People will salivate like Pavlov's Dogs for Free Gas!
On the way to the grocery store today, I pass a sign for the local Ford/Kia dealer. This dealer advertises cars for ridiculously low monthly payments, which of course is a good reason not to trust them. There is always a catch when they say you can get a new SUV for $160 a month - and the catch is that it is a lease, there is a huge down payment, and there are back-end charges.
But now, they are onto a "free gas" gambit. The plebes are all up in arms about the price of gas, so if you say you are giving it away for free, they bite on whatever odious deal you want to sell them.
The sign just says, "Free Gas for Two Years!" and the name of the dealership. No details on what this means or why.
What was funny about the sign - laugh out loud funny - was the side banner that said "No Gimmicks!"
OK, here's the deal, no one is "giving away" free gas. It is a gimmick. And putting a little note on it saying "No Gimmicks!" doesn't change that basic fact.
What are they "giving away"? Well, money actually - in the form of a debit card - and you pay for it with the price of the car. Say you buy a Ford Focus, that gets 30 mpg. The average person drives 15,000 miles a year, which works out to about 500 gallons of gas, which at $3.75 a gallon, works out to $1875 a year. Two years, well that would be $3750. But of course, they might not give you that much.
That's a lot of money on a very inexpensive car. So how do they finagle it? Well, for starters, they play with the numbers - not using the 15,000 mile a year mark, for starters. Chrysler did this back in 2005 to move some iron, and their debit card was $2500, not $3750. And the rebates offered were higher than the gas card. So if you took "free gas" you didn't get the rebate. So free isn't free, you pay for it.
So why isn't this a good deal? After all, they are giving you at least a grand or two off on the price of the car, right? Yes and No. Again, to get the "free gas" you forgo any other incentives AND you pay full sticker. It reduces your options, in terms of negotiation.
Free cash would beat free gas, any day.
And if you are financing the car, what you are doing is financing the "free gas" - which means a higher loan balance and more interest paid. Good news for the finance company, and no doubt the dealer gets a "taste" of this as well.
But to a poor person - a person impoverished in their spirit and mind - this seems like a "good deal" as they are dangling out the words "free" and "gas" and they figure they can plan their auto expenses, at least for two years, based on the monthly payment.
But since they are paying more for the car than they have to, and buying a brand new car (and financing it) they are actually getting a very raw deal - and paying far more, in terms of overall ownership costs, as well as cost-per-mile, than I pay to drive my BMW. It makes no sense.
So where was this billboard? That is the tipoff right there. Just down the road from Wal-Mart, near a corner famous for its Title Loan shops, Pawn Shops, and Check-Cashing stores. Oh, and the Dog who Rents Furniture. I forgot about him. In other words, it is odious deal corner, right down the street from the projects (which they call the "homes" to make them sound more homey).
In other words, they put this billboard where all the poor folks can see it - and bite on the hook and swallow the lure. And gasoline is a powerful lure.
The more complicated you can make any financial transaction, the easier it is to rip-off the consumer. Buying a car should be a simple transaction - car on one side, money on the other. Adding gasoline, toasters - or in one celebrated case, automatic weapons - only serves to distract the buyer from the underlying deal.
New car dealers are just a bad deal, period. And new car dealers in small towns (which this one was) are the worst of the lot. They will do or say anything to get their country cousins to sign those loan docs on whatever load they have on the lot.
Just walk away from that nonsense!
