Topic: 0% financing question

[AP]

Sorry - I'm not buying it just 'cause you say so.

Okay, then, lets see how your learned contributions would play out in an actual court:

Jaeger:  AP is wrong Your Honour.  All he can point to is a late 20th century decision of the Ontario High Court of Justice.

The Court:  You are aware that law is based on precedent are you not?

Jaeger:  The precedent is stupid.

The Court:  The precedent to which you refer, sir, is established law in this jurisdiction.

Jaeger:  I don't accept it.  AP is making this up for reasons I can't comprehend.

The Court:  Listen, son, the only evidence you have any legal training is your aggressive and haughty demeanor.  It is one thing not to know the law.  It is quite another to parade your ignorance.  Move along now and play with your Hyundai, leaving the heavy lifting to the big boys.

[my2cents]

Sorry - I'm not buying it just 'cause you say so.

Okay, then, lets see how your learned contributions would play out in an actual court:

Jaeger:  AP is wrong Your Honour.  All he can point to is a late 20th century decision of the Ontario High Court of Justice.

The Court:  You are aware that law is based on precedent are you not?

Jaeger:  The precedent is stupid.

The Court:  The precedent to which you refer, sir, is established law in this jurisdiction.

Jaeger:  I don't accept it.  AP is making this up for reasons I can't comprehend.

The Court:  Listen, son, the only evidence you have any legal training is your aggressive and haughty demeanor.  It is one thing not to know the law.  It is quite another to parade your ignorance.  Move along now and play with your Hyundai, leaving the heavy lifting to the big boys.

AP held in contempt and executed for the transcript.Or the judge himself?

[articsteve]

I think that Common Law jurisdiction courts quote ancient jurisprudence  ( precedents) all the time. If it needs looking up, as AP presumably did, then that is what law clerks are for.  I would bet you that at some point in the last five years some precedent from a UK court from before Canada was a country has been quoted in Canada.  

and you would be a winner.  Defamation: Libel and Slander.  Very British, very old, used in Ontario courts frequently.

[articsteve]

The required publication of  "nominal APR" is still not the true rate.  For that one needs to calculate the "effective APR". 

But in the end, vehicle sales are all driven by monthly payments.  For 99% of ppl, their life is a month long and then it repeats. 

[tpl]

The required publication of  "nominal APR" is still not the true rate.  For that one needs to calculate the "effective APR". 

But in the end, vehicle sales are all driven by monthly payments.  For 99% of ppl, their life is a month long and then it repeats. 

Shudder!    That needs to be framed.  It should be the SIG of this sub-forum.

[Jaeger]

The Court:  Listen, son, the only evidence you have any legal training is your aggressive and haughty demeanor.  It is one thing not to know the law.  It is quite another to parade your ignorance.  Move along now and play with your Hyundai, leaving the heavy lifting to the big boys.

You know what they say about guys who refer to themselves as "big boys"?   

But in the end, vehicle sales are all driven by monthly payments.  For 99% of ppl, their life is a month long and then it repeats. 

Scary, but no doubt true.

Jaeger

[AP]

You know what they say about guys who refer to themselves as "big boys"?   

Somewhat ironic coming from a forum member who has chosen to identify himself with a phallic image, one that I suspect may in your case be optimistically large.

Don't get fussed.  It's all in good fun. 

[Shnak]

But in the end, vehicle sales are all driven by monthly payments.  For 99% of ppl, their life is a month long and then it repeats. 

I'm in that 1% then, our life is a week long, and it repeats much quicker.

[Jaeger]

Last year when I bought the GTI, VW was offering 0% financing for 36 months on all Golfs.

There was no choice of a rebate or the lower rate, just the lower rate if you wanted it. I decided to keep my money in the bank and take VW's money for free.

Same deal when I bought my Sonata - only you could finance up to 84 months at 0% (not that I'd want to go nearly that long).  Free money is hard to pass up.  

Jaeger

[Mike]

I'm paying interest    But 1.9% over 39 months to lease a car I always wanted was hard to pass up.

[Jaeger]

I'm paying interest    But 1.9% over 39 months to lease a car I always wanted was hard to pass up.

Well, if you had to pay interest, that number's no great hardship.  And getting the car you want is entirely the point of the whole exercise. 

Jaeger

[CanuckG35]

Nope. Nothing is disguised - unless you are operating under the misapprehension that you cn get BOTH 0% AND $3k factory cash.   You can pick one - the choice is yours.  Calling it disguised interest is purely arbitrary and not based on fact.

Jaeger

Ontario law says otherwise.  The Ontario High court of Justice ruled on this specific issue in Re Motor Vehicle Manufacturer's Association and Wrye [1988] O.J. No. 265.  The court said dealerships must express the foregone cash incentive as a rate of interest.  The concern is that calling the rate of interest "0%" has the potential to be misleading if it comes at the price of a foregone cash incentive. 

So my question would be, if this is the law, why are dealerships not adhering to it?  Are these laws different from Province to Province?  I am not sure about Ontario, but here in NB virtually all car dealerships have a cash back incentive OR 0% interest on some of their models. 

[AP]

So my question would be, if this is the law, why are dealerships not adhering to it?  Are these laws different from Province to Province?  I am not sure about Ontario, but here in NB virtually all car dealerships have a cash back incentive OR 0% interest on some of their models. 

They are allowed to say 0%.  They just have to disclose in the fineprint what a foregone cash incentive represents as an APR.  The fineprint is very fine...almost not readable.

[CanuckG35]

^ Gotcha.  I'd be interested in reading that fine print and see how they have it worded.

[Cord]

^ Gotcha.  I'd be interested in reading that fine print and see how they have it worded.

Here you go:

Cash rebate offer will be deducted from the negotiated price before taxes and cannot be combined with special finance or lease offers. *MSRP of $25,995/$25,195/$30,195 on 2011 Forester 2.5X (BJ1 X0)/Legacy 2.5i (BA2 25)/Outback 2.5i (BD2 CP). Representative lease example: 1.9%/1.9%/3.9% nominal lease rate for 48/39/48 months. 3.98%/4.62%/5.91% effective lease rate for 48/39/48 months.

from Ontario Subaru ad: http://ontario.subarudealer.ca/WebPage.aspx?WebPageID=16825&WebSiteID=446

[AP]

^ Gotcha.  I'd be interested in reading that fine print and see how they have it worded.

I did a lecture on cost of credit disclosure legislation years ago and included for the students the disclosure language from ads taken out of the Toronto Star.  Here is the langauge from one of the ads.  The rate is high b/c the ad ran in 2003.

The monthly lease payment and the purchase finance rate are not available with and are not calculated on the "Cash purchase price" shown.  The difference between the price for the lease/purchase finance offer and the "cash purchase price" offer is deemed under provincial disclosure laws to be a cost of borrowing, whether or not the same represents actual interest, and is required to be expressed as an actual percentage rate which is 5.15%. 

[Arctic_White]

Nope. Nothing is disguised - unless you are operating under the misapprehension that you cn get BOTH 0% AND $3k factory cash.   You can pick one - the choice is yours.  Calling it disguised interest is purely arbitrary and not based on fact.

Jaeger

Ontario law says otherwise.  The Ontario High court of Justice ruled on this specific issue in Re Motor Vehicle Manufacturer's Association and Wrye [1988] O.J. No. 265.  The court said dealerships must express the foregone cash incentive as a rate of interest.  The concern is that calling the rate of interest "0%" has the potential to be misleading if it comes at the price of a foregone cash incentive. 

As I said in my earlier post, if you give up a $3,000 cash incentive to get 0% financing, you actually paid the equivalent of $3,000 interest.  I think the court got this one right.

Good thing we have the courts to require someone to explain the obvious to people with no common sense.

Figure out the cost of financing at whatever rate you can get.

If financing costs you $3500 - take the 0%.

If financing costs you $2500 - take the $3000 cash back.

Talking financing at 4% and getting it bumped to 7% - now there is where problems happen and people get shafted.

The prob is that if you're a cash buyer, you have to find some equal-risk investment to dump your cash into if you don't get the choice between cash incentive vs. "zero" financing.

If the "real" cost of financing is 4%, and the NPV of the 0% offer is say $3k, you have to find some place to dump the money you'd use for the car at an IRR of 4% to come out flat against the guy who doesn't have cash and needs to finance (at "zero"). But there is no investment thats going to get you 4% at equal risk, because paying down your own debt is a zero risk investment, and the risk free rate sure as hell isn't 4%.

(I guess that's the game central banks are playing right now. You got cash? Well its earning zero, so go spend it on something! )

How very true.