That is often not true, given how low the APR on a new car loan is if you have good credit.
E.g. loan at 0.9% and you can get WAY more than that by sticking that $40k in even a safe mutual fund.
E.g. loan at 0.9% and you can get WAY more than that by sticking that $40k in even a safe mutual fund.
Is there something I'm missing here? I'm extremely confused as to why someone buying a car, even with insanely good credit, would get a FAR better rate on borrowing money than the US Government.
If Toyota doesn't want to offer $rate, Hyundai will - and now Toyota has to match it or they lose market share. (Of course, it's more complex than that, since obviously people get car loans from banks, but most of the big automakers have finance arms).
I don't have any particular insight into this industry beyond my own personal experience though, so there's a non-trivial chance that I'm wrong with regards to the general case.
Exactly. Most auto makers would actually be better described as financing companies that happen to build autos on the side. Particularly when you look at their financials and realize that all of the actual profits are coming from financing and that actual vehicle sales are often a net loss if taken by themselves.
I suspect the local sales guy pockets any loan origination fees; the automaker is just paying that as commission for the actuarial likelihood that the people who finance will default at a rate that still makes it profitable when taking into account the benefits of maintaining low inventory in a given model year.
Loan origination fees are a thing.