Screw PH. Recommend ME/my SO a new car!

[ColdWizard]

**** your logic, there's profit to be made

[Dauphin]

I honestly don't think you are capable of understanding my point; you are too numbers-oriented to grasp the high-level reasoning.

As I've said several times now, I understand its business strategy and I understand its financial basis. But if you actually think about it, it is remarkably stupid. That's not to say it's not effective.

He would understand it in the form of an instability due to a feedback loop in the rate of interest calculated as payable based on the risk profile of the individual. The higher the risk, the higher the rate, the higher likelihood of not repaying and so higher the risk. Repeat.

Or phrase it as a paradox.

[onodera]

Yeah, from the risk management PoV, lowering the principal amount and increasing the interest rate are both valid risk mitigation strategies. The first one is of course the better and saner one, but in your case the principal was fixed to the car value, so they tried to hike up the interest. Btw, do they have partial financing in Canada? Wonder why they wouldn't offer that.

[Hauldren Collider]

Asher, I think you're missing Kuci's point by a lot here.

[Dauphin]

He's not missing the point, he's pointing out an obvious counterintuitiveness from the perspective of an individual. Banks are more willing to lend you more money at a lower rate if you can demonstrate you don't need more money and can afford a higher rate; and are more likely to lend you less money at a higher rate if you demonstrate you need more money and can't afford the higher rate.

[Zoetstofzoetje]

It means that instead of borrowing more money at a lower rate, you borrow less money at a higher rate. Simple.

[Asher]

He's not missing the point, he's pointing out an obvious counterintuitiveness from the perspective of an individual. Banks are more willing to lend you more money at a lower rate if you can demonstrate you don't need more money and can afford a higher rate; and are more likely to lend you less money at a higher rate if you demonstrate you need more money and can't afford the higher rate.