Deals of the week, payment madness strikes marketplace

Jeremy Cato

Globe and Mail Update Published on Friday, Oct. 15, 2010 1:04PM EDT Last updated on Friday, Oct. 15, 2010 2:46PM EDT

There it was in a big, bold headline on the Nissan Canada website: The Bottom Line Clearance Event. Nissan is promising up to $10,000 in “factory reductions” or 0.0 per cent financing for up to 84 months.

Now why anyone would want to get locked into a car payment for seven years is beyond me. SEVEN YEARS? Even if the interest rate is zero and the car performs flawlessly, by the time the loan is paid off you will be thoroughly sick of that Nissan.

Of course, the appeal of an 84-month term is obvious – a lower monthly payment. And Nissan is not the first and only auto maker to offer seven-year loans to Canadians. This type of deal is all about lowering the monthly payment.

But the savvy shopper never buys a monthly payment and auto makers are smart never to offer them. From the car company’s perspective, locking a customer into a seven-year payment plan pushes that customer out of the purchase cycle for seven years. Not a good idea for car companies bent on churning the fleet – sales-wise -- every three or four years.

For the consumer, long payment plans usually come with a massive price tag in interest costs. You really do not want to pay for a lower monthly payment.

Here’s the telling number: $10,971.36. That’s how much more you’ll pay for a 2010 Nissan Rogue with all-wheel drive if you opt for the 84-month payment plan over the 48-month term. So you’ll fork over the price of a brand new Nissan Versa subcompact in extra interest costs to buy a lower monthly payment.

And really, the payment isn’t that much lower. The 84-month payment shuffle makes the monthly payment $502,68, versus $651.12 for the 48-month loan. The key here is that Nissan is offering 0.0 per cent financing on the Rogue over 48 months, but on seven-year terms, the interest rate is 8.99 per cent.

Stretching the payment plan to match what you might say is the life of the car – simply to lower the monthly payment – is a waste of money. If saving money is key to your car-buying game plan, don’t buy the payment; buy the car.

Finally, take note that if you are a cash buyer, Nissan Canada has a $3,000 factory-to-dealer cash incentive on the table for Rogue buyers. Nissan has $3,000 on the 370Z sports car, too. Here are details for those two deals, plus two others we like.

As usual, Deals obtained most pricing information from www.carcostcanada.com, though for this week other sources were also used.