Why is the APR on a car from a dealership so much lower than a banks?
You can get a sub 2% APR with ease on a new car, whereas getting under a 4% loan from a bank to purchase a car over the same period of time is tough to do.
Genuinely curious as to why this is. Is it because of the perceived ease of resale of the asset? Seems that banks dont even compete on personal auto loans. Am I missing something?
Likely because they view the interest as a. gravy on top of the profit they already make selling the car and b. a way to get people to buy cars on the spot. Any time spent talking to loan officers is time spent reconsidering the purchase.
the automaker is self-financing the purchase and subsidizing the interest rate...they car maker has a self interest to increase sales...where the bank does not
1) some of the financing partners are owned by the OEM (GM financial, BMW bank, ..)
2) once you hook the customer, this is a great opportunity to up-sell other financial services, like credit cards, car insurance, and more
Even Tesla had several job postings for insurance specialists from the US to Europe. I am guessing they are working on a hyper-personal insurance plan for Tesla owners based on all the data they are collecting.
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