Car buying incentives: Are they a good deal?

Updated: August 9, 2010

Automakers are wheeling and dealing to drive customers into the showrooms. Recently Ford, General Motors, and Hyundai offered conquest deals to Toyota owners to try to lure them away from the brand and now Toyota fighting back with its own deals. Toyota’s deal includes 0-percent financing and low-cost leasing options, but are these types of incentives really good deals?

Zero-percent financing

Zero-percent financing can save you real money, if you qualify. Such offers usually have terms that render many car buyers ineligible. Typically, customers must have a high credit score. Given the challenges with the economy, many consumers’ credit score has taken a beating and consequently, they may not qualify.

If you qualify for the zero-percent financing you may end up paying more for the car. Sometimes, the dealer will refuse to budge from the manufacturer’s suggested retail price in a 0-percent deal, sticking you with a higher-priced car. Also, low-interest rates are also no bargain if they persuade you to buy a car that you’re not happy with. It’s important to do your research before you head into the showroom.

The lowdown on leasing

Leasing is very inviting for many people because of the low monthly and down payments. Looking at the site for New York area, I found a 2010 Toyota Camry for $179 a month and $1,299 due at signing. While that may sound like a good deal, there are a number of compromises and disadvantages to leasing, which means that it’s not right for everyone.

  • Once you’re in the leasing habit, monthly payments go on forever.
  • There are a limited number of miles in the contract, typically 12,000 to 15,000, and you will have to pay extra if you go over.
  • You must maintain the vehicle in good condition. If you don’t, you’ll have to pay penalties for excess wear and tear when you turn it in.
  • If you need to get out of a lease before it expires, you may be stuck with thousands of dollars in early-termination fees and penalties-all due at once.
  • Leasing is rarely a better financial arrangement than buying. The financial advantage of buying increases the longer you keep the vehicle after the loan is paid off.
  • At the end of the lease, you have no equity in the vehicle to put toward a new car.
  • You can’t customize your vehicle in any permanent way.

This is not to say that leasing can’t be a satisfying and cost-effective way to acquire a new vehicle. But it’s a mistake to think that leasing is always easier or less expensive than buying.

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