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Credit Union Rate
vs.
Dealer Rebate
Calculator
Plan A
The low rates that most dealers advertise are for short-term loans. For
example, one dealer offers 1.9% financing, but that's only available
on two-year loans. A new $20,000 car with a $2,000 down payment (10%
down) will require financing $18,000. This translates to an astounding
$765 monthly payment—out of reach for most buyers.
The same dealer offers other options, which become less attractive as
the loan term lengthens. The dealer's three-year loan has a 4.9% rate,
while its four-year loan has a 5.9% rate, and its five-year loan has
a 6.9% rate. Financing $18,000 on your $20,000 car at the dealer's
5.9% rate for four years results in a monthly payment of $422—a
more realistic outlay for many consumers' budgets.
Plan B
On the other hand, if you choose the dealer's rebate plan, you forego
the low-interest-rate loan, but get a $2,500 cash rebate. Adding the rebate
to your down payment can make credit union financing very attractive—because
the larger down payment reduces the amount you need to finance.
So which alternative is best—taking the dealer's low-rate loan or
the credit union's loan with the dealer's cash-back offer? Use the calculator
to find out. Fill in all six fields before you hit calculate.