A 10% or 8% loan at your credit union or bank can often beat one of those special 0% or 1% rate sales at a dealership.  How?  Such rate sales usually offer the choice of the low interest rate or a cash rebate, sometimes called “cash back” or “cash allowance.” Many times you can save by taking the cash rebate and using it as part of your down payment and financing a smaller loan at your credit union or bank. Check out the following comparisons. Remember you are interested in the overall cost of the loan, not just one aspect.

 

HOW 10% APR CAN BEAT 0% APR

 

0%

10%

10%

10%

Cost of new car

$15,000

$15,000

$15,000

$15,000

Less equity in trade

$3000

$3000

$3000

$3000

Less rebate

$0

$2000

$2000

$2000

Months financed

24

24

36

48

Amount to finance

$12000

$10,000

$10,000

$10,000

Finance charge

0

$1074

$1610

$2174

Monthly payment

$500

$461.40

$322.50

$253.63

Total cost of financing

$12,000

$11, 074

$11,610

$12174

Savings at 10% APR

0

$926

$390

($174)

 

HOW 8% APR CAN BEAT 1% APR

 

1%

1%

1%

8%

8%

8%

 

Cost of new car

$15,000

$15,000

$15,000

$15,000

$15,000

$15,000

 

Less equity in trade

$3000

$3000

$3000

$3000

$3000

$3000

 

Less rebate

$0

$0

$0

$1500

$1500

$1500

 

Months financed

24

36

48

24

36

48

 

Amount to finance

$12000

$12,000

$12,000

$10,500

$10,500

$10,500

 

Finance charge

$125.28

$186

$247

$916

$1344

$1803

 

Monthly payment

$505.22

$338.50

$255.14

$475

$329

$256.31

 

Total cost of financing

$12,125

$12,186

$12,247

$11, 146

$11,844

$12174

 

Savings at same length

of loan

 

 

$56

$979

$390

($56)