How about this for an incentive: A customer qualifies for an initial rate on his car loan, say, 7.5%. After the first 12 months, the rate would be reduced to 6.5%; after the next 12 or 18 months it would be reduced to 5.5%. (The rate reductions could be 50 or 75 basis points, or some other such amount.) Maybe these price cuts would keep people paying their car loans longer — they would give customers something to work toward and reward them with lower payments the longer they pay.
Banks in Ohio used variable rate car loans starting in the 1980s. They were very successful and were difficult to compete against. I don't know how successful they were for the banks but dealers and customers loved them. I'd be curious to learn on the ones you quoted what drives the rate down 100 bps the succeeding year? Great idea.
Thanks for the feedback, everyone. I don't actually know of any auto lenders offering this type of loan; it was just something I thought of. It seems like it would be an exercise in risk management -- lenders would have to figure out, based on vehicle price, monthly payment, interest rate, depreciation, etc., how much they could lower the rate after whatever time period they choose, to still make a profit while attracting customers. I read something recently that talked about whether we, as an industry, would ever get away from manufacturer incentives and rebates, and was just thinking that this might be a possible alternative.