3 ms·
Could you clarify what this means for a layman? AIUI you are saying that a car dealership will borrow money from the bank to purchase their inventory, but nowad
by shard 5y ago
Could you clarify what this means for a layman? AIUI you are saying that a car dealership will borrow money from the bank to purchase their inventory, but nowadays with no inventory, banks are not getting payments from the dealers for the money they've borrowed. 1. With no inventory, why does the dealer need the money from the bank? 2. If the dealer is still borrowing money from the bank despite having no inventory, don't they still need to pay interest? I think there is something fundamental that I am misunderstanding here.
- skybrian 5y agoIt sounds like dealers choose how much to borrow. If they borrow less, banks get less interest, meaning less income, unless they replace it by finding other people to make loans to.
- mdavis6890 5y agoDealers have a line of credit, like a credit card, that they use to purchase inventory. They pay it back as they sell cars, and run it up as they buy new inventory to replace it. So the overall loan balance roughly represents their current unsold inventory. No inventory means no loan balance, which means no interest payments to the bank.