Using Advanced Calculators To PROVE 0% Car Loans Are FAKE

 All right, guys, we're going to be talking about all things, financing, cars, interest rate lies. How can car companies give these 0% or 1.5% loans? How does it make sense if you hear to break it down? Is Todd Langford? We're in a series talking all about the truth about numbers and Todd's the founder of Truth Concepts Calculator. We'll have more about that in a second. But Todd, welcome. This one's going to be a light video compared to some of our other heavy, heavy videos. I think this one is going to be like a, if you get overwhelmed by a lot of numbers, I think you should give this a try. And I think the insights that you're going to learn about how interest rates work are going to be really powerful. Yeah, I think this is important. I think you're going to see this in several different areas. Automobiles, furniture, you know, they kind of play the same game. And there's probably a lot more out there. But so many financial ideas, I think if we think through it logically, we can usually figure out maybe not the answer, but the something's not right. Like we're being, we're being fooled somewhere and think about it from the standpoint of the automobile manufacturers for just a minute. So they're going to offer money at 0 or 0.9. And yet a majority of their profits comes from financing vehicles. So sorry, the math doesn't work there. You can sell a lot of cars, but if you're doing it at 0%, you're still not making any profit there on that part of it, on the financing side. Yes, on the manufacturer of the cars and selling the cars, sure, but not on the financing piece if they're doing it at 0%. And so, you know, what that opens up is maybe we need to dig a little deeper. Maybe it's not really zero because if it was, why wouldn't they just be a bank? Why why mess with cars, right? With the kind of money they have, they could just finance all kinds of things. And so let's break this down and look at this from the standpoint of kind of comparing it to a bank for a minute. And what usually happens in those type of financing deals is there's a rebate or the financing. And sometimes that rebate is not published. A lot of times it's just kind of behind the scenes. And you know, you and I discussed that there are times when the auto-wheel manufacturers won't buy it on it even. They'll say, nope, the cash price, you can pay cash this or you can pay 0% financing. And if that's the option than the 0% financing would be way cheaper than paying cash. But the reality is they probably just boosted the cash price up. And you might want to check with another dealership somewhere else and see if they'll buy you a little bit on that cash price. Yes, so, let me set the stage here just to make sure I'm on the same page is what you're saying is when we're buying furniture or cars and it's common for commercials to say like, hey, this this company will give 0% financing or 1.9% interest rate. And logically, if you're if you're looking at where we're at, it's like there's no way that they can do that, especially if you're going to enjoy their profits come from the financing side. Like there's something that doesn't make sense there. And so what you're saying, well, we're going to break down is how they're actually lying when they say 2% or 1% and they're they're lying in a unique way. They're not they're math is right based on their inputs that they're giving you. But if we change some of the inputs like what you're going to walk through, you're going to realize that the financing rates much greater, which makes sense of why they make a greater profit. And what you are going to be equipped of doing in this video is you're going to you're going to be a better buyer. You're going to be a better buyer and you're going to think more like an investor whenever you're going to make a purchase. So let me know if I am I'm an in alignment. But I think like this for me changed my life when I understood this. I have never bought big items the same because I know that this is like a thinking tool for me. It's it's been really beneficial. Yeah, and one of the things is going to be hard to look back in time and I'm just going to warn anybody who tries to do that. Well, let me see what mine was. I've already got the car. I've had it for two years. You're not going to remember you there's no way you're going to know what that cash walkout price might have been only what the published one was. And so that's going to be a difficult thing. But going forward, you know, you're in a position to be able to look at that and say, you know what, no, we're going to pay cash. We're not going to take the financing. What's the best deal you can give me? I'm going to go down the road to your to your competitor and ask them. And so understand that's where we are before you ever get into the financing. And that's going to be the only way you're going to find that bottom line price. But you're right. We see this in furniture's we see this in furniture's we see this in furniture purchases. We see this in automobile purchases in heavy equipment. They do the same thing. You know, case caterpillar. It's it's all kind of the same thing on a larger scale. But this is the way we can break it down and see kind of what's happening. And so what I'm going to use just to simplify a little bit is a 40,000 dollar car that has a published $4,000 rebate. Let's make it a $5,000 rebate or 0% financing. And again, like we said earlier, you never get both. It's one or the other. And sometimes that $5,000 rebate in this case is not published. It's just one that they'll offer if they think you're going to pay cash. Okay. All right. So we're going to look at financing. So we're going to put a minus 40,000 because minus present value is alone. At the end of the time frame, we want zero. Right. We're going to pay it off. And let's say this is over 48 months. And we're going to go change this to beginning and end of my I'm sorry end of month and monthly. And 0% over 48 months. And it shows us a payment of $833.33. Okay. I want to make sure that that truly is zero. So I'm going to take that $833.33 with all the decimal places. I'm going to put it in a rate calculator. Again, change to end and monthly. And minus 40,000 is our present value because it's alone over that 48 months. And it tells me it truly is 0%. So if we were borrowing $40,000 from our banker and he said the payment is $833. The truth and lending statement would show that okay, he's charging as a 0% interest. Yep. Yep. All right. Now, what I want to do is the only way to really see through this is to think about it from the standpoint of not using them, but let's go to our banker. And so if I go to my banker, how much do I have to borrow to buy that same car? Well, I get the $5,000 rebate. Now here's another thing that doesn't make logical sense if you think about it. So if the largest profit from the automobile manufacturers comes from financing vehicles, why would they pay you to take your business elsewhere? Why are they going to give you a $5,000 reduction in price to take your financing business to your banker? Okay, it didn't really fit, does it? Yeah. It's a good point. All right. So let's look at what happens over here. So if I borrow from my banker to buy this car, I don't have to borrow $40,000. I only have to borrow $35,000. So minus $35,000 are present value. Again, end and monthly. And if my banker said your payment is going to be the same $833.33 that the car manufacturer said, 0 in the future over 48 months, my banker would have to list that as 6.7% on the truth and lending statement we get for exactly the same payment. And there's really no difference. In both scenarios, we get a call out of $40,000 car. We'll talk about that a minute. So we get a $40,000 car. We pay for it in 48 months with the same $833. Why does my banker have to call that 6.7? But the car manufacturer gets to call it 0. And this is what will kind of clarify, I think, all of those pieces and parts that don't make logical sense. So the manufacturing division was asked, how much can you build this car for and sell it for a profit? And the manufacturing division said, we can build and sell that car for a profit at $35,000. Then the financing department got a hold of it and said, let's add $5,000 of interest to the price of the car and tell them it's 0% over this time frame when we just divide it out. They just added the interest cost in the price. It's all they did. And if you're not going to finance it with them, they take the interest off in the form of a rebate that you get to take somewhere else. But the reality is either one of them is making the same 6.7%. And people because they get so fooled by the media and all the hype out there, that 0% is mere enticing. I'm even in situations where the banker had a lower payment than the car manufacturer at 0. But people opted for that higher payment because I thought they were getting 0% and it was a better deal. And that's how that's how deceiving that can really be. Right? Yeah, there's so many things that I could say. I mean, one of the reasons why they might do this is for leases and like, it's always better to have like a higher number and that kind of factors in. Whereas if they started with a $35,000 and added, if they did the same financing, yeah, 0% is way more sexy than 6.7. But you just laid out the point that it's the exact same scenario with these inputs. Right. Yeah. And so in this, it's pretty easy to figure out what's going on. It's the whole process that's, you know, it's that slide of hand. It's hard to figure out because you're looking in one direction and they're talking to you over here on the other side and it's hard to see all those pieces. But if we can find out what the bottom line cash walk out price is and then, you know, the payment that they're saying, we can find out what they're actually. Yeah. So let's just, so what if the rebate here was, you know, $2,000? So if we bring this up to the loan balance being $38,000, I'm just just playing this as an example of like if we were to run the numbers ourselves. Yeah. Just change that $35,000 to minus $38,000. Yeah. I just, I just, this is, this is where we can, and then we, we might run the numbers and we might say, listen, like right now at the time of this recording that I, it's not 0% from the car finance car, but it's like for me, I'm not going to be able to get other money at 2, 2, 2.54%. But the vice versa could also be the case where you could realize that 6.7% could be on the low end. And then it might be double digit financing. And if you're able to really get the cash by, that's like the key thing here is like you got to know what the lowest offer is going to be if you come to the table with your own money. Right. And it could be that, you know, when we, that 6.7 that we saw earlier, it might be that we have cash value with our life insurance company that we could put up as collateral. And maybe we buy the car there and maybe they're charging us only 5. I mean, yeah, if we don't know what that baseline is, it's hard to really make an informed decision as to what the best routes can be. And so that's all we're trying to do is figure out what's actually going on. And Todd, not maybe you can just speak for yourself. Let's say the interest rate truly is like 2 or 3% and you have cash value at 5 or 6% would you be someone that would say take the, take the dealers money and hold on to liquidity and control of your cash value. Hey, it's Caleb William. Here. I'm just interrupting this video quickly to invite you to check out our NS at vault. You may have been there. We've actually revamping it. And if you are somebody that wants to learn more about his life insurance rate fit for me, does this and that's it makes sense? Like does this actually help me be more efficient? We've put together a 10 minute documentary style video that I can test a really, really good job giving the history why the end asset, different setups and designs that we use. And then we have an NS at vault that gives like case studies calculators, handbooks and so much more. We are here to serve you whether it's a conversation, whether it's education or the video. So make sure to go check out and asset.com slash vault. Learn more. Yeah, I'm always going to go that way. Even if it's even if it's slightly more than what the insurance companies offer it. If the bank is willing, let's let's say the insurance company is got a rate at 5%. Let's say my bank or the automobile manufacturers at six. I'm probably going to opt for the six just because the value of having access to that cash because that cash is accessible to me regardless of what my financial state is. If right now my bank's happy with where I am and they're willing to loan me maybe only a point more because I can always take money from my life insurance company and pay that loan off if that becomes beneficial. And you know, one of the other things that happens there is people often say, well, life insurance loan, it's a lot better because I'm in control of the loan and I don't always have to make a payment. But if I have the life insurance cash value, I can effectively skip a payment with my bank or two. I can't directly, but what I can do is borrow money from my insurance company for that payment and give it to my banker. So I still have that same flexibility, but now I have money even in a situation where I might have some cash flow issues. I can always get to my life insurance cash value money. So I'm going to always try to hold that as much as possible unless the differences in the rates are really massive. I view this the same way probably it's because I've been influenced by you on this, but it just makes sense. Is it true to say that okay, if the bank will give me a 6% loan, but my life insurance company will give me a 5? Is it fair to say that I value, if I take the bank's money, I value control liquidity more than 1%. Is that the right mindset to have or am I being... It is. Yeah, I think it absolutely is, Caleb. I think though it's more than 1% it depends on how much equity we're talking about and what that percentage between that difference. The reality is 5% to 6% is actually a 20% increase in the cost, but it's on a small amount of money and it's not going to make a big difference in actual dollars. And so is it 1% no, but it is... There's a number in there that it is. And so I think that still that is the best option because it's a small amount. We could look at that pretty easily right here and push that back to 35,000 for just a minute. The reason I'm saying this is if someone will loan me money for a car or for a home, I'm going to take that money even if it's higher interest, mainly because my value of control is far greater than 7, even 9%. The return that we're getting on our business is huge. And so why in the world would I want to potentially starve or take myself out of playing the game that is bringing me most of the film and most money to maybe pay a little bit less. It's a very costless, but I don't have a great way to articulate the actual math of that, but it's a mindset that I've had for a while. Yeah, and it's right on track. It's opportunity. You look positively about the future and what the capability is. And if a deal comes along, it could wipe out that 1% differential very easily because you're in that position of cash. And the flip side of that, which is probably even more impactful. And that is a negative cash flow situation could impact negatively everything that you're doing in a really pretty drastic way. Right. And so, so being able to float inside of that is it increases certainty, but even looking at this. So this 35,000, so Kim, if you'll give me another payment calculator. And let's put minus 35,000 dollars. And in monthly. Let's say the bank will do, I mean, the insurance company will do 5% 48 months. That payments 806. So we're talking about $27 a month difference. So basically for $27 a month, we're securing 35,000 dollars of cash that I can get even if I have bad credit or something happens. Right. That's that's that's that's that's something that I'm going to start applying is you run the difference. And in the case where the insurance company is cheaper than the banks, which right now in this industry environment, this is this very common that you can get cheaper money at an insurance company that are bank, then you factor in the difference of payment and you say, what do you would you read? Is it that like for example, is it worth paying an additional 27 or 28 dollars a month to have control of 35,000? And you you you tell me the answer to that, but that I think that's a really really good way of laying it out. And sometimes the number is going to be so big where it's like, no, I totally let's take from let's take from the insurance company. But some people might realize like, what you're telling me that I can potentially control 35,000 dollars more money with potential pennies. That's a really good analogy that I think we need to be talking more about. We have to look at the big picture and I think there's a couple of things that happen. One of the things we talk about is the idea of letting the tax tail wag the dog often. And so we make decisions based on tax rates or other things that are looking at the big picture of, hey, what if we make more than the taxes? Do we really care how big the taxes are? But the same thing happens with interest rates. We have to be careful not to let that interest rate tail wag that whole dog too, right? Yeah, one of the things that we'll also do in this, if you want to learn more about interest rates, we'll we'll have Kim's book that's on this subject in the description below. I highly recommend if you this is like interesting to you like Kim did a phenomenal job breaking down the interest rate lies and use truth concepts calculator within that. So whether you're in in the business of helping people and you really want to better understand this, obviously, truth concepts would be an amazing tool that book would be great. And if you're someone who's like wanting to really be the best store with your money, we got resources from for you. We would love to serve you and between Kim and Todd, like you guys have great resources for this. Any any final words Todd as it relates to to what you want to say on what we covered? No, I think the big thing is just breaking it down. Let's look at the math and try to get rid of the hype. And that that comes from both sides of you know any any argument. I'm going to be passionate about my argument just because you know I've run the math behind it. But let's just look at the math and let that be our guide and then step away. And so I think that that plays in exactly what you were saying here as far as this analysis right here. If we only look at the math, then the way to go is the 5% period that's it. But then when we step away and we understand the math, we can say well, okay, I'll I'm willing to take a little less efficiency for a little more control because the difference in cost is not that big. But but if we don't if we're not actually looking with real numbers and truth begin with then we then our decisions are made on faulty faulty premises. And so I think at the idea is let's get really clear on what truth is and then let's take that and make the best decision. And that's where everyone's different. And it would be malpractice if I say this is the way that everyone should do it because not everyone makes the same amount of money. Not everyone has the same investor DNA. Not everyone does the same anything. But at the end of the day, we should all at least know what truth is. And unfortunately, there's just a lot of bad math out there. And a lot of people are thinking they're getting 0%. So they might be taking the 0% loan when they have access to other opportunities because they're not willing to step in and know the real rate or turn in the scenario. Yep. That's it.