Originally Posted by benjamin

"about the 0%.... domestics are all curretly offeriing this incentive.. and yes, its FREE credit... thats what happens when you u sell piieces of shit that no one buys..."

When a customer finances a loan through a dealership, what's really happening is that the dealership is reselling, for a profit, a loan offered by a bank.

Lets say Chase Manhattan Bank USA is a lender that your local Honda dealer works with. You fill out a credit application and the dealer submits it to Chase Manhattan Bank. Chase runs your credit report and decides whether or not to take a risk lending you money, and how much of a risk to take. If you have bad credit, its more likely that you won't finish paying off the loan, so they charge you more interest in order to get a return on the investment.

A good interest rate for someone with middle-of-the-road credit would be about 8.9% in a scenario like this. If you have excellent credit, maybe you get offered 5.9% or better. The rate is also dependent upon several factors including the interest rate set by the federal reserve.

If you sign a financing agreement at 8.9%, chances are that the dealership marked up the loan by 3 points, and the cost of the loan is actually 5.9%. In New York, its illegal to charge more than 3 points of markup. There are more complicated ways to get financing, but lets stick with this for now.

When you see 0% financing advertised, check the fine print -- it says "for qualified buyers." Usually that means a Transunion credit score of 810 or better, which is excellent credit. The way it works is that instead of the buyer paying the interest on the loan, the auto manufacturer pays it. Ford et al. use a 0% loan as an incentive to get people to buy a Focus or whatever.

Therefore, there is no such thing as free money. Somebody is paying interest, always.