Car Payment Protection Programs
Keeping Up With Payments in A Down Economy
Every three to four years, the big automakers have to come up with something to drag consumers into the showrooms to buy the biggest and best cars out there; their bottom lines are built on the average tenure of car ownership being about four to five years. This is why they give five year, 50,000 mile warranties and more. It also explains cash rebates, 0% interest sales and more.
With the current down economy, the newest wrinkle on this is the Payment Protection Program. In a nutshell, if you meet all the terms and conditions, if you lose your job, the company will take over paying your car payment for a specified period of time. From their perspective, missing X number of months of car payments if you lose your job is roughly the same as giving you a discount…and if you keep your job, the discount doesn’t even come up at all.
Most of these programs expire within 24 to 36 months after the purchase of the car, which is somewhat telling. Even better, from a corporate accounting perspective, they’re great on the balance sheet for reasons that we won’t cover here.
Psychologically, what they’re trying to do is convince you that it’s OK to spend money even if you’re not entirely certain about your job situation. If that’s sounding kind of familiar, like, say when that mortgage broker talked you into refinancing your house, there’s a reason: It’s usually a bad idea.
Don’t buy the car because there’s a payment protection program and you think you need a new car. Buy the car because you genuinely need the car, new or not. Any time you’re making a multi-thousand dollar purchase, you should ask yourself if you can live without it for a little while longer. Chances are, the answer is yes…and you can save the money you would’ve otherwise thrown into car payments into something earning you interest. Or spend it on fixing up your existing vehicle, or buying an extended car warranty for it.
Remember, if it still rolls, it does everything you need it to do; you’re better off being frugal and saving that money for something really important.
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Filed under: Buying a Car
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