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.
