Zero-percent Financing Vs. Rebates, What’s Better?

Many times with zero-percent financing there are limitations. In many cases if you finance through the manufacturer your loan will be shorter, resulting in higher monthly payments then compared to a credit union or bank.  Your credit also has an effect on the rate you get, just because zero-percent is advertised, doesn’t mean it is guaranteed. Special zero-percent financing deals can also be limited to specific makes and models, most likely those that the dealership is looking to move off the lot.   

With a manufacturer’s rebate, most car buyers apply the rebate to the down payment, which reduces the amount of money you would need to finance. This also reduces the amount of interest and results in better equity on the vehicle. So, if you decide to trade the car in before you have finished paying it off, you will have more flexibility since you owe less on the car.   

Still not sure? The easiest way to decide which is the better deal for you is to do the math!   

Let’s say you are purchasing a $30,000 car:   

Zero-Percent Financing
If you put down $3,000 (10% of the cost) and borrow $27,000 with 0% financing, you will pay $750 a month for 36 months or $375 with 72 months.   

Rebate
If you do the same thing as above, and put down 10%, and then apply a rebate of $3,000 you are left with $24,000 to borrow. Financing $24,000 with a rate of 1.99% (instead of 0% your payment) is $687 a month for 36 months, or $354 over 72 months.     

For most, the rebate offers better value for most car buyers. However, zero-percent financing might be best if you plan to keep the car for five years or more.   For more information and loan generating calculators, visit www.GrooveCar.com to continue your research.