Lend Money to Mercedes Benz

[Hyperborea]

I just got a letter in the mail yesterday from Mercedes Benz Financial Services. They are offering to let me loan them money and they will pay me 1.6% but that rate can change. I can get the money back with no waiting so it's at least as accessible as a money market or at worst a 1 year CD so the rate is better (by 0.3 to 0.6%). It however isn't FDIC covered so that's worse. They aren't backed by Mercedes Benz but by Mercedes Benz Financial Services so likely being used to loan money people buying/leasing MB cars. There is some risk because of that and I'm not sure that the level of risk is being covered by the rate differential.

You need to have a certain level of assets or income to buy these so it's likely that one of my brokers squealed. Do any of our retired financial whizzes have an opinion on these?

https://firstclassdemandnotes.com

 

[euro]

I don't think 1.6% is enough to bother with it. The fact that you have to prove accredited investor qualification usually suggests significantly higher risk than FDIC insured investments, so I would want to be paid better for taking these risks and bothering with proving and constantly renewing accredited investor status. Online banks offer in the 1-1.1% range for savings accounts, more for short term CDs.

 

[OldShooter]

The reason they are going through the hassle of offering a 1.6% rate to individuals is that professional lenders with vastly more skills and resources than individuals have determined that 1.6% is not adequate compensation for the risk involved in this deal. They are most definitely not doing the offering as a favor to the individuals.

Limiting the deal to accredited investors is another signal that the risk is significant. If something goes wrong, they do not want to be in the newspapers for defrauding widows and orphans. Limiting yourself to defrauding fat cats is OK in our society.

 

[jazz4cash]

I think it's ok risk for a small allocation but it's not enough to be worthwhile to me. I've owned or considered similar products from GM, GE, and Cat but without the accredited investor requirement.

 

[Ready]

Ridiculous.

I could buy a 5 year CD at 2.25% with a 6 month early withdrawal penalty and be far better off with no risk. This offer is for people who don't know any better.

 

[travelover]

......... This offer is for people who don't know any better.

Well, it worked for them, selling cars.........

 

[Chuckanut]

IMHO, one would need at least 3.6% to even consider the loan.

 

[Ed_The_Gypsy]

Is the return address in Lagos?

 

[brucethebroker]

Just read yet another article about the next "bubble" will be in auto loans. Guess the defaults are huge.

 

[Texas Proud]

The reason they are going through the hassle of offering a 1.6% rate to individuals is that professional lenders with vastly more skills and resources than individuals have determined that 1.6% is not adequate compensation for the risk involved in this deal. They are most definitely not doing the offering as a favor to the individuals.

Limiting the deal to accredited investors is another signal that the risk is significant. If something goes wrong, they do not want to be in the newspapers for defrauding widows and orphans. Limiting yourself to defrauding fat cats is OK in our society.

Wrong on your thinking on why it is limited... they want accredited investors so they do not have to file as much info with the SEC... nor keep filing stuff... much less requirements with accredited investors...

Also, almost all really big companies that do financing offer these types of securities... I would bet that the vast majority of buyers will be the big boys...

 

[Totoro]

I have a similar offer here for 3%. In the Eurozone with 0.1% savings accounts.

If the offer is legit (it actually is mercedes financial services) the risk should be quite minimal. In that case, I'd treat it as a CD alternative.

 

[copyright1997reloaded]

Your getting maybe 55 basis points to give up FDIC insurance and also to eliminate their requirement for SEC overview (e.g. the requirements associated with SIPC or the Securities Act or those of a money market mutual fund).

To me, that isn't much given the single issuer risk, nor are they even backed by MB parent itself.

No way I would buy these for a cash equivalent. In terms of bond holdings, a 2 year AA corporate is around 1.37%, so maybe these are competitive in that way.

 

[NW-Bound]

I just got a letter in the mail yesterday from Mercedes Benz Financial Services. They are offering to let me loan them money and they will pay me 1.6% but that rate can change. I can get the money back with no waiting so it's at least as accessible as a money market or at worst a 1 year CD so the rate is better (by 0.3 to 0.6%). It however isn't FDIC covered so that's worse. They aren't backed by Mercedes Benz but by Mercedes Benz Financial Services so likely being used to loan money people buying/leasing MB cars...

Quite some years ago, I had a similar account with Ford Motor Credit Company, which is an arrangement similar to the one above. They offered better rates than CD's, and I had quite a bit og money with them. Then, the rate went down, and down, and I eventually took my money out. Many companies have a similar affiliated subsidiary. I also looked at Caterpillar, and some others.

Just now, went to Ford Credit site to check. Their current rate is 0.95%, which goes up to 1.05% for accounts of more than $50K. Does not look too good. So, Mercedes 1.6% rate is quite a bit more (but still not good enough to me).

Ford Motor Credit prospectus says that they have some notes paying as high as 3.339%, but it looks like only institutional investors get those deals. And those notes are not redeemable before maturity, so one would be stuck if things go south.