A true-life parable from Beldar on low interest rates, "free money," and Democrat logic

In July, for the first time during this millennium, I bought a car. I'm very happy with it and with the transaction by which I acquired it: I test-drove at the dealer closest to my home, did further comparison shopping and took competitive bids on the internet, and then struck a fair deal with no game-playing by me or the salesman I dealt with. But when I was arranging the paperwork, one of his colleagues was tasked by the dealership with selling me something I was not much interested in buying — one of their various extended warranty packages.

For some people and on at least some kinds of purchases, extended warranties can make economic sense. In my circumstances, for a purchase like a car, they don't: I'm at a lower than average risk than many other car owners whose vehicle use is more demanding than mine, I can usually tolerate the kind of cash flow disruption caused by unexpected car repairs, and when you add in the transaction costs and profit margin that's necessarily part of the price for an extended warranty, it just makes more sense for me to rely on the original manufacturer's warranty (which on this vehicle was already excellent) until it runs out, then to self-insure.

So I knew going into the conversation that there was zero chance that this fellow could persuade me, even though he was charming and professional and knowledgeable. I cut through most of the chase and told him my decision, and my rationale for it, right away. He didn't argue with my facts or logic.

But he had to at least give it one last try. So he pointed out that I could finance the entire up-front cost of a multi-year extended warranty using very attractive manufacturer-provided financing at less than one percent interest! "That's like doubling your original manufacturer's warranty using practically free money! It's too good a deal to pass up at those rates, even if you normally wouldn't buy the extended warranty package."

(I'm thinking to myself: Either this guy is a Democrat, or he thinks I think like one. He thinks I'm an Obama voter.)

"So," I asked, "this 'free money' — that means if I finance the cost of the extended warranty package, the manufacturer will loan me the entire cost and I'll only ever have to pay 1% of it back, and they'll just write off the rest at no charge to me, is that it?"

He looked at me with puzzlement; I think he was wondering if he'd overestimated my financial acumen. "No," he replied, "You'd just pay it back over several years' time at this very attractive interest rate."

"So I would still have to pay back every single dime that I borrow, plus a little more," I continued, "in order to buy something that I really don't want anyway and that I otherwise couldn't justify buying. Is that what you're telling me? And you think that because the extra I'd have to pay back is just a little more instead of a lot more, that makes this too good a deal to pass up?"

The confusion disappeared and was replaced with a moderately respectful grin. He pushed the paperwork to my side of the desk. "Check here and here to acknowledge that I explained the extended warranty options to you and that you declined them," he said, "and we're all done." I did, and we were.