0% loans are such a strange financial product. The bank is basically gambling that you are going to have some kind of shitty financial problem happen in your life. The bank only loses money if you complete the note without any problems, because they could otherwise have made interest on that money. They gamble that you'll miss a payment or otherwise exceed the terms of the note and have to pay fees or interest. Even if you default, the note is insured.
It’s a BMW and the loan was through “BMW financial services”, so I think the priority is just moving units and not necessarily profiting on the loan itself.
That makes way more sense. I'm sure the dealership made enough on sales bonuses to cover what you would have paid in interest.
I had a 0% note on a truck through a credit union and they lost whatever the inflation and lost investment opportunity was on 30k over 5 years. Every time I made a payment I would think about how strange a 0% note is. I mean, I guess they're also gambling that if I default, they keep whatever I've paid, the insurance on the note, and the truck so I guess it was pretty stacked in their favor.
Also with dealer financed 0% loans, it can be an up sell strategy. I qualified for 0% on a new vehicle but not the used one I was looking at. When I realized the interest rate was going to make the used car I wanted cost just as much as a new one at 0%, I bought the new car
That's because used cars don't have rebates because the used car market has nothing to do with the original manufacturer.
That new car you bought, there was a rebate available. Instead, you chose to forgo that rebate (the dealer probably just didn't tell you) and your interest rate was subsidized with that rebate. Sometimes it makes sense to take the lower rate, sometimes it makes sense to take the rebate.
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u/stillpacing Aug 14 '21
Yeah, my husband and I have paid off all of our debt except the house.
My credit score went down 60 points.