I'm angry with the auto industry! Not with the vehicles but with this specific selling practice: Burying old loan balance into a 'new' loan. This practice is used when a customer has an outstanding balance on a vehicle loan and wants to purchase a new vehicle. It's called being 'Upside Down'. Both the customer and Dealer/Finance company are at fault in this crazy transaction: The customer for not paying off one vehicle before purchasing a new one; The Dealer/finance company for actually writing the loan agreement! The end result is that the customer pays way more and for a longer period of time!
Here's a real example: An associate just buried $20,000 into a new vehicle lease on a new vehicle that had a capital cost of $50,000. Total indebtedness: $70,000 on a vehicle worth $50,000! She has the same monthly payments as before due to a longer lease term. But hey...she got floor mats and an extended warranty thrown in for 'Free'!
This should be criminal! It breaks one cardinal rule of sales: There is no customer benefit. I can already hear the howls of protest: 'But the customer wanted it and she gets to drive a shiny new vehicle'. No comment!
Come one people...put on your big boy pants! Don't buy something you can't afford especially when it depreciates faster than you can pay it!
If you are upside down, here's how to get out from under it: Facts about underwater car loans.
Until next time...