Comments on: Bank Gives Free Mercedes Benz For $1 Million Deposit

By: Editor

Editor — Tue, 08 May 2012 22:10:47 +0000

I think the promo was mostly a PR play. I don’t think they’ll mind if they don’t get any takers on the offer. If someone does bite, you’re probably right: they will likely be UHNW types who were already in the market for a Benz.

From C1′s disclosure for the CD:

“Pre-calculated interest earned and paid in advance on the CD may be subject to applicable State or Federal taxes. C1 Bank will issue a same year (2012) 1099-INT Interest Statement for pre-calculated interest earned. Client should consult and discuss any taxation issues with a tax advisor.”

By: Mark I

Mark I — Tue, 08 May 2012 19:07:06 +0000

Your are not getting a car for $15k, you’re getting a car in lieu of interest you’d get in a vanilla CD and the $15k is the tax bill, which would happen whether you get paid lump sum in cash or in this case a car. The bank would need to make it VERY clear to the customer that they will get a 1099-INT next January with the value of car reported to IRS as taxable interest income. People do care about having to pay tax on income they didn’t receive in cash.

This offer is certainly a conversation starter and so from this standpoint is quite successful but I will be shocked to see if even a handful of takers materialize. The 7-figure CD investor and the new Mercedes owner profile has a lot less overlap than one might think.

The best target for this offer: someone already considering to buy this car who has financial capacity/liquidity to commit $1MM into this CD for 5 years, not some random 7-figure CD investor who’s going think getting a car instead of cash over time is cool.

By: Editor

Editor — Tue, 08 May 2012 14:46:22 +0000

Wouldn’t taxes be owed on the 1.2% APY earned either way, whether the interest is paid upfront, in installments over time, or in one lump sum at the end?

The deal is obviously a good idea from the financial institution’s point of view. But the consumer? Maybe, maybe not. If someone has a million cash laying around who wants a new Benz for $15K, this is probably a fantastic offer. Even if it isn’t, who’s going to feel bad for a millionaire if they make one silly/frivolous investment here or there? As long as the customer isn’t investing their only million in the CD, they’ll probably find a way to manage through it.

By: Mark I

Mark I — Tue, 08 May 2012 13:44:16 +0000

Clever idea, but what about the upfront tax hit? The value of the vehicle should show on a 1099-Int which get reported as taxable income so customer will need to pay taxes out of cash outside CD. Even at 25% tax bracket, the fed tax bill will be approx $15k.

By: Editor

Editor — Thu, 03 May 2012 18:11:52 +0000

That’s one of those interesting time-value of money questions — the depreciating value of the car the instant you drive it off the lot vs. waiting for money five years down the road. It can get really complicated when you start factoring inflation predictions. The bank has to wrestle with cost-of-funds, inflation and other variables as well.

By: The Financial Marketer

The Financial Marketer — Thu, 03 May 2012 18:06:30 +0000

Very cool and outside the box offer that’s for sure.

As far as the investment goes.. well consider what that benz is worth as soon as it leaves the dealer lot much less after 5 years. ($20-$25K) If i had a $1M cash i’d rather just splurge and buy a used one.

Can’t knock them for creating a very exciting incentive though.

By: Shawn

Shawn — Wed, 02 May 2012 20:38:18 +0000

This is a great idea, and surely there are a few millionaires out there who will take him up on the offer.