For good or ill, U.S. automobile manufacturers have become a big target in the current economic downturn. But whether they’re a victim or perpetrator of the current financial crisis is actually immaterial. The result is that they’ve decided to improve their position and reputation amongst buyers by providing as many incentives as possible to encourage people to purchase their automobiles.
One of the new incentive programs that’s receiving a considerable amount of press and media attention is the buy-back program, a program which is being offered in several different variations by several manufacturers. These buy-back programs are touted as being the next step in relationship-building between auto manufacturers and buyers – a step that shows that big business cares about you.
Don’t be fooled.
As the old saying goes, if something looks too good to be true, it probably is. These buy-back programs make for good press, but you have to look beyond the press to the actual terms being offered. Don’t let a false sense of “If I can’t make my payment, everything will be just fine” security tempt you into entering into a purchase agreement with ultimately unfavorable terms.
The bottom line is that every business is chiefly concerned about their own bottom lines. When a car manufacturer says they’re willing to “forgive” a certain number of payments if you lose your job, what they’re really saying is that they’ll postpone those payments, adding to the term of your loan – and only in certain cases.
Will this actually help you in the long run? That depends on how long you’re out of work, and what that’s going to do to your interest rate. It also depends on how long you have to be out of work before their “payment forgiveness program” kicks in, and how that will affect the terms of your financing. For example, do you qualify for payment forgiveness if you only receive a cut in pay or hours? And how does receiving unemployment benefits affect the payment forgiveness plan?
In addition, when a car manufacturer says they’re willing to “buy-back” your car if you lose your job, they might actually mean that they’re going to repossess the car they essentially leased to you. Chances are you won’t be keeping the car, and won’t have anything to show for the payments you have made so far. Is this better than having a car repossessed and still owing an amount of money if the car doesn’t sell for what was owed on it? Again, it all depends on the terms of the agreement.
That’s the crucial point – it all depends on the terms of the agreement. There’s no standardization among incentive plans – each one is different and has to be carefully evaluated. It’s up to you – the buyer – to determine whether any incentive is a valuable one for you. You’re the best judge of your financial situation and circumstances, so you’ve got to be sure to read the fine print on any of these offers.
Further, don’t let these incentive plans cloud the other considerations you must make when purchasing a car. For example, don’t be tempted to pay a higher overall price just to get a “buy-back” plan. Getting a lower payment to begin with may mean more to you in the long run in terms of being able to pay for the car than an agreement you may never have to use.