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Ah, lucky you. I read your comment on my phone and came to my desktop to type comfortably my rant. Have you ever tried to cancel a loan? The following story ma

Ah, lucky you. I read your comment on my phone and came to my desktop to type comfortably my rant. Have you ever tried to cancel a loan? The following story may or not apply to you. It happened in a small country called Spain: Some time ago I bought a car. They offer you a very nice discount if you, instead of paying upfront, finance the purchase. Why? I asked the seller, it makes no sense. He gave me a list of more or less valid reasons, leaving the most important out: the draconian interest rate, which I inmediatly noticed. Noticing also the lack of integrity I decided to play along and took the loan with the intent of cancelling it ASAP. To summarize: it took something like 10 calls and saying on the last one that I was going to send a certified mail and forbidding my bank to pay a single €. I paid the loan and saved several thousand euros, even after paying "cancellation costs". The whole enterprise has changed my view about regulation. It was regulation that gave me the right to cancel the loan against their will, and capped the cancellation costs, which I find it amazing they are even allowed, to compensate "for lost earnings". After the 2008 crisis a lot of regulation has been put in place affecting the banks. It's incredible they are allowing still this kind of scam to buy a car.

Humdeee 5y ago
> nice discount if you, instead of paying upfront, finance the purchase Save $3,000 today so you can spend $12,000 tomorrow!
nickpp 5y ago
You took a loan and "the draconian interest rate" was a surprise?! I would've thought that was the most important factor.
- Spivak 5y ago
  You're missing the "car dealership game" that has to be played sometimes. Lots of places will offer you a cash discount and/or 0% interest if you finance with them. They get cash kickbacks and sometimes a cut of the interest. Now you, the savvy customer, see an opportunity here. You were going to buy the car in cash and so there's an obvious play; buy the car, take the financing, and then immediately pay off the loan (or when the 0% interest expires). It's a win-win right? Not for the bank unfortunately which is why nowadays there are early payoff fees and dealerships will try to make it annoying to pay them. Terrible terrible incentives but the discount can be worth the headache -- the discount is almost always more than the early payoff fee.
mbg721 5y ago
In the US, financing is also a lucrative profit source for car sales, but I think prepayment penalties are less common.

Humdeee 5y ago

> nice discount if you, instead of paying upfront, finance the purchase Save $3,000 today so you can spend $12,000 tomorrow!

nickpp 5y ago

You took a loan and "the draconian interest rate" was a surprise?! I would've thought that was the most important factor.

Spivak 5y ago
You're missing the "car dealership game" that has to be played sometimes. Lots of places will offer you a cash discount and/or 0% interest if you finance with them. They get cash kickbacks and sometimes a cut of the interest. Now you, the savvy customer, see an opportunity here. You were going to buy the car in cash and so there's an obvious play; buy the car, take the financing, and then immediately pay off the loan (or when the 0% interest expires). It's a win-win right? Not for the bank unfortunately which is why nowadays there are early payoff fees and dealerships will try to make it annoying to pay them. Terrible terrible incentives but the discount can be worth the headache -- the discount is almost always more than the early payoff fee.

mbg721 5y ago

In the US, financing is also a lucrative profit source for car sales, but I think prepayment penalties are less common.