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Open a $1 million CD, get a Benz?

By Claes Bell, CFA · Bankrate.com
Monday, May 7, 2012
Posted: 5 pm ET

Ever feel like you're getting nothing for opening a CD these days? One Florida bank is offering you the chance to get a very tangible return on your investment (and one Janis Joplin probably would have loved): a brand-new Mercedes Benz.

Tampa, Fla.-based C1 Bank is offering the keys to one of four different Mercedes models in exchange for opening a $1 million, five-year CD account. From the press release:

Trevor Burgess, CEO of Community Bank announced today that, in conjunction with its name change to C1 Bank on May 1 and in partnership with Crown Eurocars, it will be offering a new five-year $1 million CD product where the client will receive a brand-new Mercedes-Benz from Crown Eurocars as prepaid interest.

Clients will be able to choose from the 2012 SLK350 Roadster, 2012 E350 Sedan, 2012 ML350 SUV, and 2012 E350 Convertible.

C1 Bank CEO Trevor Burgess said, "C1 Bank is offering its clients the ability to drive off in their own brand-new Mercedes-Benz just for moving their money to C1 Bank. In this interest rate environment where the five-year CD has an APY of 1.2 percent, it is thrilling to change the game with the instant gratification of a spectacular Mercedes-Benz that our client will own including tax, title and license."

As a promotion, it's hard to beat this deal, which has attracted the attention of national media and probably a lot of potential customers.

But as an investment, the CD has some serious issues. For one thing, as the press release notes, the car isn't some kind of special freebie you're getting in addition to the yield; it is the yield. Once you drive off in the car, you're not getting any other return on that $1 million in the bank for the next five years. And since the average car loses around 65 percent of its value after just four years due to depreciation, instead of that APY of 1.2 percent, you'll probably realize something closer to a 0.4 percent APY after all is said and done.

But even if you did get to keep that whole 1.2 percent yield, that's not exactly a return to write home about, even in these low-rate times. Bankrate's CD rate database spits out five-year jumbo rates topping out at 1.8 percent, which would generate thousands of dollars worth of yield more than the C1 offer on that $1 million principal.

Finally, there's the issue of principal risk. Because the FDIC only insures deposits up to $250,000 for an individual account or $500,000 for a joint account, buying a $1 million CD amounts to a significant investment in the future solvency of C1 Bank. According to Bankrate's Safe & Sound Star Ratings, C1 Bank gets a 3 out of a possible 5 stars, but even if it got 5 out of 5, that 1.2 percent APY may not adequately compensate you for the risk that the bank will fail and take a chunk of your deposit with it.

Still, the C1 deal is a sign of hope that soon more banks will be trying to sweeten their pitch to depositors with special offers and promotions. Just be sure you do the math before being seduced by that red convertible or any other reward.

What do you think? Would you deposit $1 million for a Mercedes roadster?

Follow me on Twitter: @ClaesBell

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3 Comments
Dmitry
May 14, 2012 at 4:08 pm

A conservative investment of the same 1 million will bring you 4-5% annual return that will amount to 200-250K before taxes over 5 years.

You'd have to be rich AND bad at math to fall for the offer.
Just who are they targeting?

Meagan
May 08, 2012 at 7:26 am

No way. I would just use my $1 million to buy myself 18 new Mercedes Benz.

Lightrider
May 07, 2012 at 10:47 pm

Hell no!!