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I'm not sure why you are heaving such a difficult time with this, but I will try one more time.
Toyota is currently offering "0% interest" for 60 months on the purchase of a 2016 Camry. Since you believe that the finance rate is in no way tied to the purchase of the car, please answer this simple question:
What other lender will lend you $35,000 for 60 months at 0% interest, when the loan isn't tied to the sale of a product in which the lender has an interest?
Doesn't matter as the "lender" in this case is the car manufacturer. They made their money with the sale of the car already. No one but the manufacturer knows the exact true total cost to develop engineer, build, deliver each and every unit. They're making money (talking thousands) on each and every unit sold no matter how good the customer negotiates a deal.
When the lending institution already has made their money, offering a zero interest loan is not beyond the realm of possibility. Especially when the offer is only available to a very select well qualified buyers. But it is available nonetheless.
Doesn't matter as the "lender" in this case is the car manufacturer. They made their money with the sale of the car already. No one but the manufacturer knows the exact true total cost to develop engineer, build, deliver each and every unit. They're making money (talking thousands) on each and every unit sold no matter how good the customer negotiates a deal.
When the lending institution already has made their money, offering a zero interest loan is not beyond the realm of possibility. Especially when the offer is only available to a very select well qualified buyers. But it is available nonetheless.
I don't understand the point of posting thousands of words trying to tell people that the car companies and dealers always make profit even if you get a good deal.
Is this something that is supposed to be earth shattering or something? Holy myopia.
I don't understand the point of posting thousands of words trying to tell people that the car companies and dealers always make profit even if you get a good deal.
Is this something that is supposed to be earth shattering or something? Holy myopia.
Let me see if I understand you. I walk into a dealership where they are offering 0% interest for 60 months for qualified buyers. I negotiate the price of the vehicle as if I were buying it flat out in cash. Once I'm done haggling and we settle on a price ($30k for example), I turn around and tell the salesman that I changed my mind and instead now want to take advantage of the 0% interest for 60 months deal and since I have tier 1 credit and will qualify for it. Are you telling me that the $30k that we settled on is no longer $30k and instead I will be paying more? If so, please tell me how?
I have purchased several new cars where the manufacturer was offering teaser rates on financing. In every instance, upon paying cash, I received an additional discount off of the purchase price, approximately equal to the difference between the teaser interest rate and the current market rate for similar loans. YMMV.
Just for fun, why don't you answer the question that was in my post that you responded to? The answer might be enlightening.
Doesn't matter as the "lender" in this case is the car manufacturer. They made their money with the sale of the car already. No one but the manufacturer knows the exact true total cost to develop engineer, build, deliver each and every unit. They're making money (talking thousands) on each and every unit sold no matter how good the customer negotiates a deal.
Ah, but it DOES matter. For all those who believe that teaser rates are NOT tied to the sale of the vehicle, you have to reconcile the difference between loans offered by those who tie the loan to the purchase of a particular product, versus those loans where there is no relation to the purchase of a particular product.
Quote:
When the lending institution already has made their money, offering a zero interest loan is not beyond the realm of possibility. Especially when the offer is only available to a very select well qualified buyers. But it is available nonetheless.
If this is the case, then they would offer those zero % loans to anyone who qualified, for ANY purpose. But you and I both know that those loans are only available to those buying the cars.
Why don't you try answering the question that I posed? The correct answer sheds a lot of light on this issue.
Last edited by TaxPhd; 12-23-2015 at 10:18 AM..
Reason: Fixing a typo. "loand" changed to "loans"
Plain and simple:
It is prioritizing goals and allocating our limited resources to reach them. Priorities differ between people and change over time for everyone.
Speaking from experience, a carefully chosen cheap car can save you a ton of money. We don't owe anything but a small house mortgage balance and still drive them. Rather than making car payments, we're saving more for retirement, kids' college, etc. and paying down the mortgage with whatever is left over.
Would we like to drive fancier cars? Of course, but not at the expense of our other current priorities.
That's not a slam on people who chose differently. Its just what's right for us right now.
Ah, but it DOES matter. For all those who believe that teaser rates are NOT tied to the sale of the vehicle, you have to reconcile the difference between loans offered by those who tie the loan to the purchase of a particular product, versus those loans where there is no relation to the purchase of a particular product.
If this is the case, then they would offer those zero % loans to anyone who qualified, for ANY purpose. But you and I both know that those loans are only available to those buying the cars.
Why don't you try answering the question that I posed? The correct answer sheds a lot of light on this issue.
You've moved the goalposts. The original argument was "you pay more for the car if you take incentivized interest rates." Now your saying that it somehow matters that you have to purchase a car from that manufacturer to get the incentive rate.
Ah, but it DOES matter. For all those who believe that teaser rates are NOT tied to the sale of the vehicle, you have to reconcile the difference between loans offered by those who tie the loan to the purchase of a particular product, versus those loans where there is no relation to the purchase of a particular product.
If this is the case, then they would offer those zero % loans to anyone who qualified, for ANY purpose. But you and I both know that those loans are only available to those buying the cars.
Why don't you try answering the question that I posed? The correct answer sheds a lot of light on this issue.
Of course. I never argued otherwise. I wasn't trying to argue that zero interest loans are readily available across all product lines or as personal loans.
All I'm saying that it is offered and available for a very select few car buyers.
You've moved the goalposts. The original argument was "you pay more for the car if you take incentivized interest rates." Now your saying that it somehow matters that you have to purchase a car from that manufacturer to get the incentive rate.
I haven't moved the goalposts at all. The two points that you bring up are two sides of the exact same coin. There are three issues, and they are all tied together.
1) Below market rates on manufacturer provided financing are tied to the price of the car.
2) Money is never free, and a below market rate results in a higher price for the car. This is evidenced by the fact that after negotiating best price, paying cash for the car will result in a further discount (rather than a higher price resulting from the use of the "cheap" financing).
3) The 0% rate on loans is ONLY available when purchasing a product that the lender has an interest in. It is IMPOSSIBLE to get the same 0% financing if one ISN'T buying a product in which the lender has an interest.
My #3 above is, perhaps more than any other issue, THE prima facie evidence that the below market rate is tied to the purchase price of the vehicle, something that you have steadfastly denied throughout this discussion.
I really don't see how this could be any more clear.
Of course. I never argued otherwise. I wasn't trying to argue that zero interest loans are readily available across all product lines or as personal loans.
All I'm saying that it is offered and available for a very select few car buyers.
I wasn't saying that was your argument. It's simply a point used to illustrate that "0% auto loans" don't represent the true cost of financing.
Without repeating it, my post above summarizes my position.
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If so, please tell me how? 
