Car Financing with a Dealer vs. with a Financial Institution

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Sometimes we get so excited when purchasing a new car that we forget about interest rates and convince ourselves that we can handle any payment.

Consider all the options available to you. Is it better for you to finance at the dealer or to take a cash back option and finance with your financial institution? The example below shows you that sometimes it does pay - in most cases - to skip the 0.00% APR option!

Let’s say you have excellent credit and qualify for 0% interest financing for 60 months through the dealer or the dealer is offering a cash rebate of $4000 and you choose to finance the loan on your own at 1.99% for 60 months. The price of the car is $25,000.

Dealer Lending Direct Loan
Purchase Price $25,000 $25,000
Cash Rebate From Dealer
Loan Balance $25,000 $21,000
APR 0.00% 1.99%
Monthly Payment $417 $367.99
Amount Saved Monthly $49.01
Total after 60 months (5 years) $25,000 $22,079.45
Overall Loan Savings $2,920.55

*This is an example of a cash rebate offered through a car dealership. The rebate is for example purposes only.

If you find a low-enough interest rate through your credit union, then you can actually beat the 0.00% APR financing. In this example, you can save almost $3,000 over the life of the loan by taking the rebate and financing it through your financial institution. The loan payment was also $49 cheaper per month!