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Buying a Car: Why Are Luxury Brand Financing Rates Higher Than Mainstream Brands?

If you’re interested in buying a car and you’ve already spent some time researching your purchase, you’ve probably discovered that financing rates for luxury car brands like Audi, BMW or Mercedes-Benz tend to be higher than rates for mainstream brands like Chevrolet or Ford. So why is this? Is it possible to get interest rates for luxury models down to mainstream-brand levels? We have an answer and an explanation.

Some Examples

If you’ve looked into purchasing a BMW, you’ve probably realized that the automaker rarely offers financing incentives below 2.9 percent. It’s the same story with Audi and the same story with many Mercedes-Benz models. And some luxury brands, like Porsche, don’t offer any special interest rate incentives.

By comparison, mainstream brands, such as Ford, Chevrolet and Honda, frequently offer interest rates as low as 0.9 percent and sometimes as low as zero percent, except on their most hotly demanded models. So what’s the reason? Why won’t luxury brands offer zero percent financing?

The Reason

There are a few reasons why luxury brands don’t usually offer zero percent interest rates. Demand is the primary one: Luxury cars are almost always in higher demand than mainstream models, which means luxury brands don’t usually need to offer lower interest rates in order to appeal to shoppers.

Another reason is that many luxury brands feel that offering an especially low interest rate would cheapen the brand, and for high-end automakers whose success depends on their upscale reputation, that’s a bad idea.

Finally, luxury automakers don’t tend to offer ultra-low interest rates because sales volume isn’t as important to high-end brands as it is to mainstream automakers. While an upscale brand like Lexus or BMW doesn’t usually define itself solely on sales volume (due to higher profits per vehicle), mainstream automakers rely on big sales numbers for profit, and low interest rates help make sales happen.

Can You Get a Luxury Car With a Low Rate?

If you’re interested in buying a car from a high-end automaker with a lower interest rate than they’re offering, it can certainly be done. But you’ll have to go through your own bank or credit union in order to make it happen and you’ll need excellent credit. Once you’ve secured your own financing, then you can purchase the car, and instead of making payments to the automaker or to the dealer’s lending institution, you’ll pay your own bank or credit union at their (hopefully) lower interest rate.

Doug Demuro
Doug DeMuro writes articles and makes videos, mainly about cars. Doug was born in Denver, Colorado, and received an economics degree from Emory University in Atlanta. After graduation, Doug spent three years working for Porsche Cars North America. Eventually, he quit his job to become a writer, largely because it meant that he no longer had to wear pants. Doug’s work has been featured in a... Read More

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