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Fed raises the discount rate


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I just got a letter from Honda to buy or lease a car for 0% interest for 60 months. Now that sounds like deflation to me.


Do you consider it a sign of deflation because it is being offered by Honda instead of GM or Ford (who have often made such offers in the past 20 years)?


0% financing is generally just a advertising gimmick to get people on the lot. My limited understanding of auto financing is that there is usually a "gotcha" with 0% financing. (like 0% financing in lieu of a manufacturer rebate).  It is not the same as a 0% loan that can be applied to any car you choose. http://www.ontariocarfinancingloans.ca/zero-percent-car-financing.html




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We bought a Mazda van 6 years ago with 0% financing for 48 months.  It really was 0% financing (that is there was neither a markup nor a rebate on the vehicle). We negotiated the price, and then got the financing.  At the time everyone was offering similar deals except Toyota and Honda.  It is the same again now. 


I am given to understand that it makes more sense to get the financing than to pay cash.  The dealership doesn't care if you pay cash, or not, so they generally wont bother to deal on that alone.  To a dealership financing is the same as cash... it just comes from different source. 


The other thing is that dealerships make the Lion's share of their money on repair work not car sales.  Even Honda's and Toyota's need work sometimes.


Anyway, I invested the theoretical 30000 from the cost of the vehicle at my customary rate of return which is somewhat higher than 0%. 


These low interest rates have been like a license to print money.  Borrow money at 3 %, and invest some in dividend paying stocks at 5%, pocket the spread.  All too soon, this too shall pass, in fact its already passing as divident paying stocks rise in price. 

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