So far this year, I have spent well over $1000 in gasoline for commuting. So a recent NPR story on Elio Motors talked about their three-wheeled car that will get 84mpg, I turned up the volume to listen! Even better, the car is slated to cost only $6800. Color me interested! If I were to buy this car, it would pay for itself in gas savings in about 3-4 years. But the story wasn’t about the car. It was actually about how the company plans on financing the car: with a credit card.
Their idea: issue a credit card with the car. Instead of making payments on a loan, payments are made whenever you purchase gas with the credit card. To the tune of 3X what you just spent on gas. So if you spend $25 on gas, you are charged an additional $75 to go towards the amount owed on the vehicle. Frankly, that is the most ridiculous thing I’ve ever heard. Here’s two examples why:
Case #1: High Mileage Driving
I’m currently driving between 300-500 miles every week. I’d basically be filling up once per month. At $25 per tank, that’s a $75 car payment every week, or $300/month. The car gets paid off in under 2 years. That’s $400 per month to put on the plastic. Oh, wait. The card is only going to have a $300 limit.
Case #2: Low Mileage Driving
What if you are the proverbial little old lady that drives to the bank once per week? This car will probably go a year or more on a tank of gas. At that rate, it would take 7.5 years to pay off!
The other issue is that, well, it’s a credit card. While details haven’t been released yet, one would assume that it will have credit card-like rates. On average, those are about 3-4 times those of auto loans.
What do you think of Elio Motor’s non-traditional financing plan?