Fascinating Financials

[ChehRob]

I received this a couple days ago"


Ford Credit is pleased to offer an opportunity for US residents to invest in its Ford Interest Advantage (FIA) Floating Rate Demand Notes. Established over 40 years ago, this flexible and liquid investment product currently pays an attractive interest rate of 5.50% and is offered by program prospectus.

FIA Program Features:

• Interest rate of 5.50%*
• Convenient online enrollment and 24/7 online access
• No management fees
• Access to funds via ACH, bill pay or redemption check
• Minimum initial investment of $1,000
• A rate that's at least 0.25% higher than the average yield for all taxable money funds as reported weekly in iMoneyNet Money Fund Average™
• Notes can be held in individual, joint, custodial, trust, or corporate ownership types

I have a zero four year no interest loan. Why doesn't Ford just offer me a discount to pay off my loan? For 4.1 or 4.2 discount per year, that would save Ford a few percent. Instead, and in effect, Ford would pay me 5.5% for the next three years, and I am borrowing the money to do it from Ford at 0%

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[Jimrpa]

I’ve had FIA accounts (used to be Ford Money Market accounts) for close to 30 years. They’ve always been a trouble-free place to stash extra cash, that earn a “decent” rate while being liquid. Only caveat is that they’re not FDIC insured, so you have to hope that Ford doesn’t go out of business overnight ?

 

[AliRafiee]

Because when you give them money in FIA, they can use that money while they have it to make more money. Giving you 4% off your 0% interest just doesn’t make financial sense to anyone.

The 0% interest was to make the purchase more attractive, especially since most people would go to a third party bank and Ford wouldn’t make any money on the loan anyway.

 

[ChehRob]

But the fact remains that Ford is having to borrow money at 5.5% (likely to go lower in the next three years), and in the bigger picture that money is subsidizing my zero percent loan.

 

[Sikkun]

But the fact remains that Ford is having to borrow money at 5.5% (likely to go lower in the next three years), and in the bigger picture that money is subsidizing my zero percent loan.

If Ford is giving you 5.5% (which, so are lots other people currently). They are making more than that off it. Interest rates go down? So does that 5.5%, they make money off this.

Your 0% loan? They made money off selling you the vehicle.

Two different ways to make money. Both are a win for Ford.

 

[kodiakng]

ford credit is a subsidiary of ford motor company - it deals in financial products, not cars (directly).

they're doing pretty well ( from their Q4 2024 financials ):

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