Auto Buying: Rebate or Low Financing?

Manufacturers often market vehicles by offering a rebate or exceptionally low financing. Should you take the rebate or the special financing? The dealer does not give you both.

For example, you have decided to purchase a vehicle for $20,000. The dealer is going to give you a rebate of $3,000 or a finance rate of 0%. Which deal is in your best interest?

Here is a comparison of the loan payments with the dealer’s reduced financing and a credit union’s standard financing.

0% APR financing for 36 months on a $20,000 loan

Monthly Payment = $555.56

Total of Payments = $20,000.00


5.5% APR Credit Union Financing* for 36 months on a $17,000 loan

($20,000 minus the $3,000 rebate)

Monthly Payment = $513.33

Total of Payments = $18,479.88

$1520.12 is saved over the term of the loan with credit union financing. In addition, if you were to sell the car during the time you were paying on the loan, more money would come back to you because you had a lower loan balance.

Here are a few other things to consider:

• Many consumers will not qualify for the low rate financing. You generally must have near-perfect credit to get the best rates.
• In many cases, special financing is available only on specific models
• Most often, offers of special financing are for a limited term, generally up to 36 months. This can make the payment considerably higher than most of us would like.
• Large down payments may be required.

*The rates quoted are for comparison purposes only, and are not a guarantee of the rates offered by any particular credit union. Contact your credit union for the current rates on new and used car loans.