Interest Rate Subvention

Category: finance

A marketing strategy where the manufacturer pays the bank to offer artificially low (or 0%) interest rates to the consumer.

Subvention is essentially a "discounted loan." The manufacturer absorbs the difference between the bank’s standard interest rate and the promotional 0.9% rate offered to the buyer. This costs the manufacturer money, which is why it is often offered in lieu of a cash rebate.

Common Examples

• The manufacturer provided an interest rate subvention on the heavy-duty trucks to keep the monthly payment within the fleet manager’s budget.
• Choosing the interest rate subvention deal often means you must forfeit the cash-back rebate, so calculate the total cost savings carefully.