Electric car, car | Gossip warns: - Do not blindly look at promotional interest rates

Attention campaigns are becoming more important than reach. This is what neighbors talk about when they shovel snow: car rate hikes.

This is what the then editor of Belforlaget magazine, Atle Falk Toverud, said The 2023 car year was recently scheduled to be summed up.

With mortgage interest rates skyrocketing and car loan interest rates skyrocketing, all car sales have hit a wall. Being able to be tempted by a subsidized interest rate has been more important to many car sellers than the amount of discount they can offer on a car.

The lowest rate we've seen advertised is a three-year fixed rate of 0.05 percent.

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This is how promotional interest works

A supported interest rate usually works this way:

The seller is usually the one who pays you to get a lower interest rate. Therefore, you often have to choose between a discount or a promotional price.

If you choose floating interest, the full value of this agreement is the difference Between the promotional rate and the market rate – whether that's your mortgage or the interest rate on a car loan.

If the choice is between increasing your home mortgage at an interest rate of 6 percent, or a subsidized interest rate of 2 percent, your savings is 4 percent. On a loan of NOK 500,000, this works out to NOK 20,000 per year before tax.

What happens when interest rates fall?

But some interest rate offers that have been introduced to the market recently have been so attractive that a whole new problem has begun to arise:

What happens if the interest rate falls below zero?

Until the new year, it was possible, among other things, to reduce the subsidized interest rate to 0.25 percent. Interest rates of 0.99 percent are relatively common.

A floating promotional rate for the first three years (currently 0.99%), which then adjusts to the current product price (currently 9.40%), Mobile wrote, on one of its models
The rent is charged at a variable interest rate and follows regular interest rates throughout the lease term, Berger en Hoge writes

Now the overwhelming majority agree that we are at peak interest rates. Most expect one or more interest rate cuts during the year, and there will likely be more during the three years to which the agreement applies.

Does this mean that you could end up in a situation where the bank pays part of your loan, instead of paying interest?

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Refuses to receive negative interest

The short answer to that is no, according to two big players in the auto finance space:

– In the terms of our agreement related to such campaigns, we write that the interest rate cannot be less than 0.0 percent, says Communications Director Eskil Pedersen at Santander Consumer Bank.

In practical terms, this means that if the interest rate continues to fall, the value of the promotional rate declines.

DNB cannot offer a negative interest rate:

– In general, our car loans will not have a negative interest rate, says communications consultant Lukas Loeb at DNB for Nettavisen, and points out that “you never want contract interest rates to fall below zero percent.”

At the same time, he admits that they will now look at the way this is being marketed on a show that could now end up in this situation.

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– Don't blindly look at promotional interest rates

Thomas Iversen, senior lawyer at the Consumer Council, believes it can be very difficult to get an overview of the type of agreements you actually enter into.

-We have seen many different forms of car loans with campaign-based interest rates in the past year. A common theme with many campaigns is that it can be difficult for consumers to read from the ad what is actually being presented, as well as what happens after the campaign ends. In consumer agreements, there is a requirement of clarity in European contract law. The advantages and disadvantages of the loan product are important pieces of information for the consumer, and the seller must highlight them clearly.

– It is essential to ensure that the information provided about the promotional price is clear and distinct throughout advertising and other marketing materials. When the interest rate follows a differential pattern with the prime interest rate, it naturally follows that the interest rate can become negative. If the company has expressed reservations about something else, this should be clearly stated, says the senior lawyer.

The clear message from the Consumer Council is to think about more than promotional interest rates:

– It is important that people do not blindly look at promotional interest rates – whether purchasing or leasing. Before entering into an agreement, you should both evaluate your need for a car and whether your finances can handle the additional loan. If you're looking for a newer electric car, there's also a great flea market you can explore.