In the auto industry's attempts to ramp up sales one of the hot plugs is always NEAR-ZERO PERCENT FINANCING. At the cusp of the 2001-2002 recession General Motors began offering 0-2.00% financing for their vehicles- or you could opt to take a rebate of several thousand dollars in their attempt to ratchet up sales. That tactic was quickly adopted by other manufacturers as well to an overwhelming success of bringing consumers back into the showrooms and get the Auto Industry back on the road, so to speak. Several manufacturers have brought this product back into the market place hoping for similar results.
At that time I was a Loan Officer for a mid-sized community bank in west-central Ohio and I remember fielding numerous phone calls from customers not wanting to finance their car with the manufacturer- they wanted their trusted local institution to handle it. The problem was that they couldn't understand why we didn't offer the same rates GM was offering.
One of the secrets of this financing is that in almost every case, the consumer is better off taking the manufacturer's rebate and financing it local. Our website has some insight on it to give you calculations to show the savings if you wish to look it up www.emeryfcu.org/autoloans.aspx.
SITUATION: Purchase new car for $24,000.
CHOICES: 60, month financing with 0% manufacturer or $1200 rebate to finance elsewhere.
Case #1 Details: Loan Amount: $24,000, Rebate Amount: $0.00, Interest Rate: 1.90%APR, Term: 60 months, Monthly Payment: $420, Total Finance Charges Over Life of Loan: $1,180, Total Cost of New Vehicle: $25,180.
Case #2 Details: Loan Amount: $22,800, Rebate Amount: $1,200, Interest Rate: 3.90%APR (special promotional rate EFCU is offering), Term: 60 months, Monthly Payment: $415, Total Finance Charges Over Life of Loan: $2,080, Total Cost of New Vehicle: $24,880.
Next time you are looking to buy a new vehicle and come to the precipice of this decision- pull out a financial calculator and look at all of your options. ZERO or near-zero percent financing sounds like a steal- and to be honest, if you can get it, it is a GREAT DEAL!..... but- it may not be the "best" deal.