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This time of year, we make our members a lot of auto loans.
One of the phrases we often hear is, “I can get Zero Percent financing at the
dealership.” But, is Zero Percent financing really 0%? Do you save more money
taking the car with the dealer’s 0% financing or would you be better off
negotiating the price of the car including the rebate and taking out a loan
from your local credit union?
Here is the dealer’s basic program: 0% financing for up to
60 months or you have the option of taking a rebate from $1,000 to $2,000 and
find your own financing. Which one is the better deal for you? Let’s look at
this 0% deal and compare it to a low interest Meriwest Credit Union 60 month
loan with the manufacturer’s rebate applied.
Dealer loan:
$20,000 @ 60 months 0% interest = 60 payments of $333.33
Meriwest Credit Union
loan after $2000 rebate is applied:
$20,000 minus $2,000 rebate = $18,000
$18,000 @ 1.99% * = 60 payments of $315.20 total interest
paid: $925.20
$18,000 + $925.20 = $18,925.20
You save $1,074.80 ($20,000 - $18,925.20) with a Meriwest
Credit Union loan
(This is an example. Your actual savings will depend on the
size of the rebate on the Vehicle you purchase and the actual rate you qualify
for at the Credit Union).
Besides the outright savings using your Credit Union loan,
you also get that savings up front! That
means that even if you decide to sell or trade in your vehicle before the
60-month loan is paid, you already have saved the money when you
purchased.
If you decide the 60-month 0% is the better way to buy, also
consider that in order to actually save the full amount you must keep the car
the entire 60 months. If you sell or
trade before that time period, you have lost the value of the rate. Statistically most 60 month loans are paid
off by members in a period of 36 months, as members choose to sell or trade in
their vehicles on a newer model and in some cases as a result due to an
accident.
Members who take the up front cash rebates are free to do as
they please with regards to trade-in etc, since they are not forced to keep the
vehicle for the full term of the loan in order to realize the advantage of low
or 0 % financing. So, if you are in the
market for a new vehicle from a manufacturer offering large rebates or
artificially low interest rates, contact a Meriwest Credit Union financial
service representative to give you a comparison between a Meriwest loan and the
Dealer’s. You might find out that 0%
isn’t really as good as it sounds!
About P.A.S.S.: Whether
you're looking for a new or used auto, using P.A.S.S. means you don't have to
deal with dealership salespeople. Instead, you work directly with Bill Fultz,
Meriwest's Personal Auto Shopper and your very own insider in the automotive
world. He has access to thousands of new and used cars in dealer inventories
all over the state. Need a new or used car? Check our link at WWW.Meriwest.com/PASS for more info.
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Our next Financial
Education Workshop:
Credit Myths and
Credit Repair
December 11, 2013 - 6:30pm
Meriwest Credit Union Main Office
Training Room
5615 Chesbro Ave
