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.
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HOW 10% APR CAN
BEAT 0% APR |
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|
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 |
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|
|
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) |
|