Dennise Williams, Staff ReporterNO MONEY down. Could this be a new trend in the car dealership industry in Jamaica? Possibly, because at least one company, GM Challenger, is having a clearance sale that requires no deposit on a particular brand of vehicle. GM Challenger is having a clearance sale on their 2003 Chevy Celta for a cash price of $600,000 to $625,000. However, even if you don't have the cash for a deposit, the car can still be yours for no money down and a minimum monthly payment of $21,500 over a five-year term.
That's right. Of course the deal is subject to the normal credit producers, because they are not just going to give anybody their vehicles. When you come to fill out the application, you need a credit reference from a financial institution, a job letter, last two pay slips, valid identification and taxpayer registration number (TRN). According to GM sales representative, "We ask credit purchasers to come in for an interview and within three to four days, we process the application. If we decide that they get the vehicle, we then require the first month's deposit and that the vehicle is comprehensively insured."
Now you may ask why the company is doing this. Well, the sales staff informed Sunday Business that, "We want the Celtas to move. They are not selling." And hence, necessity is the mother of invention.
NOT A TREND
But other dealers do not see this as an emerging trend. According to the dealers that Sunday Business interviewed, a deposit is an integral part of the car selling trade.
From the dealers' point of view, the transaction, without a deposit, becomes too risky. A manager at Crichton Automotive Limited was surprised that in Jamaica such a thing was occurring. "This is the first that I am hearing of this. I mean, the way that I know the business operates is that you have to give a deposit in order to secure the vehicle."
However, the Crichton manager states that no deposit car sales are common in other countries. "In the United States, your job or chequing account secures the vehicle. And the company would still be the owner of the vehicle. You don't become the owner until the vehicle is paid off."
ADDED EXPENSES
In Jamaica, things are different as deposits fuel car dealerships. States the manager at Crichton, "Our car dealership relies on deposits. That is what we survive on. When we collect a deposit on a vehicle, we use that money to clear another vehicle."
And if more companies offered no-deposit deals, the endeavour could become very expensive. Sales manager at Nipo Line Auto Imports Limited explains, "In order to effectively manage a no-deposit contract, you would have to have a department to monitor these cars. That means more staff. Then you would have to have a separate lot to store the vehicles and you would have to pay someone to repossess the vehicle. Yes, it is a way of grabbing customers but the vehicles that you sell would have to be supplied so cheaply that not collecting a deposit wouldn't hurt my pocket. For me, it would only be the repossessed vehicles that are sitting on me that I want to move."
Based on their arguments, neither company would consider offering no deposit specials. The Crichton manager said, "We don't have a problem with our sales. For us to consider no deposit specials, it would be a last resort. It is a cash flow disadvantage."
The Nipo Line sales manager states, "We finance through First Caribbean Bank so a deposit is necessary. And I would not advise it from a business point of view."
From the consumers' point of view, dealers assert, the no deposit feature is more than compensated by heavy monthly payments. And this is not a good thing. At Nipo Line, the sales manager continues, "I know that Jamaicans love freeness but we need to look beyond the numbers. Without a deposit, the payback can be heavy and the interest rates can be high. Over the five years, the customer will be paying two times the value of the car."
