Rebate or Low Rate Financing: Which is better for you?

Zero percent finacing offers aren't always the best option

So what will it be, the rebate and financing at your Credit Union, or taking the low, maybe even 0% financing, at the dealer?

On the surface, a zero percent loan, or even 1% or 2% rate loan, sounds like free money. You would not be alone to think that a low-percentage loan is the better deal. Especially when you are at the dealership and the sales agent brings out the sales contract, smiles, and asks if you will be taking the manufacturer’s financing special.

Still, there is only one question you really need to be considered with: which option will cost you the least over the life of the loan? For help with the calculation you can contact your Credit Union, use our calculators on or call at 1.800.500.7010. In the meanwhile, here is a rule of thumb to keep in mind while you shop:

Rule of Thumb: Over the life of the loan, paying less for the car up front saves more than saving on the finance rate.

Not convinced? Consider this example that compares an interest rate of 6.0% and a rebate to 0% percent financing:

Purchase price: $20,000
Rebate: $2,500
Sales tax: 7%
Trade-in credit: $5,000
Amount you owe on your trade-in: $4,000
Dealer offer: Zero percent financing or $2,500 rebate. (You don’t get both)

Which is better? If you take the rebate, and finance at 6% for 48 months, you will save more than $250 over the life of the loan.

That’s right. By paying less for your car up front, you almost always save more in the long-run.

For your best deal on your next car, truck or van, obtain a CarQuotes New Vehicle Pricing Report now, and contact your Credit Union for financing. That way, when the smiling sales person asks you if you prefer the Rebate or a low-rate loan, you’ll know exactly the right answer.

1Sales tax applied before rebate taken. 2For example purposes only. Rates offered by your Credit Union may vary.

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