Honduras wins. Let’s shut it all down and the last one out make sure to lock the door. It doesn’t matter if 120-month loans become the norm or if Hyundai decides to bring back the first-generation Accent back from the dead with a new and marketing-friendly name. there’s absolutely no way to top this.
I actually had to do a double-take to check whether my eyes hadn’t just played a cruel trick on me. But nope, it’s the truth. For the very low sum of $8/day you too can own the finest new 1980’s car that money could buy. As far as going the distance to get the lowest price imaginable on the paper… it’s nothing short of a masterpiece.
Nonetheless, there’s just so many questions surrounding this thing. How many days do you have to pay $8. I’m guessing that if they wrote “For 1825 days” the ad would lose its edge. As it would if it said $224/month. The usual concerns about depreciation and extremely long loan terms are still there, and to it we have to add a nasty new threat to the humble worker’s equity.
Currency devaluation.
Until a couple of years ago my local currency, the Lempira, traded at a fixed rate of L.19.02 per USD. However, because of the tanked economy and reasons that I’m sure will make perfect sense when looked at from a board meeting of international development banks who don’t actually have to suffer the consequences, it was decided that it would be best for the country to let its currency back on the free market again. The result? Exactly the one you imagined.
The currency started to freefall in comparison to the USD and it doesn’t seem to be showing any signs of meaningful recovery. As of this writing it’s hovering around L.22.35 per USD and still dropping. I’m the first to admit that a 15% drop in your currency’s value over 4 years is not exactly the rate that would cause you to start building fires with money because it’s cheaper than wood. Still, what it means is that who knows how painful those $8/day are going to feel. If you buy it now and the currency keeps devaluating at the rate it’s been doing it essentially means you’ll be paying L.675/month more two years down the line. Better hope your wage keeps up with devaluation (Hint: It won’t.)
Strangely enough, I’m not particularly angry with this ad. Certainly not as mad as when I realized that for having the privilege of owning a base Nissan Frontier I’d have to shell out more than $25,000. If you’re buying a new car and don’t look past the glamour and the glitz, the free coffee and the hideously complicated contracts for financing. If you don’t have the common sense to check all the variables and find yourself four years down the line realizing you paid about twenty grand for a Mitsubishi Mirage well, there’s only one person to blame isn’t there?
Outsider’s Perspective: Peak Marketing
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How does this work? Are these cars financed “buy here-pay here,” with the installment payments denominated in dollars? That’s insane–denominating in dollars acknowledges a lempira devaluation risk, which necessarily implies a default risk. I wouldn’t lend money like that without having a downright usurious interest rate–are you sure that Mirage is not $8/day for 84 months?
If it is a BHPH scheme, can one get a bank to write a lempira-denominated loan that gets used to pay the dealership up front? That should offer some stability, even if the terms don’t seem as attractive at the current exchange rate.-
Well here in Honduras you can finance the car in US Dollar at a lower interest rate. At the end of the month you can pay in US$ or the equivalent in Lempiras that day – so you always pay a few lempiras each months. This is ideal if you have a great job working for a foreign company that pays you in US Dollars, otherwise you are screwed.
You can also finance the car in lempiras but at a much higher interest rate (which I think most people do because of the fear that over night the lempira would slip even more). The benefit being that you always pay the same amount regardless of the currency exchange.
BTW is not a BHPH scheme, its still a monthly payment, they are just saying that if you don’t buy lunch everyday for like 5 years you can own a mirage.-
If I pay for somebody’s lunch everyday, can I avoid having to drive a Mirage?
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Essentially yes, it’s buy-here, pay-here. I’m assuming the risks are offset by the fact that if they don’t do their business in dollars they’re essentially losing money hand over fist (You don’t buy cars overseas in Lempiras)
Your idea of getting a loan in local currency and using it to pay the car up front is really the most sensible way of doing it. That way you are actually paying the value you agreed on when the car was new. Provided you find favorable interest rates and don’t try to 72-month it.-
I don’t speak Spanish, but I think that white text on black line in the bottom of the Mitsu ad says something like “calc is based on 20% first payment and 72 monthly payments” referring to that $8/d claim. There’s also add where $8/d is calculated as 72 months + 15% first payment (9,5% interest), no idea what’t the price these % are calculated from:
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Foreign currency denomination has brought down entire economies. But you have to know that 14% devaluation over 4 years is pretty gentle in our times. Take a look at this chart:
http://www.xe.com/currencycharts/?&view=1Y
URL doesn’t seem to include currency: Looking at USD/NOK over a year, with a low of 5.89887 NOK per USD and a pretty recent high of 8.31475 NOK per USD.
Norway is a small, but well-integrated and well-developed European economy. By some measures, it is the second or third richest country in the world, and we have topped the UN’s Human Development Index (urx!) for years. Despite all the reassurances one might get out of that statement, our currency had a fall of more than 30% against the dollar within a year. Now, again, we’re not Zimbabwe. It’s one thing that my gazillion orders from aliexpress.com suddenly aren’t so cheap anymore. It’s a much different story trying to run a proper business.
I am one of those people who are as much disgusted as they are alert about current macroeconomic trends, particularly QE. Printing massive amounts of money that supports governments without economic control and sense, thus directing the ridiculous “extra money”/profits highly skewed societies produce towards stock markets, blowing up evaluations based solely on the need to stack away money. At the same time, the common man might spend an entire working life to earn what these government-/central bank-supported scam artists expect as a yearly return.
/economist-rant over -
8 per day is 240 per month, or 2840 a year. Depending on the frame (framing?) conditions, this could either be reasonable or catastrophic…
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