08-24-2006, 01:18 PM
Regardless of how you value a Ford, the point here is that they are effectively reducing the price of the vehicle to the future value of the payments over 6 years.
For example, at (3% inflation) next year's payments have a present value of only 97 cents on the dollar. And those dollars are worth about 86 cents in 6 years. So, the present value of those payments is far less.
Typically, these deals are worded as "0% interest or up to $5000 cash back" - where "up to $5000" is really "the present day value of the discounted future cash". I saw no mention of that in the linked article.
What I did see was the implication that they're going to make this offer good to people with "less than stellar" credit. Depending on how low they go on the credit worthiness scale, this could turn Ford into the Rent-A-Center of cars. I'd expect to see a ton of repos hit the market as soon as the economy hits a speed bump.
For example, at (3% inflation) next year's payments have a present value of only 97 cents on the dollar. And those dollars are worth about 86 cents in 6 years. So, the present value of those payments is far less.
Typically, these deals are worded as "0% interest or up to $5000 cash back" - where "up to $5000" is really "the present day value of the discounted future cash". I saw no mention of that in the linked article.
What I did see was the implication that they're going to make this offer good to people with "less than stellar" credit. Depending on how low they go on the credit worthiness scale, this could turn Ford into the Rent-A-Center of cars. I'd expect to see a ton of repos hit the market as soon as the economy hits a speed bump.