0% Financing May Not Be Better
Many dealers are offering special financing on new cars. It’s important to look closely at all the facts, because 0% or low-rate financing may not always be the best deal for buyers.
Will you qualify for the special financing? Only those with excellent credit histories are eligible. According to the Consumer Task Force for Automotive Issues, less than 10% of those interested qualify for the low rate. One small credit blemish could mean your rate will increase.
If you do qualify, there may be strings attached to the deal such as:
- Vehicle restrictions — Not all vehicles will qualify for special financing. You're often limited to dealer stock, so you may not get the color or options you want.
- Price restrictions — You may not be able to negotiate the price and could end up paying more.
- Term restrictions — Some deals require a shorter term, which means higher monthly payments.
- Down payment requirements — you may be required to provide a larger downpayment, such as 10% down.
- Rebate restrictions — If you take the financing deal, you usually won’t get a cash rebate.
Dealers usually offer a choice between special financing and a cash rebate. It’s important to evaluate your options. Taking the dealer’s cash rebate and financing at your credit union could be a better deal. For example:
|
60-month car loan
|
|
|
| |
|
Dealer
financing
2.90% APR |
|
|
Credit union financing
4.49% APR* |
| Car sales price |
|
$20,000
|
|
|
$20,000
|
| Dealer rebate |
-
|
$ 0
|
|
-
|
$ 3,000
|
 |
|
|
|
| Amount financed |
|
$20,000
|
|
|
$17,000
|
Total interest paid
over 60 months |
+
|
$ 1,509*
|
|
+
|
$ 2,011*
|
|
|
|
|
| Total amount you'll pay |
|
$21,509
|
|
|
$19,011
|
|
|
|
|
| Total savings |
|
|
|
|
$ 2,498
|
| Estimated monthly payment |
|
$ 358
|
|
|
$ 317
|
|
36-month car loan
|
|
|
| |
|
Dealer
financing
0% APR |
|
|
Credit union financing
4.49% APR* |
| Car sales price |
|
$20,000
|
|
|
$20,000
|
| Dealer rebate |
-
|
$ 0
|
|
-
|
$ 3,000
|
|
|
|
|
| Amount financed |
|
$20,000
|
|
|
$17,000
|
Total interest paid
over 36 months |
+
|
$ 0
|
|
+
|
$ 1,203*
|
|
|
|
|
| Total amount you'll pay |
|
$20,000
|
|
|
$18,203
|
|
|
|
|
| Total savings |
|
|
|
|
$ 1,797
|
| Estimated monthly payment |
|
$ 556
|
|
|
$ 506
|
Of course your situation will vary based on your APR, the size of your down payment and the length of repayment. Check out our calculator to compare rebate and special financing options.
Weigh all your options first and decide what is truly the best option for you and your family. Please contact us to help you compare your choices or if we can help you in any way.