Auto Loans: Rebates vs 0% Financing

Car dealerships across the country are offering zero percent financing on vehicles for an extended period in response to the COVID-19 pandemic. The words “zero percent financing” sound great… but what do they really mean? Are there other frugal financing options that may be more beneficial for credit union members?

In short – yes. This article highlights the benefits of choosing a rebate vs zero percent financing.

Zero Percent Financing
Too good to be true? Almost. Unless you have outstanding credit, the likelihood of qualifying for zero percent financing at a dealership is slim to none. If you are lucky enough to qualify, your lease term will likely be shorter, making your monthly payments higher. This is so the dealership can recoup their investment quicker.

In addition, not every make and model on the car lot will qualify for zero percent financing. The selection for your new ride may be narrow – why compromise your preferences on a new purchase?  

Rebate or Cash back
A rebate and a competitive credit union rate could potentially cover most, if not all, of your down payment – which will reduce your monthly costs. Qualifying for a rebate means the dealerships will reduce the price of a car to make the offer more appealing to a customer. A great rebate + low interest rate financing = big savings!

For example:

0% financing on a $20,000 loan for 60 months will give you a $333.34 payment. (Keep in mind, you are paying back the full $20,000 with 0% financing.) 

A $20,000 loan with a $3,000 rebate for 60 months at 2.50% APR* will reduce the loan to $17,000, giving you a $302.37 payment. (If you qualify for a great rebate, you only payback $18,104.37.)

With this example, you save $1895.63 when choosing a rebate!

At Dominion Energy Credit Union, we offer low rates and a discount for automatic repayment. It’s a good idea to get preapproved before you shop for negotiating power. Call us at 800-268-6928 and we’ll help you crunch the numbers and compare! Before making any decision, be sure to compare all options and pay special attention to the price of the vehicle, the rebate amount, and the interest rate.

*Example rate only. Your rate will vary based on term and credit qualifications. Call to see what rate you qualify for.