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Rebate Versus Low Interest Rate – How Do You Decide? Are you shopping for a new vehicle for your business or personal use? The many ‘special deals’ out there can be confusing! The 'factory rebate' is a very effective manufacturer incentive that dealers use to get customers into the showroom and move selected cars off the lot, generally to make room for newer models. Statistically only 20% of buyers who qualify for 0% financing actually take it. The other 80% take the cash back option offered in the form of a factory rebate instead, and arrange their own financing. This way you can shop for a good rate and get the factory rebate (from $500 - $5,000). By applying the rebate to your down payment you will generally save hundreds, but more likely over a thousand dollars. You can use a REBATE CALCULATOR (this calculator and others can be found at www.mycommunitybank.com) to figure which is your lowest cost new auto purchase option. Automobile prices are not as negotiable during these promotions. If the dealer is trying to persuade you to accept a low rate financing offer, it is probably more in his interest, and not yours. Applying the rebate to your down payment reduces loan balance and allows you to finance less. The best option depends on the price of the vehicle, size of the rebate and the interest rates available for financing. If you want a competitive finance rate, then dealer financing is probably not your best option. If it sounds like you are getting a good APR rate, be suspicious, as you will be making up the difference in the price of the car, your trade-in, extras, or extended warranties. When a dealer arranges your financing, he sells the contract to the lender of his choice. That "sale" costs you a minimum of $300 but it will be hidden in the actual cost of your loan. Basically you have just paid the dealer to organize your financing. You can use a general loan calculator (this calculator and others can be found at www.mycommunitybank.com) to figure the details of financing. The Loan Representative at your local bank can help you to determine the best of your Auto Loan Options. With a pre-approved loan from your local bank, you can shop at different dealers, get a total “cash” price quote from your sales person, and make your final decision to purchase that vehicle! Tips on Dealing with your Dealership
Cindy Holmes, is a Vice-President of Consumer Lending at Citizens State Bank, which was established in New Baltimore MI in 1922. Citizens State Bank is locally owned and operated, and specializes in serving small business owners in Macomb and St. Clair counties. © 2005 All Rights Reserved. No part of this article may be published without advance written approval.
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