El Queso
01-12-13, 01:26
Recently, we've been contacted by many sales persons wanting to sell us a new ("0km") car, both via SMS on our cell phones, as well as via calls made to our home phone (land line). We have been offered payments on a new car as long as 80 months, interest free.
I've owned a car here for the last five+ years. I paid cash for it, used. It's a 1999 Megane 5-door, really not a bad car. I have ridden it hard and put it up wet many times, so to speak, and really it has served me fairly well. But it's now some 14 years old, about 250K kilometers on the odometer, and I've been spending more and more money on keeping it running. My latest frustration is an engine coolant leak that I've had repaired 3 times now, and like all things Argentine, I'm going to be going back for a fourth visit soon as I find that once again I need to be very cognizant of the need to put water into the radiator before I go anywhere to make sure it doesn't overheat.
A new car is very tempting for me.
However, having lived here for the past 6+ years, I knew there wasn't a chance in hell that whatever they had to offer would be advantageous enough to make me want to buy a new car unless I had cash for the full price of the car already in my hand to offer them in exchange. But my wife, being Paraguayan and not as sophisticated as I when it comes to making big-ticket purchases (as anyone else probably is, who comes from a country where credit is relatively cheap [right or wrong] and people are mostly honest and at least try to pay their bills when it comes to stuff bought on credit) , she was certain we should go check the latest offer that had come in from Ford. Just to make sure. She wasn't sure if I was just being grumpy when I told her it would be a waste of time, or if I really knew what I was talking about. I couldn't give her a specific reason, other than I knew that interest rates on financing would be out-of-this-world expensive, but since they were offering no interest for 6. 67 years (!) I was finding it hard to debunk her optimism with any real facts.
So we went to go talk to Ford today.
Of course, in typical Argentine fashion, the salesman with whom my wife had made an appointment was not in today. Nor, it seemed, did anyone in the office even know who he was. So we had to wait some 10 minutes while they found someone who could talk to us, while just about everyone else sat staring at computer screens, or stood talking to their buddies around the water cooler.
Finally, a young man (easily early 20s) came and introduced himself to us. He asked us what we wanted and I told him we were looking for a car and wanted to see how the promotions that Ford has would work for us. He took us right into an office on the second floor, without even going to the showroom to see what sort of car might interest us.
The first thing he asks is how much we're willing to spend per month. I told him I didn't want to talk payments until I knew what I wanted to buy and had an idea of what kind of prices we were talking about, how payments worked, how financing worked, etc. He looked a bit taken aback at this, but recovered quickly and led my wife, my sister-in-law and myself downstairs to the showroom.
I won't go into much more of this particular part. He got me into a couple of cars, hoping to make me fall in love and sign away my life, like any salesman in the world will try to do. He threw out a lot of talk about payments and costs that, quite frankly, I didn't understand at all at that moment, never having looked at buying a new car here before.
We looked at a Ford Focus, a Ford Fiesta and one other model that now I don't remember the name of. 4-door sedans and 5-door hatchbacks. 1.6 and 2. 0 liter engines. Prices ranged from 106K to 130K pesos.
So we went to the office again and started to talk seriously. I had to ask him many times about some of these things because the concepts were so foreign to me that I wasn't sure I was understanding. And in some cases, it turned out, I was not! To make a story that's already running long shorter, here's the basics on buying a new car in Argentina:
You have three options for buying a new car here:
1) Pay cash.
2) Finance.
3) Layaway (sort of).
I already knew #1 was really the only way to go. It is the cheapest and easiest and most straight-forward way to do it. At the blue rate from dollar to peso, the range goes from roughly $15. 3K to $18. 5K USD. Not really bad for the value. It's relatively a lot of money, and I have bought cars in the States from $12K to $22K (and leased more expensive) , but have never bought with cash a new car. I never had that much money at one time that I wanted to lay out on a car.
And yet still, this is the best method for Argentina.
#2 is a nightmare. The only thing that was offered for financing was 30% down payment at a 30% interest rate. I almost laughed at this and of course quickly discarded it. I forgot to even ask what terms the note could have. Even two years would be way too expensive at 30% It is not only very expensive to get, but also very difficult to qualify for a loan anyway.
Which leaves method #3, a sort of Layaway program, if you don't like the cash option.
I'm talking US phrases here, but I'm sure many countries have (or have had in the past) stores that use layaway. In the US it's usually stores selling clothes, toys and appliances that offer this (although with such easy credit nowadays for all I know no one offers layaway any more!). You choose what you want to buy, make a down payment, and make payments until you have paid the full amount and can walk away with the merchandise.
Here, they sell cars in a similar fashion. The payments must be made every month, and the "loan" is indeed interest free. It almost sounds good until you really start looking into it more closely. It took me about half an hour to get things worked out.
The nice thing about this is that you don't have to wait until you have paid the full amount of the car to actually take possession of it and start using it. You do, however, have to make a certain amount of payments (unless you get lucky. More about that in a moment) before you are able to drive it away. I understand that perfectly, makes good sense.
BTW. All of this was calculated on a basis of 80 monthly payments. I'm not sure if things get squeezed doing proportionately if, for example, you only want a 24 month period to pay for the car to begin with.
You have to make 24 payments, all things being equal, before you can take possession your car. There are actually three ways you can take possession before you make the actual 24 payments:
1) Win a lottery (yes, seriously). In that case, those few who are lucky enough to win the draw receive their car immediately, although of course they have to continue making all the payments. But the good thing is they actually get the use of their car quicker. They make a drawing once a month.
2) Win a bet (yes, seriously). In this case, you choose an amount to put down as a "bet" (the salesman likened this literally to sitting down at the casino and betting on the roulette wheel, but really fits more closely a silent auction). If the amount you put down is the greatest for your car type, over those who put down money on the same car type, you "win" and can take possession of your car immediately. Of course, as makes sense, you still have to pay off the balance as agreed, on a monthly basis. The salesman suggested that $20K to $30K was appropriate to try to "win the bet." The good thing here is that at least the "bet" goes to your principal, it's not lost.
3) As far as I could figure, this one was a "special promotion" that they only offered to a certain amount of people each month. Upon paying 7 months of your 24 month "layaway period payment" you could elect to pay the amount of the rest of the 24 months and take possession of your car. This could ONLY happen in the 7th month. You couldn't just decide at the beginning that you were going to pay the full 24 months and take possession then, you couldn't decide at 10 months that you would go ahead and pay the following 14 months. It had to happen in the seventh month.
Now, I thought all of this was a bit complicated, but OK, not a terrible deal overall. I was actually almost tempted, thinking I could possibly win the lottery (I wasn't going to do the "bet") or wait until my 7th month to pay the rest of the 24 months and take possession of the car right then, and then continue paying at whatever monthly rate I decided I wanted to extend the layaway payments.
But something wasn't right, I realized. And I was correct. TANSTAAFL (for you Robert Heinlein fans).
On further questioning, I learned that the price of the car is NOT FIXED until you have MADE THE LAST PAYMENT. Not the last payment in the layaway period of 24 months, but the actual last payment until the car has been paid off. At that point, the salesman pretty much admitted that it was nothing more than a savings plan. That didn't pay interest. In fact, you were free to stop paying at any time and you would receive your money back. Well, heh, not all of it, but 98%
Every month that you paid, you paid on the projected future cost of the car. As he stated, the Ford Fiesta that was the cheapest of those cars we looked at, had increased in price over the last year "only" (his words) a bit more than $12, 000 pesos! That only meant an increase in monthly payments over the last year of a bit more than $100 pesos a month. Apparently not a problem to the Argentine way of thinking about money!
Of course at a flat-line increase over, say, six years of payments (BTW. The payments for the cars we were looking at using this layaway plan over 80 months ran between $1200 and $2000 pesos a month) , the price of the Fiesta would increase by as much as $60, 000 pesos by the time you paid it off! And that's if you believe in flat-line increases here.
I haven't even mentioned licensing taxes (3% of the purchase price of the car due each year, can be paid monthly) and insurance (at least $500 pesos a month, but probably more like 700-800 according to the salesman after pressed).
Anyway, as I told the salesman, I would rather save my money at something like $3000 pesos a month and pay cash all at once than give my money to Ford (or any other dealer. They all do this) to use for free and have no hedge whatsoever against inflation during that time. In fact, I'd go by a cheaper used car instead of a new one, that the owner isn't so worried about recuperating his production costs against inflation.
BTW. As we were leaving and going down the stairs to exit the building, the office above where the salesmen were erupted into cheering, clapping and a lot of laughing. We overheard something like ". Foreigners" and "way to go, Hernan" (our salesman's name) in the shouts. Seems like he had us on speaker phone while we were talking. Can't prove it, but.
I've owned a car here for the last five+ years. I paid cash for it, used. It's a 1999 Megane 5-door, really not a bad car. I have ridden it hard and put it up wet many times, so to speak, and really it has served me fairly well. But it's now some 14 years old, about 250K kilometers on the odometer, and I've been spending more and more money on keeping it running. My latest frustration is an engine coolant leak that I've had repaired 3 times now, and like all things Argentine, I'm going to be going back for a fourth visit soon as I find that once again I need to be very cognizant of the need to put water into the radiator before I go anywhere to make sure it doesn't overheat.
A new car is very tempting for me.
However, having lived here for the past 6+ years, I knew there wasn't a chance in hell that whatever they had to offer would be advantageous enough to make me want to buy a new car unless I had cash for the full price of the car already in my hand to offer them in exchange. But my wife, being Paraguayan and not as sophisticated as I when it comes to making big-ticket purchases (as anyone else probably is, who comes from a country where credit is relatively cheap [right or wrong] and people are mostly honest and at least try to pay their bills when it comes to stuff bought on credit) , she was certain we should go check the latest offer that had come in from Ford. Just to make sure. She wasn't sure if I was just being grumpy when I told her it would be a waste of time, or if I really knew what I was talking about. I couldn't give her a specific reason, other than I knew that interest rates on financing would be out-of-this-world expensive, but since they were offering no interest for 6. 67 years (!) I was finding it hard to debunk her optimism with any real facts.
So we went to go talk to Ford today.
Of course, in typical Argentine fashion, the salesman with whom my wife had made an appointment was not in today. Nor, it seemed, did anyone in the office even know who he was. So we had to wait some 10 minutes while they found someone who could talk to us, while just about everyone else sat staring at computer screens, or stood talking to their buddies around the water cooler.
Finally, a young man (easily early 20s) came and introduced himself to us. He asked us what we wanted and I told him we were looking for a car and wanted to see how the promotions that Ford has would work for us. He took us right into an office on the second floor, without even going to the showroom to see what sort of car might interest us.
The first thing he asks is how much we're willing to spend per month. I told him I didn't want to talk payments until I knew what I wanted to buy and had an idea of what kind of prices we were talking about, how payments worked, how financing worked, etc. He looked a bit taken aback at this, but recovered quickly and led my wife, my sister-in-law and myself downstairs to the showroom.
I won't go into much more of this particular part. He got me into a couple of cars, hoping to make me fall in love and sign away my life, like any salesman in the world will try to do. He threw out a lot of talk about payments and costs that, quite frankly, I didn't understand at all at that moment, never having looked at buying a new car here before.
We looked at a Ford Focus, a Ford Fiesta and one other model that now I don't remember the name of. 4-door sedans and 5-door hatchbacks. 1.6 and 2. 0 liter engines. Prices ranged from 106K to 130K pesos.
So we went to the office again and started to talk seriously. I had to ask him many times about some of these things because the concepts were so foreign to me that I wasn't sure I was understanding. And in some cases, it turned out, I was not! To make a story that's already running long shorter, here's the basics on buying a new car in Argentina:
You have three options for buying a new car here:
1) Pay cash.
2) Finance.
3) Layaway (sort of).
I already knew #1 was really the only way to go. It is the cheapest and easiest and most straight-forward way to do it. At the blue rate from dollar to peso, the range goes from roughly $15. 3K to $18. 5K USD. Not really bad for the value. It's relatively a lot of money, and I have bought cars in the States from $12K to $22K (and leased more expensive) , but have never bought with cash a new car. I never had that much money at one time that I wanted to lay out on a car.
And yet still, this is the best method for Argentina.
#2 is a nightmare. The only thing that was offered for financing was 30% down payment at a 30% interest rate. I almost laughed at this and of course quickly discarded it. I forgot to even ask what terms the note could have. Even two years would be way too expensive at 30% It is not only very expensive to get, but also very difficult to qualify for a loan anyway.
Which leaves method #3, a sort of Layaway program, if you don't like the cash option.
I'm talking US phrases here, but I'm sure many countries have (or have had in the past) stores that use layaway. In the US it's usually stores selling clothes, toys and appliances that offer this (although with such easy credit nowadays for all I know no one offers layaway any more!). You choose what you want to buy, make a down payment, and make payments until you have paid the full amount and can walk away with the merchandise.
Here, they sell cars in a similar fashion. The payments must be made every month, and the "loan" is indeed interest free. It almost sounds good until you really start looking into it more closely. It took me about half an hour to get things worked out.
The nice thing about this is that you don't have to wait until you have paid the full amount of the car to actually take possession of it and start using it. You do, however, have to make a certain amount of payments (unless you get lucky. More about that in a moment) before you are able to drive it away. I understand that perfectly, makes good sense.
BTW. All of this was calculated on a basis of 80 monthly payments. I'm not sure if things get squeezed doing proportionately if, for example, you only want a 24 month period to pay for the car to begin with.
You have to make 24 payments, all things being equal, before you can take possession your car. There are actually three ways you can take possession before you make the actual 24 payments:
1) Win a lottery (yes, seriously). In that case, those few who are lucky enough to win the draw receive their car immediately, although of course they have to continue making all the payments. But the good thing is they actually get the use of their car quicker. They make a drawing once a month.
2) Win a bet (yes, seriously). In this case, you choose an amount to put down as a "bet" (the salesman likened this literally to sitting down at the casino and betting on the roulette wheel, but really fits more closely a silent auction). If the amount you put down is the greatest for your car type, over those who put down money on the same car type, you "win" and can take possession of your car immediately. Of course, as makes sense, you still have to pay off the balance as agreed, on a monthly basis. The salesman suggested that $20K to $30K was appropriate to try to "win the bet." The good thing here is that at least the "bet" goes to your principal, it's not lost.
3) As far as I could figure, this one was a "special promotion" that they only offered to a certain amount of people each month. Upon paying 7 months of your 24 month "layaway period payment" you could elect to pay the amount of the rest of the 24 months and take possession of your car. This could ONLY happen in the 7th month. You couldn't just decide at the beginning that you were going to pay the full 24 months and take possession then, you couldn't decide at 10 months that you would go ahead and pay the following 14 months. It had to happen in the seventh month.
Now, I thought all of this was a bit complicated, but OK, not a terrible deal overall. I was actually almost tempted, thinking I could possibly win the lottery (I wasn't going to do the "bet") or wait until my 7th month to pay the rest of the 24 months and take possession of the car right then, and then continue paying at whatever monthly rate I decided I wanted to extend the layaway payments.
But something wasn't right, I realized. And I was correct. TANSTAAFL (for you Robert Heinlein fans).
On further questioning, I learned that the price of the car is NOT FIXED until you have MADE THE LAST PAYMENT. Not the last payment in the layaway period of 24 months, but the actual last payment until the car has been paid off. At that point, the salesman pretty much admitted that it was nothing more than a savings plan. That didn't pay interest. In fact, you were free to stop paying at any time and you would receive your money back. Well, heh, not all of it, but 98%
Every month that you paid, you paid on the projected future cost of the car. As he stated, the Ford Fiesta that was the cheapest of those cars we looked at, had increased in price over the last year "only" (his words) a bit more than $12, 000 pesos! That only meant an increase in monthly payments over the last year of a bit more than $100 pesos a month. Apparently not a problem to the Argentine way of thinking about money!
Of course at a flat-line increase over, say, six years of payments (BTW. The payments for the cars we were looking at using this layaway plan over 80 months ran between $1200 and $2000 pesos a month) , the price of the Fiesta would increase by as much as $60, 000 pesos by the time you paid it off! And that's if you believe in flat-line increases here.
I haven't even mentioned licensing taxes (3% of the purchase price of the car due each year, can be paid monthly) and insurance (at least $500 pesos a month, but probably more like 700-800 according to the salesman after pressed).
Anyway, as I told the salesman, I would rather save my money at something like $3000 pesos a month and pay cash all at once than give my money to Ford (or any other dealer. They all do this) to use for free and have no hedge whatsoever against inflation during that time. In fact, I'd go by a cheaper used car instead of a new one, that the owner isn't so worried about recuperating his production costs against inflation.
BTW. As we were leaving and going down the stairs to exit the building, the office above where the salesmen were erupted into cheering, clapping and a lot of laughing. We overheard something like ". Foreigners" and "way to go, Hernan" (our salesman's name) in the shouts. Seems like he had us on speaker phone while we were talking. Can't prove it, but.