How do banks make money from '0' interest rate loan ?

[Khun Ying Pojaman]

Is there an arrangement between the banks and the vendors where banks get a cut of profits from the vendors ?

That is to say, if you opt for '0' interest loan, you're unlikely to get a discount from the vendor.

I'm referring to car loans.

 

[Frankiestine]

Probably they mark it already. Same like business that say they absorb GST. Which business in their fucking mind can absorb in 7% cost? Not unless this already factored in.

 

[Cestbon]

0% interest for car loan normally only for max 2 year. If you can repay back the loan within the period is good.
But most loan until max or 10 years.
For CC the zero interest are trick. They will charge processing fee about 5% upfront. And you need to make the payment according to the agreement if not they will charge fee for
1. late payment fee
2. due amount fee
3. notice/lawyer fee.

So there are no free thing. Only those greedy will be con. So many bank/insurance call me ask me if I have time for meeting/talk about finance and no obligation to buy. I tell them no thanks, please dont waste both of us time. Something really want to tell them go to hell. Almost every week will get at least on average 1~2 call .

 

[Cestbon]

0% interest for car loan normally only for max 2 year. If you can repay back the loan within the period is good.
But most loan until max or 10 years.
For CC the zero interest are trick. They will charge processing fee about 5% upfront. And you need to make the payment according to the agreement if not they will charge fee for
1. late payment fee
2. due amount fee
3. notice/lawyer fee.

So there are no free thing. Only those greedy will be con. So many bank/insurance call me ask me if I have time for meeting/talk about finance and no obligation to buy. I tell them no thanks, please dont waste both of us time. Something really want to tell them go to hell. Almost every week will get at least on average 1~2 call .

 

[Forvendet]

Be careful when people call you to borrow money from you. Be even more careful when people call you to lend money to you.

 

[Khun Ying Pojaman]

Let's not digress.

So do banks actually split earnings with car dealers ?

Car dealers used to encourage customers to take a loan, and the salesman that gets paid a commission by the financing institution. But now with financing institution offering zero interest, does that mean the banks get paid by the car dealers instead ?

 

[vamjok]

I heard from my friend few years back about this. The price is already markup and there is indeed an agreement between the bank and car dealer.

 

[Soul_Reaper]

I heard from my friend few years back about this. The price is already markup and there is indeed an agreement between the bank and car dealer.

When I bought my Nissan a couple of years ago...... I told the salesman I am paying cash for it dun want to take loan...... he said cannot must loan at least $30K or else the offer price is not valid.

 

[Khun Ying Pojaman]

When I bought my Nissan a couple of years ago...... I told the salesman I am paying cash for it dun want to take loan...... he said cannot must loan at least $30K or else the offer price is not valid.

But did you have to pay interest for the loan ? We're talking about zero interest loan in this thread.

 

[vamjok]

this one someone explain to me before but i still very blur about it as well i must say up front, i remember him saying the reason why cannot use cash one shot pay everything is because of that agreement. that cost that is offered to you is the already marked up price.

 

[Khun Ying Pojaman]

this one someone explain to me before but i still very blur about it as well i must say up front, i remember him saying the reason why cannot use cash one shot pay everything is because of that agreement. that cost that is offered to you is the already marked up price.

You're referring to interest loan, not interest free loan. In the case where you take up a loan, the interest that the bank will earn has been factored into the price. The bank makes money from the interest you pay and so a portion of the interest is calved out as discount for the price of the car so as to entice you to take up the loan.

Then again, we're now talking about zero interest.

 

[Unrepented]

Extract from an article below indicates that manufacturer absorbs the interest cost to increase sales. Dealers will have to get approval from principal for the program if it is not initiated by the principal. It is quite common that principal can give discounts to dealers or reimburse dealers for programs, in this case; the interest absorbed. Bank may give preferred interest rate thru the dealer.

See article below"

"The auto manufacturers -- primarily General Motors -- really did a service to the country when they slapped the zero-percent financing on their vehicles after Sept. 11 to jump-start the economy,'' says Bruce Belzowski, assistant research scientist at the Office for the Study of Automotive Transportation at the University of Michigan.

"But there comes a point where you say, how much money can we spend on these programs and still be profitable? Only now have they started to dial them down.''

Most manufacturers offer zero-percent loans now on just a few slow-selling models, or have limited the term of the zero-percent loans to just 36 months, which would put the monthly payment higher than most people would want



Read more: Zero-interest car loans fading to . . . zero http://www.bankrate.com/finance/auto/zero-interest-car-loans-fading-to-zero.aspx#ixzz1IgG1rrmu

Is there an arrangement between the banks and the vendors where banks get a cut of profits from the vendors ?

That is to say, if you opt for '0' interest loan, you're unlikely to get a discount from the vendor.

I'm referring to car loans.

 

[HellAngel]

When I bought my Nissan a couple of years ago...... I told the salesman I am paying cash for it dun want to take loan...... he said cannot must loan at least $30K or else the offer price is not valid.

That's true. Borneo motors also the same. In the end, I was 'forced' to take a minimum loan of $20,000 for 1 year in order to get a discount.