Do you take the rebate or the zero rate loan? Which is better for you?
Manufacturers often try to boost sales by offering new car buyers either a rebate or "zero" (or low) rate financing, but it can be hard to figure out which is the better deal for you. You can go with your gut hunch or you can figure it out for sure.
Before now, figuring it out wasn't real easy but that's changed.
Bankrate.com has built on their website (click here) a calculator that lets you put all the numbers in and then compares them so you can see the real cash difference. Just plug the numbers in and it tells you the best deal in plain English.
For instance, let's take a look at a $20,000 loan over 4 years (try never to go over 4 years or you'll hear the car dealer start talking about "Negative Equity" when you go to trade it in any earlier than 2 or 3 years down the road; that and other car dealer terms can be learned by clicking here for our Car Dealer Dictionary).
If you can get a 5% loan rate and take a rebate of $1,000, is that a better deal than if you can get a zero interest rate but no rebate money in your pocket? At first glance, it seems like it and that's what Detroit wants you to think, but you'd be wrong.
Turns out that if you take the zero rate loan you'd save yourself $1,000. In other words, the rebate equals the interest you'd save. Now that you know the real truth, the decision becomes different. It's just a matter of do you want to pay higher payments each month or get that $1,000 in your pocket right now? You can see that actually, if you take the higher interest rate loan then you basically are borrowing that $1,000 from yourself because the loan will cost you $1,000 more than it would if you just took the zero rate in the first place.
The numbers can change depending on the interest rates in your area and the rebate numbers for the vehicle you are considering. And don't forget that often the manufacturer will give the dealer their own rebate (they call it "incentive money") so take advantage of that too.
Manufacturers don't make it easy to pick and choose your best deal, what with gas savings, rebates, dealer incentives, 1.9 and zero rate loans, and all the rest. Bankrate.com makes it a little easier.
Of course you still have to avoid the lemons out there. And the binding mandatory arbitration clauses too.
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ABOUT THE AUTHOR
Known nationwide as a leading Lemon Law attorney, Ronald L. Burdge has represented literally thousands of consumers in "lemon" lawsuits and actively co-counsels and coaches other Consumer Law attorneys. From 2005 through 2018, attorney Ronald L. Burdge has been named as the only Lemon Law Ohio Super Lawyer by Law and Politics magazine and Thomson Reuters Corp., Professional Division. Burdge restricts his practice to Lemon Law and Consumer Law cases. The Ohio Super Lawyer results are published annually in the January issue of Cincinnati Magazine. Ronald L. Burdge was named Consumer Law Trial Lawyer of the Year 2004 by the National Association of Consumer Advocates, the nation's largest organization of consumer law private and government attorneys. "Your impact on the auto industry has been magnified many times over because of the trail you blazed for others," stated NACA's Executive Director, Will Ogburn. Burdge has represented thousands of consumers in Ohio, Kentucky and elsewhere since 1978 and is a frequent lecturer to national, state and local Bar Associations and Judicial organizations. Burdge is admitted to Ohio's state and federal courts, Kentucky's state courts, and Indiana's federal courts. Other court admissions are on a "pro hac" temporary, case by cases basis.