sign you up to a new credit card, charge your down payment to it then write the lease or retail contract showing that as “cash down”. You could end up with an additional $5,000 in credit card debt AND your car loan! You technically take no money "out of pocket"!
Do the math, you pay a punishing finance rate on the credit card loan and you are paying more, not less, for the vehicle! You have to write two checks every month. Your true payment is actually higher!
Besides the fact that this puts you in a bad financial position, it also may put you in a risky legal position. Yes, I said legal. Many finance contracts dictate that money “down” not be borrowed. The down payment has to be “unencumbered”. The bank depends on you to actually have the cash to put down that you say you have.
Banks do not expect customers to take out loans from other banks to put down payments on loans to them.
So be careful out there and don’t be lured. What is “too good to be true” most often is.
Why do I tell you these things? Because an educated consumer is our best customer!