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Know the Facts about Zero-Interest Loans! |
Serving Members Since 1931
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Serving Members Since 1931 |
Zero Percent Financing
Know the Facts
With all the major auto manufacturers advertising zero percent financing, no down payment or no payments for any given period of time, many auto buyers seem mesmerized by the attractive low rates. Consumers are running to the dealerships to see how to take advantage of the great deals. While this is enticing, you should read the fine print and know the facts before you head to your local dealer.
These teaser rates have always been offered to drive more business to the dealerships, but often these offers are not beneficial to everyone. These variations, like prices, can change from dealer to dealer but knowing what to look for and ask can help you decide if 0% financing is for you. Here are a few restrictions and facts that often apply:
Almost perfect credit may be needed to qualify for these offers;
You may be required to give up a manufacturer’s rebate;
It usually means shorter terms and often large monthly payments;
It’s usually offered on a limited number of models or slower-selling models with a lower resale value; and
You may be limited to current dealer inventory and may not be able to choose the exact vehicle you are interested in purchasing.
Research your options
As a credit union member you are already aware of the many benefits that GEFCU offers including low interest rates, end of year rebates, and great service tailored to fit your needs. By researching your financing options prior to visiting the dealership, you may find that you can use GEFCU’s low interest rates and still take advantage of the manufacturer’s rebates. See the following example of a 36 month term on a $22,000 vehicle at zero percent vs. taking the $2,500 rebate and a credit union rate of 4%.
|
Dealer |
GEFCU |
GEFCU |
|
|
Amount to Finance |
$22,000 |
$22,000 - $2,500 (rebate) |
$22,000 - $2,500 (rebate) |
|
Interest Rate |
0.00% |
4.00% |
4.00% |
|
Length of Loan |
36 months |
36 months |
60 months |
|
Monthly Payments |
$611.11 |
$575.86 |
$359.22 |
|
Total Amount Paid |
$22,000.00 |
$20,730.65 |
$21,552.96 |
| Savings | $1,269.35 | $447.04 |
As the example shows, when taking the dealer's rebate, the price of the vehicle drops and so does the monthly payment. Since you are reducing the amount financed even further with the rebate and with the Credit Union’s low rate your overall costs are lower than if you had received the special factory financing.
The last column on the table shows a loan term of 60 months. Your monthly payment is considerably lower reducing buyer’s remorse which happens many times when your monthly payment is higher than you may have hoped for in order to receive the special financing rate.
This next example shows a 48 month term on $19,000 at zero percent from the dealer (payment in blue on the chart) versus taking the manufacturer's $2,500 rebate and financing with GEFCU at 4.0% (payment in red below). The total amount paid with the zero percent financing is $19,000 vs. $17,886 with the credit union financing saving $1,114.
Amount Financed in $
|
% |
16K |
16.5K |
17K |
18K |
19K |
20K |
21K |
22K |
23K |
24K |
25K |
|
5.00 |
$368.47 |
$379.98 |
$391.50 |
$414.53 |
$437.56 |
$460.59 |
$483.62 |
$506.64 |
$59.67 |
$575.73 |
$596.76 |
|
4.50 |
$364.86 |
$376.26 |
$387.66 |
$410.46 |
$433.27 |
$456.07 |
$478.87 |
$501.68 |
$524.48 |
$570.09 |
$592.89 |
|
4.00 |
$361.26 |
$372.55 |
$383.84 |
$406.42 |
$429.00 |
$451.58 |
$474.16 |
$496.74 |
$519.32 |
$564.48 |
$587.06 |
|
3.90 |
$360.55 |
$371.82 |
$383.08 |
$405.62 |
$428.15 |
$450.69 |
$473.22 |
$495.76 |
$518.29 |
$563.36 |
$585.89 |
|
2.90 |
$353.44 |
$364.49 |
$375.53 |
$397.62 |
$419.71 |
$441.80 |
$463.89 |
$485.98 |
$508.07 |
$552.25 |
$574.34 |
|
1.90 |
$346.42 |
$357.25 |
$368.06 |
$389.73 |
$411.38 |
$433.03 |
$454.68 |
$476.33 |
$497.98 |
$541.29 |
$562.94 |
|
0.90 |
$339.49 |
$350.10 |
$360.71 |
$381.93 |
$403.15 |
$424.37 |
$445.59 |
$466.80 |
$488.06 |
$530.46 |
$551.68 |
|
0.00 |
$333.33 |
$343.75 |
$354.17 |
$375.00 |
$395.83 |
$416.67 |
$437.50 |
$458.33 |
$479.17 |
$520.83 |
$541.67 |
To insure you are getting the best deal, contact your GEFCU to find out about our auto financing rates and then visit your local dealership to complete the deal. Also take a moment to review our Auto Buying Tips (click here).
Send mail to mail@gefcu-austin.org with questions or comments about this web site.
Copyright 2004 GEFCU
Last modified 02/29/2008