A $15,000 auto loan may sound like a lot, but in actuality it is virtually the same as buying a cash with cash. Auto makers have a particular competitive advantage when it comes to auto loans because they don’t actually need to make money from the auto loan itself. You see, auto makers are able to profit from the sale of the car itself instead of just from the money. It is for this reason that those who are interested in auto loans should go directly to the car manufacturer if possible.
A few months ago, Toyota signed a deal with Texas to move its factory over into Texas from California. For that reason they will be used as my example of an auto maker which is worth borrowing and buying from. Auto makers have multiple divisions, first is of course the division which builds and sells cars, but the other division is the one which finances these cars. Almost all auto makers have this division, because many clients will require an auto loan to buy a vehicle. A car is, after all, very expensive.
Let’s say that a bank aims to provide auto loans. In order to match the interest that they would receive from these auto loans with what they would receive from personal loans, the interest rate for the auto loan would need to be upwards of 6%. This renders banks non-competitive in the auto loan realm, unless they are willing to compromise.
What banks have begun to recognize is that they can in fact compete in the auto loan sphere with auto makers because auto makers only finance new cars. Additionally, banks recognize that car loans are lower risk than some other forms of personal loan since an asset is actually being purchased. Loans for things like vacations are less secure since the money is simply spent and cannot be recovered under any circumstances.
It’s actually quite surprising that auto makers allow banks to provide auto loans at all. It would be far too easy for auto makers to offer a blanket auto loan to anyone interested in buying one of their cars, even on the used car market. Simply approaching an auto maker with a classified ad should be sufficient to get the auto maker to provide clients with a loan. After all, the auto maker makes most of their money from repairs, and thus the faster people sell their cars the more likely they are to get repaired and the more likely the auto maker is to make long-term money.
A way to make this business venture particularly lucrative would be to get those who took out an auto loan through them to sign a contract with them for, say, oil changes for a year or two. This would be enough to offset any potentially lower interest rate while also giving the chance of ever-more repair income. I’m amazed that auto makers don’t do this already, but either way, the principle remains the same.
If you’re trying to get an auto loan, look first for those from auto makers themselves. They have a vested interest in getting a car on the road, and thus have a vested interest in providing you with the auto loan that you need. After that, a bank will do just fine, and the interest is lower than the federal tax, anyways.
Standard Find Texas Loan’s Borrower Information :
Loan Amount : $15,000
Bank name : Toyota Financial
Type of Loan : Auto loan
Loan Processing Speed (Time frame when money is needed) : Within a week or two, I’d like to get my new wheels soon!
Where do you live (City/Town, State) : San Antonio, Texas
Zip : 78227
What is your field of employment? : Welder on an oil rig
What is your credit like (Good, fair, bad)? : Good credit
How did you find us? : Billboard ad
Gross Amount Per Paycheck : Currently I make about $7,000 per month
Do you agree to have this information published online? : Yeah
Extra information : I’ve needed a new car for a long time, I’ve just been a little bit reckless with my money. Also, I’ve never been easily convinced that taking out an auto loan was a good idea. I guess being told that it’s as good as paying with cash up front is all the convincing a guy should really need. With an interest rate of 1%, it’s pretty hard to beat Toyota Finance. I’m very happy to be in my new Tundra, a beast of a truck!
Note to lender : Thanks a lot, Toyota! Loving my new truck.