Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Jul 11, 2012

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Auto loan borrowers should feel free to send a thank you letter to the criminal bankers involved in the $800 trillion LIBOR scandal for creating artificially low car loan rates over the last seven years.

The recent LIBOR scandal derived from several London banks that conspired to manipulate the LIBOR.

LIBOR, the London Interbank Offered Rate, is the average interest rate that London banks charge one another for borrowing.

If a borrower experienced an interest rate change at anytime between 2005 and the present day—such as a drop in his or her car loan rates—that change could have been the result of to the manipulated LIBOR.

All interest rates are tied to certain indexes. For instance, many are tied to our own government’s treasury notes. Others are tied to the LIBOR. Higher LIBOR rates mean higher interest payments while lower LIBOR rates mean lower interest payments.

“Every town and municipality in America probably has investment holdings that are pegged to LIBOR,” said Matt Taibbi, contributing editor at the Rolling Stone. “I think the Wall Street Journal calculated $800 trillion of financial products. So if there’s cartel-style corruption that is affecting the LIBOR rate, it is just impossible to imagine a financial corruption scandal that is bigger in scope than this.”

Car loan rates, credit card rates, and mortgage rates were all affected by LIBOR manipulation.

Barclays, one of the banks involved in the LIBOR manipulation, was fined $450 million for their part in the scandal.

As the world was reeling in the midst of the financial crisis, Barclay reported deceptively low lending costs in an effort to seem robust. The bank also submitted false rates in order to assist traders to obtain profits. The bank did this by betting that the LIBOR rate would increase, then preemptively reported high rates which raised the LIBOR averages—thus forcing LIBOR to actually rise.

Aside from ensuring Barclays made a handsome profit, this manipulative move also raised interest on home loans, which created higher monthly payments for countless homeowners during a time of severe economic recession.

But Barclays didn’t just manipulate LIBOR to boast high rates. Instead, they also—and quite often—manipulated LIBOR to be artificially low.

While manipulation is unethical in any situation, it is believed that Barclays actions to keep rates artificially low actually helped some consumers since it lowered their credit card, mortgage and car loan rates.

This level of influence shows that LIBOR has affected a huge number of consumers in America. As a result of Barclay’s manipulations, Americans across the country enjoyed lower car loan rates as well as lower rates on their credit cards.

Some—even though it may not have seemed like it—also enjoyed lower mortgage payments.

While some Americans might simply shrug at the LIBOR scandal, chalking it up as a British-only problem, the fact remains that LIBOR has affected many financial mechanisms, including car loan rates, in America.

What’s more is an artificially low LIBOR isn’t always positive.

“Everyone who has saved or put any kind of money into products that are linked to a fixed interest rate – you may not even know that that is where your pensions come from, but it typically is – all of those people are losing when interest rates are manipulated down,” said Simon Johnson, MIT economist in an NPR interview.