We constantly hear all sorts of comments from a myriad of experts, pundits, analysts on how to buy a vehicle.
As much as Canada is a country of natural resources, we have lately morphed into a nation of borrowers. Agreed...serious borrowers.
The comments always focus on the programs, incentives, are they stackable. It always looks as if somebody is almost giving away cars for free.
Even with a ton of financial services that are available you still need money/cash/equity to close an advantageous deal when acquiring any vehicle. You know the saying "Money talks and everything else walks".
Let's take a look...
Expects the dealer to be in a position to have money to pay for the trade in.
The dealer expects the buyer to have equity in the trade in.
Expects the buyer to be in a financial position to close a deal.
The customer expects the dealer to provide financial services to close a deal.
We can conclude that it takes cash, equity, financial services in any combination to close any deal.
Imagine a dealer that would say "Come back in a few days, don't have any money today to buy your trade in".
Imagine a customer that would say "Oops did not expect to have that level of negative equity in the trade in".
To know precisely what your equity or cash position is prior to initiating any transaction. The financial incentives offered by manufacturers do not replace equity or cash. As well the incentives predicate an equity or cash position.
When the equity or cash position is precarious, the deal migrates to "high finance" and suddenly its not such a good deal anymore, or simply not "doable".
Reflect on the following...
There were 1.9 M new vehicle sold in Canada in 2015 of which 57% were financed in round numbers 1 Million vehicles were financed with 70% / 700,000 financed for a term of 72 months or greater.
How much negative equity from the trade in was rolled over?
While the auto business functions best on a 36 month cycle.