Lie #5: Ninety days same as cash is like using other people's money for free.
This is one of the biggest marketing ploys that America has ever fallen for. You virtually can't shop for furniture, electronics or appliances without here this sales pitch. Here is how it will cost you more money to buy things this way.
- If you are paying cash, there is a very good chance that you can negotiate a discount or go to a competitor that will. When you finance the item, you pay full price.
- Nationally, only 12% of these contracts are paid off the debt in the allotted time. Not only do these convert to very high interest rate loans, but they back-charge you to the date of purchase. Chances are that if you could have afforded to pay for it in the allotted time, you could have saved up for a few months and bought it cash at a better price.
- Most people don't read these contracts and sometimes extras 'accidentally' get added. You didn't read it. You are stuck with it. One instance that happens is when a salesperson fraudulently initials the contract to add the disability or life insurance, even though the customer declined it. I've heard of instances where the customers thought that they had paid the loan off in the allotted time, only to find the contract fraudulently said they purchased the insurance and since they didn't pay that on time, they had to also pay all the back-dated interest. Now, that wasn't a bargain.
Lie #6: You'll always have a car payment. That's just the way life is.
Other than a home mortgage, the car payment is the largest payment for most people. USA Today stated that the average car payment in America is $464 over a sixty-four month period. And if you are like most people, you will have a car payment throughout your entire life.
What if you started investing, at age 25, that $464 a month invest in an average mutual fund (which has averaged 12 percent over the last 70 years), you could retire forty years later at age 65 with $5,458,854.45 in the bank. That is a pretty expensive car.
Now, I can just hear you saying, 'But that is the only way I'll ever have a nice car.' That's true if all you know how to do is scream 'I Want it NOW' or are concerned with keeping up with the Jones or are afraid of what your family may think.
On the other hand, if you saved that $464 for ten months, you would have over $4,000 to pay cash for a car. Your friends may snicker at your old beat up car, but you can hold the title in your hands. Can they? Save that $464 for another ten months and you can trade up to an $8,000 car. Repeat another ten months and trade up to a $12,000 car, with no payments. This is the strategy that most successful millionaires in this country have used and they still normally purchase very nice, very expensive slightly used cars for cash.