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How does that make any sense? I thought the older the car the lower the apr because the price is already lower. This was at the same dealer
My guess is the older car will have a lower payoff and is trying to make some money. I mean let's say it's a 5,000 car and a two year pay off. If the apr is low, let's say 2%. He's only going to make about 1000.00...500.00 per year. Which is a little return on a 2 yr/5000.00 loan. So he bumps up the apr to make it worth wild.
The factory subsidizes the interest rate on new cars which is why it's so low. Dealers, unless they are the sleazy used lots, really have nothing to do with financing. They have a few connections with lenders (especially [Car Brand] Financial) but otherwise have nothing to do with it.
Interest rate goes up as the car gets older. You may be right about it being a profit thing. I always thought it was a risk thing- the older car is more likely to blow an engine or something like that where the debtor would stop paying and would be more likely to suffer a reposession.
It's a risk thing. A new car is a better investment for the bank. You're more likely to keep it, and it's more likely to last the length of the loan. Used cars vary by year and mileage.
But anytime you see a 2.9% rate or lower, it's almost always the manufacturer subventing the rate.
It's a risk thing. A new car is a better investment for the bank. You're more likely to keep it, and it's more likely to last the length of the loan. Used cars vary by year and mileage.
But anytime you see a 2.9% rate or lower, it's almost always the manufacturer subventing the rate.
Oic, I generally buy my vehicles used and outright. So I do very little financing. In fact, the Raptor is my first every new vehicle.
How does that make any sense? I thought the older the car the lower the apr because the price is already lower. This was at the same dealer
When a given new car model isn't meeting sales targets, the manufacturer will cut prices via a rate buy down, to avoid devaluing its brand name (i.e. so consumers won't get used to - and in future demand - a lower price for the car). Basically, it's a principal reduction that isn't available to cash buyers. It's not just an auto dealer thing. Farm equipment, computers, airplanes, x-ray machines - all will get discounted via lower lease rates* when inventory is piling up.
* Lower lease rates, coupons, rebates, etc are all classic brand management tools - the whole idea is to avoid having to cut the sticker price.
Last edited by Zhang Fei; 07-30-2011 at 09:50 PM..
Used cars are always higher to fiance because the risk is higher.Just one insatnce is that new cars ahve a three year warranty which guards the investment.
The factory subsidizes the interest rate on new cars which is why it's so low.
This, in fact, it's not uncommon to be offered either a low interest rate or an additional factory (cash back) rebate.
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