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Special Rate or Dealer Rebate?
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
6.49% 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* |
|
+
|
$ 2,953* |
|
|
|
|
| Total amount you'll pay |
|
$21,509 |
|
|
$19,953 |
|
|
|
|
| Total savings |
|
|
|
|
$ 1,556 |
| Estimated monthly payment |
|
$ 358 |
|
|
$ 332 |
36-month car loan |
|
| |
|
Dealer
financing
0% APR |
|
|
Credit union financing
6.49% 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 |
|
+
|
$ 1,754* |
|
|
|
|
| Total amount you'll pay |
|
$20,000 |
|
|
$18,754 |
|
|
|
|
| Total savings |
|
|
|
|
$ 1,246 |
| Estimated monthly payment |
|
$ 556 |
|
|
$ 521 |
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.
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