Top Advisors May be Sellouts

Have you seen the latest Hyundai car commerical? They are advertising their latest sale, which offers $3000 cash back when you buy a Sonota. After the salesperson tells the potential buyer about the cash back, out pops this financial expert (some supposedly well known financial author). This author, the “expert”, suggests to the potential buyer that they should buy this car to get the cash and “invest” the cash back in a CD (certificate of deposit.)

I can not blame Hyundai at all. The ad spot is brilliant. It really sells this as a “great investment.” However, this “expert” is selling out. How? As someone that works in finance, let me share with you what I see in this…

Most automobile loans will run between 6-10% in interest rate. With the current credit crunch, most buyers could be seeing slightly higher than this. You must note that this ad did not mention 0% financing, or anything even close. So one must assume it is the average rate.

If you put the $3000 cash back into a CD, you will at best gain a 2-3% return on the investment. So this expert is instructing the car buyer that putting the $3000 in to a CD is better than using it towards the price of the car, with will carry a higher rate than the CD will pay. The idea is to make this sound like a smart “investment”, which in turn makes you feel smart for buying their car.

So the financial expert that should warn you about such bad investments is instead pushing a bad idea so he can get paid. This just backs my overall opinion of many of the “experts” out there. Most of these talking heads are more interested in selling their books than offering you real advice.

So who do you trust? Here’s a hint… only listen to advice given by those that have taken the time to listen to you first.