Buyer Question: Should I take the Manufacturers Rebate or the Manufacturers Low/Zero Interest Financing?

Comment: Manufacturers often offer rebates or low/zero interest financing for limited periods of time.  Manufacturers usually offer either a rebate or the low/zero interest financing, some with make it more complicated by offering a lower rebate amount with a slightly different loan term or interest rate.

Manufacturer rebates on a specific model are available to qualified buyers of the specific model.  Some rebates are available to all buyers of the model.  “Purchase Loyalty” rebates are only available to previous buyers of the manufacturer or a specific model or class of models of the manufacturer.  Some manufacturers also have “lease loyalty” rebates for buyers who have previously leased vehicles.

Manufacturer financing with low/zero interest rates is usually only available to buyers who have a high credit rating.  The required credit rating will vary by manufacturer and offering.  The rate of interest may also vary by the length of the loan e.g. lower interest rates on shorter loans.  The manufacturer financing may also require a minimum down payment.

The best choice, rebate or low/zero interest financing, depends on the following factors: 1) Amount being financed   (Purchase Price of Vehicle + Tax and License –Down Payment – Value of Trade-in). 2) Amount of manufacturers rebate, 3) Interest rate of manufacturers financing, and 4) Interest rate of your Bank, Credit Union or Internet financing.

Steps #1, 2 and 5 take approximately one hour and could save you an additional $500-1000. Note: You can only complete this after you have determined your credit rating, the value of your trade-in and the interest rate of your vehicle financing.

1. Use the manufacturer’s Internet site or Autobytel at www.autobytel.com to determine current rebates and manufacturer’s financed interest rates by length of loan.
2. The manufacturer’s credit rating requirements for manufacturer’s financing can be obtained from the manufacturer’s Internet site.  Compare this to your credit rating to determine if you qualify. See Know your Credit Rating.
3. Find the value of your trade-in and pricing from your new vehicle. See Valuing Your Trade-in and Pricing a New Vehicle.
4. Find the interest rate and cost of a new vehicle loan.  See Financing a New Vehicle.
5. Use the free calculator provided by The Credit Union National Association Internet site at www.cuna.org to determine your best option, Rebate or low/no interest financing.  Click on Personal Finance, Consumer, Online, Credit Union Calculators, View Calculators, Auto, Take the Rebate or the Special Financing?
6. Include a copy of this report in your Buyer Information Folder.

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