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The financing rate is 0% because the MSRP of the car is slightly inflated. If you pay with cash, you get a cash incentive (e.g. $2000 off), if you pay by financ
by raquo 9y ago
The financing rate is 0% because the MSRP of the car is slightly inflated. If you pay with cash, you get a cash incentive (e.g. $2000 off), if you pay by financing, you get a similar discount but in the form of a lower nominal interest rate.
Jurisdictions with good legislation require dealers to also show the effective APR, which takes the cash discount into account and is almost always a more reasonable rate.
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Apart from that there could be lots of special circumstances (making a quota, etc.) that could explain the discount if the offer was made to you personally as opposed to being advertised to the public.
- thenewwazoo 9y agoMy experience hasn't matched what you've posited here. I bought a car a couple of years ago, and found that multiple dealers consistently quoted me the highest price for cash and 0% financing deals, and would only structure discounts into the price if I paid interest. A discount for cash was right out. Perhaps cash purchases may have gotten you a discount at some point in the past, but dealers appear lately to be completely uninterested in them.
- raquo 9y agoWell the discounts I'm mentioning, both the finance rate and the cash discount, are coming from the manufacturer, not the dealers. For example, here's a Forester at 0.5% rate OR $2K cash discount (might need to choose BC as region): https://www.subaru.ca/WebPage.aspx?WebSiteID=282&WebPageID=20740&Range=Forester&ModelYear=2017&CarID=951 https://www.subaru.ca/WebPage.aspx?WebSiteID=282&WebPageID=2... Not every manufacturer does this, and not on every model.
- JauntTrooper 9y agoWhat is stopping you from agreeing to a loan and then paying it off in full a week later?