The big business of auto loans

Auto financing is big business. Not all loans are bank owned. Many automakers carry their own lending to promote sales as well as to help customers with one stop auto shopping. Auto financing is the third largest consumer lending totaling approximately $900 billion.

Auto loans serve both parties. It promotes car sales for the dealer/manufacturer. On the other hand, it helps the customer who is unable to come up with almost $30,000 price tag for a new car.

There are more to what you see on the surface of an auto loan. It serves more for the dealer. It not only sells their cars but also establish a steady flow of vehicles for servicing in years to come. Servicing autos is big business that generates hefty profits for the dealer. Don’t forget the interest they earn from the loan. This is where car buyers may want to negotiate. Because the interest rate that the dealer will quote for a customer to borrow money to buy the car may be more than what the bank is charging the dealer. Banks do allow this intermediary jacking up of the interest rates charged to customers. This is why it is important to compare financing deals with other outside sources.

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