• Jul 6, 2009
Cash for Clunkers won't be official for a few weeks, but some automakers are already looking to cash in on the once in a lifetime opportunity to take up to $4,500 off the price of a new car or truck. Smart is offering its quirky little Fortwo runabout for just $99 per month with the trade-in of a 'Clunkers' eligible vehicle.

Even though we were not terribly impressed with the car in our recent review, $99 per month with no money down sounds decidedly tasty, and a payment term of only 36 months sound even better, but closer inspection shows that the promotion is way too good to be true. Here is the stupifying fine print on the promotion:
$99 monthly payment based on customer trade-in of an eligible vehicle qualifying for the CARS $4,500 voucher level and a 36-month balloon loan with $0 cash due at signing and a final balloon payment of $6,667 at the end of the loan term and a $ 13,335 MSRP which includes the destination charge and excludes tax, title and dealer fees.
A $6,667 lump sum is one hell of a payment – more than most of us could reasonably fork over at once – and certainly more money than most people who are seriously considering a $99 lease could afford. The total payment, which doesn't include taxes, title, or destination, comes in at $14,731 on a vehicle with a $13,335 MSRP.

[Source: Smart USA via All Cars All The Time]


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  • 37 Comments
      • 5 Years Ago
      And what's stopping you taking out a loan to pay that final payment?
      • 5 Years Ago
      Cash for Clunkers started out as a great idea... then the Congress machine took over and nearly destroyed it:
      http://www.cargurus.com/blog/2009/06/18/why-people-hate-congress/

      Smart's just trying to move their slow-selling fad car... I hope people don't fall for it. A $6,667 payment would come as a huge surprise!
      • 5 Years Ago
      If Bush didnt start a bunch of wars and allow money to be borrowed by people that could never repay it, Obama wouldn't have to.

        • 5 Years Ago
        Obama has ALREADY spent much more money in his first six months in office than the ENTIRE way on terror has ever cost, including everything in Iraq. Besides, I would rather know we are safe from another 9/11 than flush money down the toilet on useless government programs.
      • 5 Years Ago
      That glorified shopping cart is overpriced at any deal.
      • 5 Years Ago
      How 'bout this:

      If you can't afford to buy it cash, don't buy it.
        • 5 Years Ago
        Clearly that isn't always the best case. If you need a car for work and the one you are driving is using more resources (gas/repairs) than the cost of carrying the note, then it obviously makes sense to pay the interest on the loan as opposed to paying for continued repair/gas bills. Especially given the realities that neither the repair bills nor gas are going to get cheaper as time goes on.
      • 5 Years Ago
      That's Obama's hope and change for you. Hope you like it; apparently you voted for it.
        • 5 Years Ago
        Cash for Clunkers is another government program and Smart was only an example how how it is applied to particular automobile. A Smart fortwo is a very cheap car and the final payment is over $6,000 in one month. Can you imagine what the payment would be for even a new Honda Accord?
        • 5 Years Ago
        The Smart offer is VERY standard stuff for a "fake" lease. In TX, the majority of the consumer "lease" offers are really this sort of balloon-payment thing, generally including a promise to repurchase the vehicle for exactly the balloon amount if it's within the mileage and condition requirements. This is just a tax dodge due to the way Texas differentiates between privately-owned and leased vehicles in property tax regs.

        So, the fact that Smart is combining a dumb "lease-like" offer with a dumb government program to hook dumb customers who can't do the math is not new, it's not surprising, and it's frankly not Obama's fault. I'm sure you'll be able to do a similar deal with a Honda dealer if you can't really afford to own an Accord, and you'll be stuck at the end of that transaction with a big balloon on the Accord. Idiots have been taking deals like this since before anyone ever heard of Obama, Mr. Barnum was right.
        • 5 Years Ago
        ha, you just showed everyone on here how ignorant and pathetic your comments are by saying something like that. Educate yourself on the next topic you discuss
        • 5 Years Ago
        So you're saying that Obama owns Smart and designs their offers? Right.
        • 5 Years Ago
        OMG.... the4thheat, are you actually writing that? That is EXACTLY what all you liberals did with President Bush for 8 years!!! My gosh, I mean everything from your pay check coming late, to your toilet getting clogged up was blamed on Bush!!! At least we conservatives are just asking for people to act like an adult and take responsibility for their actions and the results of their policy's. Okay so maybe this Cash for Clunkers program is another dud, but there are much much larger issues to deal with.... like how good is called evil and evil is called good for a start.
      • 5 Years Ago
      Hmm...it's almost like car dealers are trying to make money.
        • 5 Years Ago
        Seriously. The car sale business is THE most scrutinized retail business in america. I truly feel that eventually a car make is going to be very successful with a "no negotiaion" policy...
      HotRodzNKustoms
      • 5 Years Ago
      So basically, they screw you?
        • 5 Years Ago
        @HotRodzNKustoms
        balloon payments have been around for years. its the predecessor of the lease craze.

        the intent is that you will trade it in before the end of term and be able to make the balloon payment with the tradein value.

        but you are risking what the car will be worth. leases let the mftr take the risk.

        • 5 Years Ago
        @HotRodzNKustoms
        @LS2LS7....

        How are balloon payments "trick payments?" You must be a financial newbie if you think a balloon contract is a "trick payment." Because I assure you they are standard contractual agreements that sometime benefit the consumer and sometimes benefit the lender. If you're a wise person, you will use them when they are appropriate. Just because a very small number of people misused balloons to buy homes they couldn't afford doesn't mean all balloons are bad or misleading. You can rest assured that the Truth in Lending Act passed in 1968 will assure that the buyers are fully aware of their contractual obligations before they sign on the dotted line.

        And, rest assured, you are ALWAYS holding the bag in a car purchase because you are ALWAYS liable for the full purchase price of the contract, leases included. Trying running up 100k miles on a lease car sometime with a 36k mi agreement. Or try failing to to carry insurance on a leased car and then wrecking it.

        The simple matter is, it is a damn good deal and a standard often used financial tool, regardless of what you hand-wringers think. I believe BMW calls their program BMW Select, GM calls theirs SmartBuy, etc.

        Very standard. Very much so not a "trick payment."
        • 5 Years Ago
        @HotRodzNKustoms
        There actually a benefit to balloon payments over leases.

        You don't have to make the final payment, you can return the car (just like a lease) but the car goes in your name, not the bank's so for states that let sales tax be on the difference between the trade-in and the purchase price of the next vehicle instead of just the total sale price of the new vehicle, a balloon payment style transaction lets you get back the tax amount. Many states do not offset the sales tax on a lease and tax the lease payment, not the sale price.

        So if your trade has a floor of 3500 or 4500, in state like NJ where taxes are 7%, you just saved yourself another $300.

        In some cases it may also be better on your insurance.

        Don't immediately assume evil just because it's unique. It may not be better for all, but it could be seriously better for some.
        • 5 Years Ago
        @HotRodzNKustoms
        No really so much.

        With all of the people commenting that most of the people who qualify for clunking probably won't be able to afford a new car....well here you go.

        You would get to pay less for 3 years, hoping the economy turned around, you got a better job (or just a job) and that you would start putting aside cash for the balloon payment.

        I'd be surprised if we didn't see more car loans like this in the coming year....could be the next leasing scheme.
        • 5 Years Ago
        @HotRodzNKustoms
        This is basically no different than a lease, except you can't turn the car in.

        You are simply on the hook for the other $6,667 after 3 years. $4500 + $3564 + $6667 = $14731 - $13335 MSRP = $1396 in interest over 3 years on $8,835.

        And, regardless, if you wanna keep the car, any bank would finance the remaining $6667, even Daimler, if you made your payments on time. Just about guaranteed given they probably don't want a bunch of 3 year old Smarts repo'd.

        But the whole fact of the matter is, the Federal gov't is subsidizing your new car for the tune of $4500, or about 30% of its value. And you'd be stupid not to take it if your current car is a crapper. Doesn't take much gas to add up to $99 a month if your car qualifies (20 mpg vs 40, approx). If you average out gas costs at about $3 a gal over the next 3 years, you would save that $99 driving about 16,000 mi a year. If gas continues to rise, it takes even less mileage.

        Throw in one major repair to your beater and you're in even better financial condition by buying. Consuming is not always bad. And you definitely aren't getting "screwed."
        • 5 Years Ago
        @HotRodzNKustoms
        No, they are just using creative financing to get people in the door. These are the same kind of loans that has lead to the collapse in the home building industry. It's not that a ~$1500 finance charge is so bad, it's that people don't bother reading the fine print and get shafted at the end of our payment.

        If you break that $6,667 into the 36 months you are looking at a total payment of around $285.
      • 5 Years Ago
      As usual, the large print giveth and the small print taketh away. At one time, Honda had a $400 penalty at lease end if you didn't buy the car. This when they weren't as reliable as now.
      • 5 Years Ago
      You would really need to know the residual value of the car after three years. If it is worth the $6,667.00 you sell it and and walk away just as you would in a lease. This is not really as complicated as many are trying to make it out to be.
      • 5 Years Ago
      @LS2LS7...

      OMG. You have to be effin' kidin' me. I clearly stated in my post that you were paying ~$1400 in interest on the loan. So, I don't know how that qualifies as "ignoring." Secondly, YES YOU PAY INTEREST ON THE WHOLE CAR IN A LEASE! There is your problem right there; you have no idea what you're talking about. You pay interest on a leased car's entire capitalized cost NOT just the expected depreciation. I have no clue whatsoever how you could get the idea that a bank would buy a $30k car to rent to you and then only charge you interest on the $10k of depreciation. They charge you interest on the whole pie, kid, not just the slice you eat. Money factor is figured by averaging the starting price and the depreciated price (cap + final)/2 and multiplying by the monthly interest rate. So, for ease of calculation, in our example of the $30k car and a 6% rate, you pay (($30k+20k)*.005)/2 in interest every month for the finance fee, or $125. Not $50, as you surmised.
      • 5 Years Ago
      If you were driving a 15 year old car, chances are you can't afford to pay $6,667 to keep your car at the end of the 3 years. So the next effect of this is you give up your old car now, get a new car for 3 years for $99/month and then have to sell your new car at the end of 3 years to cover the balloon payment and thus end up no longer having a car anymore...unless you can find a really affordable old clunker...
        • 5 Years Ago
        Not these people. You have to own a very old car to be eligible for the cash-for-clunkers deal. But I understand the people you are talking about. They don't exist where I am because balloon payments are illegal on cars in California though. When I bought my Audi in 2000, Audi had a "SmartLease" (I think it was called) program which worked like you say but it wasn't available here.

        Even with regular leases you can get boned. I had a friend who had two or three Camry's in a row. They'd just roll the penalties for the old lease into the new one when he traded it in. Then he lost his job during his last lease and couldn't get a new lease. He asked me for advice. I looked at his deal, he paid about $18,000 to lease a $22,000 Camry for 3-4 years, and then of course at the end he doesn't even own it! I believe the payoff was about $8K at the end of the lease, which meant he'd pay $26,000 to buy a $22,000 car, but given that he had put less then 22,000 miles on it, he would be a fool to not buy it out. At worst he could buy it and immediately flip it for more.

        Given it was a Camry, it had a lot more than 4 years life in it. Well, he bought the car (no idea where he got the money) and is still driving the car today, it's older than my car, I guess that means it's 12 years old or so, and he hasn't paid a dime on it in 8 years, so that worked out well in the long run.
        • 5 Years Ago
        What those customers you describe have been doing for the last 10+ years is just flipping to new fake-leases when their current fake-lease runs out. I know a couple of people who've REALLY screwed themselves on these "deals" because they have no awareness of what they actually do year in and year out. They sign these agreements that include a promise to repurchase the car for the balloon *IF* they put 10k or 12k miles (or less) on the car per year. Of course, they've been averaging 17k miles/year since they got their license (pretty typical for TX) and at the end of the "lease" they can't afford to give the car back!

        I know one girl who paid for a Jetta for about 7.5 years, because there's a convenient offer baked into some of these fake-lease contracts that lets you just continue to make the payment you were making all along until that balloon is paid off. The rates aren't usually favorable, since at that point you're financing a 3- or 4-year-old car and they know they've got you backed into a corner.... She did finally own the car, but by then she was spending more on service than on the note on an 8-yr-old 2.slow automatic Jetta with broken AC.
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